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AdminlsTrative Conference of the United Stores

3j^

minisrraiive
Conference
of the
United States

ecommendations
and Reports

1986

Indexed Bibliograptiy

1968-1986

Administrative Conference of the United States

The Administrative Conterence of the United States was established by statute as an
independent agency of the federal government in 1964. Its purpose is to promote
improvements in the efficiency, adequacy and fairness of procedures by which federal
agencies conduct regulatory programs, administer grants and benefits, and perform
related governmental functions.

To this end, the Conference conducts research and issues reports concerning various
aspects of the administrative process and, when warranted, makes recommendations
to the President, Congress, particular departments and agencies, and the judiciary
concerning the need for procedural reforms. Implementation of Conference recom-
mendations may be accomplished through direct action on the part of the affected
agencies or legislative changes.

Administrative
Conference
of thie
United States

Recommendations
and Reports

1986

Cite as:
1986 ACUS

CONTENTS

Page

RECOMMENDATIONS of the

Administrative Conference of the United States

Recommendation 86-1: Nonlawyer Assistance

and Representation 3

Use of Federal Rules of Evidence

in Federal Agency Adjudications 6

Agencies' Use of Alternative

Means of Dispute Resolution 9

The Split-Enforcement Model

for Agency Adjudication 18

Medicare Appeals 21

Petitions for Rulemaking 27

Case Management as a Tool

for Improving Agency Ajudication.. 30
Acquiring the Services of "Neutrals"

for Alternative Means of

Dispute Resolution 37

Recommendation 86-2:

Recommendation 86-3:

Recommendation 86-4:

Recommendation 86-5
Recommendation 86-6
Recommendation 86-7

Recommendation 86-8:

BACKGROUND REPORTS for Recommendations

Rec. 86-1: Zona Fairbanks Hostetler Nonlawyer Assistance to
Individuals in Federal Mass Justice Agencies:
The Need for Improved Guidelines >47

Rec. 86-2: Richard J. Pierce, Jr. Use of the Federal Rules

of Evidence in Federal Agency Adjudications... 133

Rec. 86-3: Philip J. Harter. Points on a Continuum:
Dispute Resolution Procedures
and the Administrative Process 165

Rec. 86-4: George Robert Johnson, Jr. The Split-
Enforcement Model: Some Conclusions
from the OSHA and MSHA Experiences 293

Rec. 86-5: Eleanor D. Kinney. The Medicare Appeals

System for Coverage and Payment Disputes 339

Rec. 86-6: William V. Luneburg. Petitions for Rulemaking:
Federal Agency Practice and
Recommendations for Improvement 493

Rec. 86-7: Richard B. Cappalli. Model for Case

Management: The Grant Appeals Board 663

Charles Pou, Jr. and Charlotte Jones. Agency
Time Limits as a Tool
for Reducing Regulatory Delay 835

Rec. 86-8: George D. Ruttinger. Acquiring the Services of
Neutrals for Alternative Means of Dispute
Resolution and Negotiated Rulemaking 863

INDEXED BIBLIOGRAPHY:

Sue Judith Boley. Administrative Conference of the United States:

A Bibliography 1968-1986 951

RECOMMENDATIONS OF THE

ADMINISTRATIVE CONFERENCE

OF THE

UNITED STATES

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RECOMMENDATION 86-1:
NONLAWYER ASSISTANCE AND
REPRESENTATION

A substantial number of individuals involved in federal "mass
justice"^ agency proceedings need and desire assistance^ in filling
out forms, filing claims, and appearing in agency proceedings, but
are unable to afford assistance or representation by lawyers. A
lack of assistance or representation reduces the probability that an
individual will obtain favorable results in dealing with an agency.
Further, unassisted individuals are more likely than those who are
assisted to cause a loss of agency efficiency by requiring more
time, effort, and help from the agency.

Federal agencies currently provide help to persons involved in
agency proceedings through information given by agency
personnel and through funding of legal aid programs and approval
or payment of attorney fee awards. This recommendation does

^The term "mass justice" is used here to categorize an agency
program in which a large number of claims or disputes involving
individual or family matters come before an agency; e.g., the Old
Age Survivors and Disability Insurance program administered by
the Social Security Administration. To the extent that principles
incorporated in this recommendation may be applicable to other
programs in which non-lawyer assistance or representation is (or
could be made) available, the Conference recommends the
consideration of these principles by the agencies involved.

^The term "assistance" is used here to indicate all forms of help,
including representation, that may be beneficial to a person in
dealing with an agency. The term "representation" is used
whenever the most likely form of assistance involves such
activities as making an appearance, signing papers, or speaking for
the assisted individual. Neither term is meant to be exclusive.

i ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

not deal with whether government aid may be needed for persons
who cannot afford any form of assistance. This recommendation
focuses on the potential for increasing the availability of assistance
by nonlawyers. Federal agency experience and statistics indicate
that qualified persons who are not lawyers generally are capable of
providing effective assistance to individuals in mass justice agency
proceedings.

While it is recognized that no established privilege protects
the confidentiality of communications between nonlawyers and
their clients, agencies may adopt some protections covering their
own proceedings. The possible limitation of such protections does
not outweigh the benefits of increased assistance and
representation.

Agency practices do not currently maximize the potential for
free choice of assistance, and, in some instances, may hinder the
availability of qualified, low-cost assistance by nonlawyers.
Agencies should take the steps necessary to encourage— as well as
eliminate inappropriate barriers to— nonlawyer assistance and
representation.

Agencies generally have the authority to authorize any person to
act as a representative for another person having business with the
agency. Where an agency intends to permit nonlawyers to assist
individuals in agency matters, the agency needs to state that
intention affirmatively in its regulations for two reasons. First, an
affirmative statement is essential, under existing case law, to
protect a nonlawyer from prosecution— under state "unauthorized
practice of law" prohibitions— for assisting and advising a federal
client preparatory to commencing agency proceedings, as well as
for advertising the availability of services. Second, an affirmative
agency position is needed to overcome a common assumption of
nonlawyers that agencies welcome only lawyers as representatives,
and thereby to encourage an increase in the provision of
nonlawyer services.

RECOMMENDATION

1. The Social Security Administration, the Immigration and
Naturalization Service, the Veterans Administration, the Internal
Revenue Service, and other federal agencies that deal with a
significant number of unassisted persons who have individual or

OFFICIAL RECOMMENDATIONS t

family claims or disputes before the agency, should review their
regulations regarding assistance and representation. The review
should be directed toward the goals of authorizing increased
assistance by nonlawyers, and of maximizing the potential for free
choice of representative to the fullest extent allowed by law.

2. If an agency determines that some subject areas or types
of its proceedings are so complex or specialized that only specially
qualified persons can adequately provide representation, then the
agency may need to adopt appropriate measures to ensure that
nonlawyers meet specific eligibility criteria at some or all stages of
representation. Agencies should tailor any eligibility requirements
so as not to exclude nonlawyers (including nonlawyers who charge
fees) as a class, if there are nonlawyers who, by reason of their
knowledge, experience, training, or other qualification, can
adequately provide assistance or representation.

3. Agencies should declare unambiguously their intention to
authorize assistance and representation by nonlawyers meeting
agency criteria. Where a declaration by an agency may have the
effect of preempting state law (such as "unauthorized practice of
law" prohibitions), then the agency should employ the procedures
set out in Recommendation 84-5 with regard to notification of
and cooperation with the states and other affected groups.

4. Agencies should review their rules of practice that deal
with attorney conduct (such as negligence, fee gouging, fraud,
misrepresentation, and representation when there is a conflict of
interest) to ensure that similar rules are made applicable to
nonlawyers as appropriate, and should establish effective agency
procedures for enforcing those rules of practice and for receiving
complaints from the affected public.

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

RECOMMENDATION 86-2:

USE OF FEDERAL RULES OF EVIDENCE

IN FEDERAL AGENCY ADJUDICATIONS

Federal agencies have adopted hundreds of different sets of
rules governing admission of evidence in formal adjudications.
While those rules vary in their details, they can be placed in three
general categories: (1) Rules that reflect the wide open standard
of APA section 556(d); (2) rules that require presiding officers to
apply the Federal Rules of Evidence (FRE) "so far as practicable;"
and, (3) rules that permit presiding officers to use the FRE as a
source of guidance in making evidentiary rulings. In a few
instances. Congress has required the agency to adopt a standard
that refers to the FRE; in other cases the agency voluntarily
adopted such a standard.

Presiding officers vary substantially in the extent of their use
of the FRE as a source of guidance in making evidentiary rulings.
Presiding officers at agencies whose rules refer to the FRE rely on
the FRE as a source of guidance much more frequently than
presiding officers at agencies whose rules reflect only the APA
standard. Presiding officers at agencies with rules that refer to
the FRE are more satisfied with the rule they apply than presiding
officers at agencies with rules that reflect only the APA standard.
The relative dissatisfaction expressed by many presiding officers
in the latter group seems to be based on their perception that the
APA standard does not accord them sufficient discretion to engage
in responsible case management. Because they perceive that they
do not have the discretion to exclude evidence they consider
clearly unreliable, they must devote valuable hearing and opinion-
writing time to reception and consideration of such evidence.

OFFICIAL RECOMMENDATIONS "i

Because the APA evidentiary standard is broadly permissive,
courts routinely decline to reverse agencies that have adopted this
standard on the basis of alleged erroneous admission of evidence.
However, courts seem confused by the FRE "so far as practicable"
evidence standard. Some courts apparently interpret it to accord
near total discretion to agencies. Other courts interpret it as a
mandate to comply with the FRE except in unusual circumstances.
Still others apparently view the standard as a mandate to admit
evidence inadmissible under the FRE except when unusual
circumstances require application of the FRE.

Independent of the evidentiary standard adopted by the
agency, reviewing courts apply three general rules: (1) an agency
must respect evidentiary privileges; (2) an agency can be reversed
if it declines to admit evidence admissible under the FRE; and

(3) an agency will be reversed if it bases a finding on unreliable
evidence.

The FRE "so far as practicable" standard has four significant
disadvantages: (1) courts seem confused as to what it means or
how to enforce it; (2) instructing presiding officers to exclude
evidence based on the standard forces them to undertake a
difficult and hazardous task; (3) excluding evidence on the basis
that it is inadmissible in a jury trial is totally unnecessary to
insure that agencies act only on the basis of reliable evidence; and

(4) agencies, like other experts, should be permitted to rely on
classes of evidence broader than those that can be considered by
lay jurors. Yet the APA standard alone has the disadvantage that
presiding officers perceive it as an inadequate tool for effective
case management, despite the fact that it permits presiding
officers to use relevant parts of the FRE and scholarly texts as
sources of general guidance in making evidentiary rulings in
formal adversarial adjudications. Federal Rule 403 can be
particularly valuable to presiding officers in discharging their case
management responsibilities. That rule authorizes exclusion of
evidence the probative value of which is substantially outweighed
by other factors, including the consideration of undue delay. In
addition, under any set of evidentiary rules, an agency can assist
presiding officers in their evidentiary decisionmaking by
specifying, insofar as they can be foreseen, the factual issues the
agency considers material to the resolution of various classes of
adjudications and the types of evidence it considers reliable and
probative with respect to recurring factual issues.

8 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

RECOMMENDATION

1. Congress should not require agencies to apply the Federal
Rules of Evidence, with or without the qualification "so far as
practicable," to limit the discretion of presiding officers to admit
evidence in formal adjudications.^

2. Agencies should adopt evidentiary regulations applicable to
formal adversarial adjudications that clearly confer on presiding
officers discretion to exclude unreliable evidence and to use the
weighted balancing test in Rule 403 of the Federal Rules of
Evidence, which allows exclusion of evidence the probative value
of which is substantially outweighed by other factors, including its
potential for undue consumption of time.

3. To facilitate the efficient and fair management of the
proceeding, when otherwise appropriate, an agency should
announce in advance of a formal adjudication as many of the
factual issues as the agency can foresee to be material to the
resolution of the adjudication.

iThe term "formal adjudications" refers to adjudications
required by statute to be determined on the record after
opportunity for an agency hearing in accordance with the
Administrative Procedure Act, 5 U.S.C. 554, 556 and 557, and also
includes agency adjudications which by regulation or by agency
practice are conducted in conformance with these provisions. The
recommendation does not apply to nonadversarial hearings, e.g.^
many Social Security disability proceedings.

OFFICIAL RECOMMENDATIONS

RECOMMENDATION 86-3:

AGENCIES' USE OF ALTERNATIVE MEANS OF

DISPUTE RESOLUTION

Federal agencies now decide hundreds of thousands of cases
annually— far more than do federal courts. The formality, costs
and delays incurred in administrative proceedings have steadily
increased, and in some cases now approach those of courts. Many
agencies act pursuant to procedures that waste litigants' time and
society's resources and whose formality can reduce the chances
for consensual resolution. The recent trend toward elaborate
procedures has in many cases imposed safeguards whose
transaction costs, to agencies and the public in general, can
substantially outweigh their benefits.

A comprehensive solution to reducing these burdens is to
identify instances where simplification is appropriate. This will
require a careful review of individual agency programs and the
disputes they involve. A more immediate step is for agencies to
adopt alternative means of dispute resolution, typically referred to
as "ADR," or to encourage regulated parties to develop their own
mechanisms to resolve disputes that would otherwise be handled
by agencies themselves. ADR methods have been employed with
success in the private sector for many years, and when used in
appropriate circumstances, have yielded decisions that are faster,
cheaper, more accurate or otherwise more acceptable, and less
contentious. These processes include voluntary arbitration,
mandatory arbitration, factfinding, minitrials, mediation,
facilitating, convening and negotiation. (A brief lexicon defining
these terms is included in the Appendix to this recommendation.)
The same forces that make ADR methods attractive to private
disputants can render them useful in cases which a federal agency

10 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

decides, or to which the government is a party. For these
methods to be effective, however, some aspects of current
administrative procedure may require modification.
It is premature to prescribe detailed procedures for a myriad of
government activities since the best procedure for a program, or
even an individual dispute, must grow out of its own needs.
These recommendations therefore seek to promote increased, and
thoughtful, use of ADR methods. They are but a first step, and
ideally should be supplemented with further empirical research,
consultation with experts and interested parties, and more specific
Conference proposals.

RECOMMENDATION

A. General

1. Administrative agencies, where not inconsistent with
statutory authority, should adopt the alternative methods discussed
in this recommendation for resolving a broad range of issues.
These include many matters that arise as a part of formal or
informal adjudication, in rulemaking, ^ in issuing or revoking
permits, and in settling disputes, including litigation brought by or
against the government. Until more experience has been
developed with respect to their use in the administrative process,
the procedures should generally be offered as a voluntary,
alternative means to resolve the controversy.

2. Congress and the courts should not inhibit agency uses of
the ADR techniques mentioned herein by requiring formality
where it is inappropriate.

B. Voluntary Arbitration

3. Congress should act to permit executive branch officials to
agree to binding arbitration to resolve controversies. This
legislation should authorize any executive official who has
authority to settle controversies on behalf of the government to

^See ACUS Recommendations 82-4 and 85-5, "Procedures for
Negotiating Proposed Regulations," 1 CFR §§305.82-4 and 85-5.

OFFICIAL RECOMMENDATIONS 11

agree to arbitration, either prior to the time a dispute may arise or
after a controversy has matured, subject to whatever may be the
statutory authority of the Comptroller General to determine
whether payment of public funds is warranted by applicable law
and available appropriations.

4. Congress should authorize agencies to adopt arbitration
procedures to resolve matters that would otherwise be decided by
the agency pursuant to the Administrative Procedure Act ("APA")
or other formal procedures. These procedures should provide
that—

(a) All parties to the dispute must knowingly consent
to use the arbitration procedures, either before or after a
dispute has arisen.

(b) The parties have some role in the selection of
arbitrators, whether by actual selection, by ranking those
on a list of qualified arbitrators, or by striking individuals
from such a list.

(c) Arbitrators need not be permanent government
employees, but may be individuals retained by the parties
or the government for the purpose of arbitrating the
matter.

(d) Agency review of the arbitral award be pursuant
to the standards for vacating awards under the U.S.
Arbitration Act, 9 U.S.C. § 10, unless the award does not
become an agency order or the agency does not have any
right of review.

(e) The award include a brief, informal discussion of
its factual and legal basis, but neither formal findings of
fact nor conclusions of law.

(f) Any judicial review be pursuant to the limited
m scope-of-review provisions of the U.S. Arbitration Act,

rather than the broader standards of the APA.

1^ (g) The arbitral award be enforced pursuant to the

U.S. Arbitration Act, but is without precedential effect for
any purpose.

12 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

5. Factors bearing on agency use of arbitration are:

(a) Arbitration is likely to be appropriate where—

(1) The benefits that are likely to be gained
from such a proceeding outweigh the probable
delay or costs required by a full trial-type hearing.

(2) The norms which will be used to resolve
the issues raised have already been established by
statute, precedent or rule, or the parties explicitly
desire the arbitrator to make a decision based on
some general standard, such as "justice under the
circumstances," without regard to a prevailing
norm.

(3) Having a decisionmaker with technical
expertise would facilitate the resolution of the
matter.

(4) The parties desire privacy, and agency
records subject to disclosure under the Freedom of
Information Act are not involved.

(b) Arbitration is likely to be inappropriate where—

(1) A definitive or authoritative resolution of
the matter is required or desired for its precedential
value.

(2) Maintaining established norms or policies is
of special importance.

(3) The case significantly affects persons who
are not parties to the proceeding.

(4) A full public record of the proceeding is
important.

(5) The case involves significant decisions as to
government policy.

6. Agency officials, and particularly regional or other
officials directly responsible for implementing an arbitration or
other ADR procedure, should make persistent efforts to increase
potential parties' awareness and understanding of these procedures.

OFFICIAL RECOMMENDATIONS 13

C. Mandatory Arbitration

7. Arbitration is not in all instances an adequate substitute
for a trial- type hearing pursuant to the APA or for civil
litigation. Hence, Congress should consider mandatory arbitration
only where the advantages of such a proceeding are clearly
outweighed by the need to (a) save the time or transaction costs
involved or (b) have a technical expert resolve the issues.

8. Mandatory arbitration is likely to be appropriate only
where the matters to be resolved—

(a) Are not intended to have precedential effect other
than the resolution of the specific dispute, except that the
awards may be published or indexed as informal guidance;

(b) May be resolved through reference to an
ascertainable norm such as statute, rule or custom;^

(d) Do not involve the establishment or
implementation of major new policies or precedents.

9. Where Congress mandates arbitration as the exclusive
means to resolve a dispute, it should provide the same procedures
as in Paragraph 4, above.

D. Settlement Techniques

10. In many situations, agencies already have the authority to
use techniques to achieve dispute settlements. Agencies should use
this authority by routinely taking advantage of opportunities to:

(a) Explicitly provide for the use of mediation.

(b) Provide for the use of a settlement judge or other
neutral agency official to aid the parties in reaching
agreement.^ These persons might, for instance, advise the

^For example, the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. §136 et seq.^ provides for mandatory
arbitration with respect to the amount of compensation one
company must pay another and yet provides no guidance with
respect to the criteria to be used to make these decisions. The
program has engendered considerable controversy and litigation.

^See, e.g., the procedure used by the Federal Energy
Regulatory Commission.

14 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

parties as to the likely outcome should they fail to reach
settlement.

(c) Implement agreements among the parties in
interest, provided that some means have been employed to
identify other interested persons and afford them an
opportunity to participate.

(d) Provide for the use of minitrials.

(e) Develop criteria that will help guide the
negotiation of settlements.^

11. Agencies should apply the criteria developed in ACUS
Recommendations 82-4 and 85-5, pertaining to negotiated
rulemaking, 5 in deciding when it may be appropriate to negotiate,
mediate or use similar ADR techniques to resolve any contested
issue involving an agency. Settlement procedures may not be
appropriate for decisions on some matters involving major public
policy issues or having an impact on persons who are not parties,
unless notice and comment procedures are used.

12. Factors bearing on agency use of minitrials as a
settlement technique are:

(a) Minitrials are likely to be appropriate where—

(1) The dispute is at a stage where substantial
additional litigation costs, such as for discovery, are
anticipated.

(2) The matter is worth an amount sufficient
to justify the senior executive time required to
complete the process.

(3) The issues involved include highly technical
mixed questions of law and fact.

(4) The matter involves materials that the
government or other parties believe should not be
revealed.

^See ACUS Recommendation 79-3, "Agency Assessment and
Mitigation of Civil Money Penalties," 1 CFR §305.79-3.

^See also, ACUS Recommendation 84-4, "Negotiated Cleanup
of Hazardous Waste Sites Under CERCLA," 1 CFR §305.84-4.

OFFICIAL RECOMMENDATIONS 15

(b) Minitrials are likely to be inappropriate where—

(1) Witness credibility is of critical importance.

(2) The issues may be resolved largely through
reference to an ascertainable norm.

(3) Major questions of public policy are
involved.

13. Proposed agency settlements are frequently subjected to
multiple layers of intra-agency or other review and therefore may
subsequently be revised. This uncertainty may discourage other
parties from negotiating with federal officials. To encourage
settlement negotiations, agencies should provide means by which
all appropriate agency decisionmakers are involved in, or regularly
apprised of, the course of major negotiations; agencies should also
endeavor to streamline intra-agency review of settlements. These
efforts should serve to ensure that tlie concerns of interested
segments of the agency are reflected as early as possible in
settlement negotiations, and to reduce the likelihood that tentative
settlements will be upset.

14. In cases where agencies must balance competing public
policy interests, they should adopt techniques to enable officials to
assess, in as objective a fashion as possible, the merits of a
proposed settlement. These efforts might include establishing a
small review panel of senior officials or neutral advisors, using a
minitrial, publishing the proposed settlement in the Federal
Register for comment, securing tentative approval of the
settlement by the agency head or other senior official, or
employing other means to ensure the integrity of the decision.

15. Some agency lawyers, administrative law judges, and
other agency decisionmakers should be trained in arbitration,
negotiation, mediation, and similar ADR skills, so they can (a) be
alert to take advantage of alternatives or (b) hear and resolve other
disputes involving their own or another agency.

E. Private Sector Dispute Mechanisms

16. Agencies should review the areas that they regulate to
determine the potential for the establishment and use of dispute
resolution mechanisms by private organizations as an alternative to
direct agency action. Where such use is appropriate, the agency
should—

16 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

(a) Specify minimal procedures that will be acceptable
to qualify as an approved dispute resolution mechanism.

(b) Oversee the general operation of the process;
ordinarily, it should not review individual decisions.

(c) Tailor its requirements to provide an organization
with incentives to establish such a program, such as
forestalling other regulatory action, while ensuring that
other interested parties view the forum as fair and
effective.

Appendix

Lexicon of Aftemative Means of Dispute Resolution

Arbitration. Arbitration is closely akin to adjudication in that
a neutral third party decides the submitted issue after reviewing
evidence and hearing argument from the parties. It may be
binding on the parties, either through agreement or operation of
law, or it may be non-binding in that the decision is only
advisory. Arbitration may be voluntary, where the parties agree
to resolve the issues by means of arbitration, or it may be
mandatory, where the process is the exclusive means provided.

Factfinding. A "factfinding" proceeding entails the

appointment of a person or group with technical expertise in the
subject matter to evaluate the matter presented and file a report
establishing the "facts." The factfinder is not authorized to resolve
policy issues. Following the findings, the parties may then
negotiate a settlement, hold further proceedings, or conduct more
research.

Minitrial. A minitrial is a structured settlement process in
which each side presents a highly abbreviated summary of its case
before senior officials of each party authorized to settle the case.
A neutral adviser sometimes presides over the proceeding and will
render an advisory opinion if asked to do so. Following the
presentations, the officials seek to negotiate a settlement.

Mediation. Mediation involves a neutral third party to assist
the parties in negotiating an agreement. The mediator has no
independent authority and does not render a decision; any decision
must be reached by the parties themselves.

OFFICIAL RECOMMENDATIONS 17

Facilitating. Facilitating helps parties reach a decision or a
satisfactory resolution of the matter to be addressed. While often
used interchangeably with "mediator," a facilitator generally
conducts meetings and coordinates discussions, but does not
become as involved in the substantive issues as does a mediator.

Convening. Convening is a technique that helps identify
issues in controversy and affected interests. The convenor is
generally called upon to determine whether direct negotiations
among the parties would be a suitable means of resolving the
issues, and if so, to bring the parties together for that purpose.
Convening has proved valuable in negotiated rulemaking.

Negotiation. Negotiation is simply communication among
people or parties in an effort to reach an agreement. It is used so
routinely that it is frequently overlooked as a specific means of
resolving disputes. In the administrative context, it means
procedures and processes for settling matters that would otherwise
be resolved by more formal means.

18 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

RECOMMENDATION 86-4:

THE SPLIT-ENFORCEMENT MODEL

FOR AGENCY ADJUDICATION

Separation of functions in administrative adjudication has
usually been achieved through internal barriers within the agency
which separate and insulate those employees who judge from those
who investigate and prosecute. The chains of command, however,
come together at the top in the person of the head or heads of the
agency, who, through subordinates, are responsible for all three
functions. Internal separation of functions is sanctioned and
contemplated by the Administrative Procedure Act. When
combined with the protections accorded to administrative law
judges who preside over adjudicatory hearings, it appears, on the
whole, to have worked satisfactorily in providing fair and
impartial factfinding, while permitting the agency to speak with a
single voice on matters of law and policy. Yet the experience
with internal separation of functions has never entirely silenced
the critics who argue that it is impossible to achieve evenhanded
justice when enforcement and adjudicative functions are lodged in
the same agency.

Congress has, therefore, on a number of occasions sought to
carry separation of functions a step further. In the Occupational
Safety and Health Act of 1970, an agency in the Department of
Labor, the Occupational Safety and Health Administration
(OSHA), was assigned the responsibility for promulgating
industrial health and safety standards and for enforcing these
standards through inspections and the filing of complaints against
employers. The responsibility for adjudicating such complaints,
however, was assigned to a wholly independent three-member
agency, the Occupational Safety and Health Review Commission

OFFICIAL RECOMMENDATIONS 19

(OSHRC), which employs administrative law judges to hear
enforcement cases brought by OSHA and to issue initial decisions
subject to commission review. A similar division of

responsibilities was created in the area of mine safety and health
in the Federal Mine Safety and Health Amendments Act of 1977.
This statute assigned rulemaking and enforcement to the Mine
Safety and Health Administration in the Department of Labor and
adjudication to the independent Federal Mine Safety and Health
Review Commission (FMSHRC).l

An Administrative Conference study of the experience with
the "split-enforcement model" used in the occupational safety and
mine safety legislation was unable to conclude whether this model
achieves greater fairness in adjudication than does the traditional
structural model. Fairness is an important but an unquantifiable
and subjective value. Therefore, the Conference takes no position
on whether the split-enforcement model is preferable to a
structure in which responsibilities for rulemaking, enforcement
and adjudication are combined within a single agency. Our study
did reveal, however, that because Congress, in enacting the
Occupational Safety and Health Act, did not specify clearly the
respective responsibilities of OSHA and OSHRC in resolving
questions of law and policy, unnecessary conflicts have arisen
between the agencies and there has been confusion expressed by
reviewing courts over which agency's views were entitled to the
greater deference. For a variety of reasons these conflicts and
confusion have been largely avoided in the later enacted mine
safety legislation.

RECOMMENDATION

1. Where Congress establishes an enforcement scheme in
which rulemaking and prosecution are assigned to one agency and
adjudication to another agency, it should make clear in which
agency it intends to place programmatic responsibility and direct
the courts to look to that agency for authoritative expressions of
law or policy. Congress should also attempt to foresee other areas

^The system for enforcing certain provisions of the Federal
Aviation Act also conforms generally to this model but was not
part of the study. See 49, App. U.S.C. §1903 (a)(9).

20 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

of potential conflict, such as control over litigation and

settlements, and should so far as possible specify the respective

responsibilities of each agency and the procedures for resolving
disagreements.

2. Generally speaking. Congress should provide that in
adjudicatory challenges to standards promulgated pursuant to
agency statutory authority, the adjudicatory agency must accept
the rulemaking agency's interpretation of the standard unless it
can be shown that the rulemaking agency's interpretation is
arbitrary, capricious, or otherwise not in accordance with law. So
far as is practical, the rulemaking agency should provide notice to
the affected public concerning the administrative interpretation of
its rules and regulations, the policies that they represent, and their
intended implementation in enforcement.

3. Where uncertainties exist with regard to the responsibilities
of agencies already implementing split-enforcement schemes,
Congress should act to resolve those uncertainties consistent with
the foregoing, if the agencies are unable to do so.

OFHCIAL RECOMMENDATIONS 21

RECOMMENDATION 86-5:
MEDICARE APPEALS

The Medicare program, since 1965, provides health insurance
for nearly all elderly and most disabled Americans. The program
relies on hospitals, nursing homes and other health care
institutions (under "Part A" of the program) and physicians and
suppliers (under "Part B") to provide benefits to its beneficiaries.

This program, serving 30 million persons, has been
administered since 1977 by the Health Care Financing
Administration (HCFA), within the Department of Health and
Human Services (HHS). Congress purposefully created a
decentralized system, with implementation by localized carriers
and intermediaries, primarily insurance companies. HCFA
contracts with these organizations to administer the millions of
claims made by beneficiaries each year and the resulting payments
to providers. For Part A these organizations are known as "fiscal
intermediaries" and for Part B they are referred to as "carriers."
Additionally, statutorily - mandated peer review organizations
(PROs), made up of physician-controlled organizations under
contract with HCFA, have been given new responsibility to decide
many disputes raised by beneficiaries and hospitals under Part A.
To guide its contractors, HCFA issues health insurance manuals
containing detailed instructions, though they normally are not
published through notice-and-comment rulemaking.

HCFA also issues "national coverage decisions" on whether
new medical technologies and procedures are covered by
Medicare. These decisions are sometimes made after a
recommendation is sought from the HHS Office of Health
Technology Assessment (OHTA). Only when OHTA advice is
sought does HCFA publish notice in the Federal Register. In most

22 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

cases, affected manufacturers, providers and beneficiaries have no
notice or opportunity to file comments on proposed action, and
neither HCFA nor OHTA has published its decisionmaking
procedures or its criteria for making these decisions.

Rapidly rising program expenditures, especially inflation in
hospital care costs, led Congress to take a number of steps to
control costs. In 1982, the PRO system was created and was
delegated important responsibility to deny Medicare payment for
inappropriate or unnecessary services and to sanction providers for
improper practices. In the following two years Congress froze
physician charges for fifteen months and completely revamped the
reimbursement system for hospitals by creating the "prospective
payment system" under which Medicare pays hospitals a
predetermined fixed price for each patient case (according to a
classification system of some 470 Diagnosis Related Groupings or
DRGs), regardless of the actual costs incurred in treating that
patient. The prices are subject to annual updating and the
classification system is to be reviewed annually. Congress created
the advisory Prospective Payment Assessment Commission to
participate in this process. Additionally, to mitigate fears that the
prospective payment system might lead to unnecessary brief
admissions or premature release of patients. Congress charged the
PROs with the responsibility for monitoring hospital admissions
and discharge practices. In the first years of this program,
hospital admissions for the elderly declined for the first time since
1965, the average length of stay also declined and there was a
greater utilization of outpatient services. Moreover, many
hospitals have made record profits under the new system while
reducing the rate of inflation in hospital costs. There has also
been a marked increase in physician (Part B) services, as patients
have moved out of hospitals and into outpatient care, and to
greater reliance on home health services.

The Medicare appeals system is a patchwork with differing
administrative and judicial review requirements for beneficiaries
and providers and differing rules for Part A and Part B appeals.

Under Part A, most cases are beneficiary appeals primarily
involving coverage determinations. Initial determinations are by
PROs if hospital services are involved and by fiscal intermediaries
for other Part A services. A reconsideration step is built in.
After this "paper review," administrative review is then available
by an administrative law judge in the Social Security Office of
Heariags and Appeals if the amount in controversy exceeds $100

OFFICIAL RECOMMENDATIONS 23

($200 in hospital cases). The SSA Appeals Council may review
and reverse the ALJ's decision on its own motion. Judicial review
in the district court is available for the beneficiary if the amount
in controversy is $1000 ($2000 in hospital cases).

Providers who have disputes concerning reimbursement under
Part A (over $10,000) may bring appeals to the Provider
Reimbursement Review Board (PRRB), a five-member board
within HHS. (Appeals involving amounts between $1,000 and
$10,000 are heard by fiscal intermediaries.) The Secretary may
review PRRB decisions on his own motion and providers have a
right to judicial review. The PRRB's effectiveness as an
independent adjudicator of provider payment disputes has been
called into question by provider groups who have raised concerns
about its independence, jurisdiction, slowness and its procedures
for handling group appeals. Moreover, the PRRB's role under the
prospective payment system has been changing. The Board does
retain jurisdiction over appeals remaining under the old system
and over some key issues concerning allowable costs, and
availability of payments under the new system. But, HCFA
rulings and regulations have constrained the PRRB's jurisdiction
in prospective payment rate cases and provided that it may not
order retrospective correction of errors in those rates. Moreover,
some key provider appeals such as those involving errors in DRG
assignment have been transferred to PROs. No further review is
available in such cases.

Until passage of the Omnibus Budget Reconciliation Act of
1986, P.L. 99-509, there was no administrative and judicial review
of Part B claims. However, under the new law, beneficiaries with
disputed claims of over $500 (and physicians who have accepted
assignment of such claims) have a right to a hearing before an
administrative law judge, and to subsequent judicial review if the
claim exceeds $1,000. Previously there was no judicial review and
beneficiaries with Part B claims exceeding $100 were limited to a
"fair hearing" before an officer selected by the carrier. (This
procedure will continue for claims between $100 and $500 under
the new legislation.)

The new legislation also made several other important changes
in the laws affecting Medicare. The legislation:

— authorizes persons affiliated with providers to represent
beneficiaries in Part A appeals as long as no financial liability is
imposed in connection with the representation;

24 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

-- requires that HCFA regulations regarding the Medicare
program provide for a 60-day comment period;

— requires expanded notice procedures for medicare patients
concerning their hospital discharge rights;

-- mandates various new requirements on PROs to review
beneficiary complaints and to review the quality of care provided;
and

-- expands appeal rights in home health care cases involving
so-called "technical denials" of benefits.

The Conference welcomes these changes. Indeed, at the time of
their enactment, the Conference was actively considering
recommendations concerning some of them. Other aspects of the
process, however, also deserve modification or, at least, further
study. We therefore call upon HCFA to continue its efforts to
improve the implementation of this important program by heeding
the following specific suggestions.

RECOMMENDATION

I. Publication of Policies

A. The Health Care Financing Administration (HCFA)
should keep up to date and provide reasonable access to all
standards, guidelines and procedures used in making coverage and
payment determinations under Part A and Part B of the Medicare
program.

B. In promulgating interpretations of Medicare benefits likely
to have substantial impact on the public, HCFA should adopt
procedures that allow for public comment (either pre-
promulgation or post-adoption). See ACUS Recommendation 76-
5.

C. HCFA by regulation (or Congress by legislation if
necessary) should require fiscal intermediaries and carriers to
publish and provide reasonable access to all insurance industry
rules or other screening devices used in making coverage and
payment determinations under Part A and Part B.

D. HHS should introduce more openness and regularity into
the procedure for issuing "national coverage decisions" pertaining
to new medical technologies and procedures, through:

OFFICIAL RECOMMENDATIONS 25

(1) development of published decisional criteria; (2) providing
for notice and inviting comments in such cases, both in HCFA's
decisionmaking process and in the process by which the HHS
Office of Health Technology Assessment supplies
recommendations to HCFA; and (3) providing for internal
administrative review or reconsideration of such decisions.

n. Administrative Appeal Procedures

A. HCFA should continue to develop and assess the adequacy
and timing of notice to beneficiaries about coverage and payment
decisions on medical benefits and appeal rights regarding these
decisions.

B. Because of the increased caseload in Medicare appeals
adjudication anticipated after the recent enactment of new appeal
rights in Part B cases, HHS should consider whether modification
of the existing adjudicatory system is necessary, including whether
to establish a Medicare appeals division with its own
administrative law judges and review procedure.

C. When resolving hospital rate appeals under the prospective
payment system, the Provider Reimbursement Review Board
should be authorized, by regulation (or, if necessary, by
legislation) to assume jurisdiction of an individual hospital's
appeal in a manner that affords timely relief to successful
appellants.

in. Suggestions for Further Study

HCFA should undertake or support additional research in the
following areas:

A. An empirical study of the role, performance and
procedures of:

(1) Fiscal intermediaries and carriers in making coverage and
payment determination under Part A and Part B;

(2) Peer review organizations in adjudicating Part A appeals
by beneficiaries and by hospitals under the prospective payment
system.

B. A comprehensive analysis of the current administrative
arrangement by which hospital payment rates are updated under

26 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

the prospective payment system (taking into account the need for
fair ratemaking, timely resolution of disputes and budgetary
controls), including an assessment of the Prospective Payment
Assessment Commission in this process.

C. An examination of the future role and responsibilities of
the Provider Reimbursement Review Board under the prospective
payment system, including its jurisdiction, need for expedited
review procedures for group appeals, qualifications for
membership, adequacy of budget and administrative support, and
the need for independence from the rest of the Department.

D. An examination of whether or not the implementation of
the statutorily-mandated peer review program should be done to a
greater extent through notice-and-comment rulemaking, rather
than through reliance upon program instructions and contract
provisions.

E. A study of HCFA's use of statistical sampling techniques
to determine project overpayments to a provider for a given year,
and whether the use of these techniques may effectively deny
beneficiaries or providers the opportunity to challenge payment
determinations based on actual claims experience.

F. A study of whether, in hospital rate appeals, HCFA
should allow retroactive correction of erroneous calculations of a
hospital's payment rate for affected prior years under the
prospective payment system, and payment to hospitals accordingly.

G. A study of the process by which ALJ reversals of claim
denials are implemented by intermediaries and providers,
including the need for tighter accounting of payments to
beneficiaries and reimbursements to providers.

H. An examination of the feasibility and utility of setting
internal time guidelines for each stage of the Medicare appeals
process, including reconsiderations; ALJ hearings and Appeals
Council review.

OFFICIAL RECOMMENDATIONS 27

RECOMMENDATION 86-6:
PETITIONS FOR RULEMAKING

The Administrative Procedure Act (APA) requires each
federal agency to give interested persons the right to petition for
the issuance, amendment, or repeal of a rule, 5 U.S.C. §553(e).
The APA also requires that agencies conclude matters presented to
them within a reasonable time, 5 U.S.C. §555(b), and give prompt
notice of the denial of actions requested by interested persons, 5
U.S.C. §555(e). The APA does not specify the procedures agencies
must follow in receiving, considering, or disposing of public
petitions for rulemaking.^ However, agencies are expected to
establish and publish such procedures in accordance with the
public information section of the APA. See Attorney General's
Manual on the Administrative Procedure Act 38 (1947). An
Administrative Conference study of agency rulemaking petition
procedures and practices found that while most agencies with
rulemaking power have established some procedures governing
petitions for rulemaking, few agencies have established sound
practices in dealing with petitions or responded promptly to such
petitions.

^ But other statutes expressly create the right to petition for
rulemaking, and some of these statutes specify procedures to be
followed in the petitioning process.

28 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Specification of agency petition procedures would be undesirable
because there are significant differences in the number and nature
of petitions received by agencies and in the degree of
sophistication of each agency's community of interested persons.

Agencies should review their rulemaking petition
procedures and practices and, in accordance with this
Recommendation, adopt measures that will ensure that the right to
petition is a meaningful one. The existence of the right to
petition reflects the value Congress has placed on public
participation in the agency rulemaking process. The

Administrative Conference has recognized, in past
recommendations, the benefits flowing from public participation
in agency rulemaking and from publication of the means for such
participation. 2 The absence of published petition procedures,
excessive or rigidly-enforced format requirements, and the failure
to act promptly on petitions for rulemaking may undermine the
public's right to file petitions for rulemaking.

Some agencies currently have petition-for-rulemaking
procedures that are more elaborate than those recommended in
this Recommendation. This Recommendation is not intended to
express a judgment that such procedures are inappropriate or that
the statutes mandating particular procedures should be amended.
Nor is the Recommendation intended to alter the prior position of
the Conference recommending elimination of the categorical
exemptions of certain types of rulemaking from the APA's
rulemaking requirements. See Recommendations 69-8 and 73-5.
To the extent Congress or agencies adopt those recommendations,
they should also expressly apply the right to petition to those types
of rulemaking.

2 See Recommendation 69-8, Elimination of Certain
Exemptions from the APA Rulemaking Requirements^ 1 C.F.R.
§305.69-8; Recommendation 71-6, Public Participation in
Administrative Hearings, 1 C.F.R. §305.71-6; Recommendation
73-5, Elimination of the "Military or Foreign Affairs Function"
Exemption from APA Rulemaking Requirements^ 1 C.F.R. §305.73-
5; Recommendation 76-5, Interpretive Rules of General
Applicability and Statements of General Policy, 1 C.F.R. §305.76-
5; and Recommendation 83-2, The "Good Cause" Exemption from
APA Rulemaking Requirements, 1 C.F.R. §305.83-2.

OFHCIAL RECOMMENDATIONS 29

RECOMMENDATION

1. Agencies should establish by rule basic procedures for the
receipt, consideration, and prompt disposition of petitions for
rulemaking. These basic procedures should include: (a)
specification of the address(es) for the filing of petitions and an
outline of the recommended contents of the petition, such as the
name, address, and telephone number of the petitioner, the
statutory authority for the action requested, and a description of
the rule to be issued, amended, or repealed; (b) maintenance of a
publicly available petition file; and (c) provision for prompt
notification to the petitioner of the action taken on the petition,
with a summary explanatory statement.

2. In addition, agencies should, where appropriate and
feasible:

a. make their petition procedures expressly applicable to
all types of rules the agency has authority to adopt;

b. provide guidance on the type of data, argumentation,
or other information the agency needs to consider petitions;

c. develop effective methods for providing notice to
interested persons that a petition has been filed and identify the
agency office or official to whom inquiries and comments should
be made; and,

d. establish internal management controls to assure the
timely processing of petitions for rulemaking, including deadlines
for completing interim actions and reaching conclusions on
petitions and systems to monitor compliance with those deadlines.

30 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

RECOMMENDATION 86-7:

CASE MANAGEMENT AS A TOOL FOR

IMPROVING AGENCY ADJUDICATION

Reducing the delay, expense and unproductive legal
maneuvering found in many adjudications is recognized as a
crucial factor in achieving substantive justice. In recent years, the
negative side effects of civil litigation and agency adjudication
procedures have begun to receive increased attention, and many
judges, informed scholars and other experienced observers now
cite lawyer control of the pace and scope of most cases as a major
impediment. In the federal judicial sphere, and increasingly in
the state judiciary, a consensus is developing that efficient case
management is part of the judicial function, on a par with the
traditional duties of offering a fair hearing and a wise, impartial
decision. Many federal district judges have begun to practice and
advocate increased intervention to shape and delimit the pretrial
or prehearing process.

Some federal agencies have begun to make regular use of case
management processes wherein those who decide cases interject
their informed judgment and experience early in the pretrial
stage, and consistently thereafter, to move cases along as quickly
as possible within the bounds of procedural fairness. One such
agency is the Department of Health and Human Services ("HHS"),
whose Departmental Grant Appeals Board ("DGAB" or "Board")
makes active, planned use of special managerial procedures. The
Board, which decides cases brought by state and local governments
or other recipients of HHS grant funds, has a three-tiered process
that relies extensively on use of action-forcing procedures for
completing each stage of a case. The Board adjudicates almost all
its cases- -well over two hundred dispositions and one hundred

OFFICIAL RECOMMENDATIONS 31

written decisions annually with an average "amount in controversy"
in excess of one million dollars — in three to nine months. Most
disputes before it involve financial issues concerning the
allowability of grantee expenditures, but the Board's jurisdiction
extends also to disputes over grant terminations and some
renewals. A recent study^ indicates that the Board's process
reduces the opportunity for maneuvering by the parties, facilitates
an expeditious, inexpensive disposition of all but the most
complex cases, and is overwhelmingly approved by most attorneys
who practice before it.

The Board's success should not be discounted because won in
an environment unusually favorable to efficient dispute
resolution. 2 The fact is that similar procedures are now used with
apparently equal success at other agencies. They merit the
attention of appeals boards, administrative panels, administrative
law judges ("ALJs") and all others involved in the decisional
process. Though recognizing that many factors affect the
procedures to be followed in any particular dispute, the
Administrative Conference encourages this trend toward reducing
the transaction costs of agency proceedings and believes that this
is a key responsibility of all presiding officers and their
supervisors. The Conference has, in several contexts, already
called on federal agencies to make greater use of internal time
limits,^ alternative means of dispute resolution,^ and case

1 This recommendation is based largely on the report "Model
for Case Management: The Grant Appeals Board" by Richard B.
Cappalli (1986), which explores how the methods described
separately below interact in an integrated case management system.

2 E.g., a moderate caseload per judge, a shared program
objective among all parties and a long-term relationship between
the agency and the claimant.

3 Recommendation 78-3 calls on all agencies to use
particularized deadlines or time limits for the prompt disposition
of adjudicatory and rulemaking proceedings, either by announcing
schedules for particular cases or adopting rules with general
timetables for their various categories of proceedings. Time
Limits on Agency Actions, 1 CFR § 305.78-3. The Conference has
also called on agencies to establish productivity norms and
otherwise exercise their authority to prescribe procedures and
techniques for accurate, expeditious disposition of Social Security
claims and disputes under grants. E.g., Procedures for
Determining Social Security Disability Claims, 1 CFR § 305.78-2;
Resolving Disputes under Federal Grant Programs, 1 CFR §
305.82-2.

32 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

management and other techniques^ to expedite and improve their
case handling. The Conference now calls upon all personnel who
conduct or oversee processing of adjudicative proceedings for the
federal government to make more determined efforts to use the
kinds of case management methods described below as may be
appropriate.

RECOMMENDATION

The Conference encourages the prompt, efficient and
inexpensive processing of adjudicative proceedings. Federal
agencies engaged in formal and informal adjudication should
consider applying the following case management methods to their
proceedings, among them the following:

1. Personnel management devices. Use of internal agency
guidelines for timely case processing and measurements of the
quality of work products can maintain high levels of productivity
and responsibility. If appropriately fashioned, they can do so

^ Recommendation 86-3 calls on agencies to make greater use
of mediation, negotiation, minitrials, and other "ADR" methods to
reduce the delay and contentiousness accompanying many agency
decisions. Agency Use of Alternative Means of Dispute Resolution^
1 CFR § 305.86-3. The Conference has called previously for
using mediation, negotiation, informal conferences and similar
innovations to decide certain kinds of disputes more effectively.
E.g.^ Procedures for Negotiating Proposed Regulations, 1 CFR §§
305.82-4, .85-5; Negotiated Cleanup of Hazardous Waste Sites
Under CERCLA, 1 CFR § 305.84-4; Resolving Disputes under
Federal Grant Programs, 1 CFR § 305.82-2.

5 Many of the practices recommended herein reflect the advice
contained in the Manual for Administrative Law Judges, prepared
for the Conference by Merritt Ruhlen. Recommendation 73-3
advises on using case management in adjudicating benefit and
compensation claims. It calls for continuous evaluation of
adjudicative performance pursuant to standards for measuring the
accuracy, timeliness and fairness of agency procedures. Quality
Assurance Systems in the Adjudication of Claims of Entitlement to
Benefits or Compensation, 1 CFR § 305.73-3. In addition.
Recommendation 69-6 urges agencies to compile and use statistical
caseload data about their proceedings. Compilation of Statistics on
Administrative Proceedings by Federal Department and Agencies, 1
CFR § 305.69-6.

OFFICIAL RECOMMENDATIONS 33

without compromising independence of judgment. Agencies
possess and should exercise the authority, consistent with the
ALJ's or other presiding officer's decisional independence, to
formulate written criteria for measuring case handling efficiency,
prescribe procedures, and develop techniques for the expeditious
and accurate disposition of cases. The experiences and opinions of
presiding officers should play a large part in shaping these criteria
and procedures. The criteria should take into account differences
in categories of cases assigned to judges and in types of
disposition (e.g., dismissals, dispositions with and without hearing).
Where feasible, regular, computerized case status reports and
supervision by higher level personnel should be used in furthering
the systematic application of the criteria once they have been
formulated.

2. Step-by- step time goals. Case management by presiding
officers and their supervisors should be combined with procedures
designed to move cases promptly through each step in the
proceeding. These include (a) a program of step-by-step time
goals for the main stages of a proceeding, (b) a monitoring system
that pinpoints problem cases, and (c; a management committed to
expeditious processing. Time guidelines should be fixed in all
cases for all decisional levels within the agency, largely with the
input of presiding officers and others affected. While the
guidelines should be flexible enough to accommodate exceptional
cases and should maintain their non-obligatory nature, they should
be sufficiently fixed to keep routine items moving and ensure that
any delays are justified. Agencies should encourage a
management commitment by including specific goals or duties of
timely case processing in pertinent job descriptions.

3. Expedited options. Agencies should develop, and in some
instances require parties to use, special expedited procedures.
Different rules may need to be developed for handling small cases
as well as for larger ones that do not raise complex legal or factual
issues.

4. Case file system.

(a) Agencies should develop procedures to ensure early
compilation of relevant documents in a case file. This will help
the presiding officer delineate the legal and factual issues, the
parties' positions and the basis for the action as promptly as
possible. The presiding officer may then structure the process
suitably and issue preliminary management directives.

34 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

(b) Disputes preceded by party interactions or investigations
which create a substantial factual record, as in most contract and
grant disputes, are especially amenable to this approach. Cases
involving strong fact conflicts or in which data are peculiarly
within the possession of one party who has motivations to suppress
them may be less suitable for a case file system.

5. Two stage resolution approaches. In proceedings where the
case file system is less appropriate, as where factual conflicts
render discovery important, agencies should consider using a two-
phase procedure.

(a) Phase one might be an abbreviated discovery phase
directed by a responsible official, with the product of that
discovery forming the "appeal file" for the next phase.
Alternatively, parties could be channeled into a private dispute
resolution mode, such as mediation, negotiation or arbitration,
which, even if unsuccessful, can serve to define major issues and
to advance development of the record. Before employing this
alternative, agencies would have to determine whether the
confidentiality rule that normally attaches to arbitration, mediation
and negotiation is so critical that it cannot be abandoned for the
sake of a more efficient second stage.

(b) A second stage, if necessary, should proceed under active
case management, as recommended.

6. Seeking party concessions and offering mediation.

Presiding officers should promote party agreement and concessions
on procedural and substantive issues, as well as on matters
involving facts and documents, to reduce hearing time and
sometimes avoid hearings altogether. Agencies should also (a)
encourage decisional officers to resolve cases (or parts thereof)
informally, (b) provide their officers training in mediation and
other ADR methods, and (c) routinely offer parties the services of
trained mediators.

7. Questioning techniques.

(a) Requests for clarification or development of record. If a
party makes a statement in a notice of appeal, brief, or other
submission which a presiding officer does not understand, doubts,
or wishes clarified, the officer should consider requiring the party
to expand upon its position. The ambiguity may relate to a
factual matter, or an interpretation of a legal precedent or a
document. Similarly, by preliminary study of the case file, the

OFHCIAL RECOMMENDATIONS 35

presiding officer could identify missing information and require
the party with access to such information to remedy the
deficiency. The officer could also issue "invitations to brief"
difficult questions of statutory interpretation or the like.

(b) Written questions for conference or hearing. The
presiding officer should manage cases so as to limit issues, proof,
and argument to core matters. Having ascertained the factual and
legal ambiguities in each side's case by careful study of the briefs
and documentation submitted, the presiding officer should
structure a prehearing conference or hearing as a forum for
addressing these ambiguities by seeking responses to carefully
formulated questions and providing appropriate opportunity for
rebuttal. In this way, and by otherwise seeking to identify the
specific questions in dispute early on, the presiding officer would
focus parties' attention on key issues and deflect unproductive
procedural maneuvers.

8. Time extension practices. Time extensions should be
granted only upon strong, documented justification. While
procedural fairness mandates that deadlines may be extended for
good cause, presiding officers should be aware that casual,
customary extensions have serious negative effects on an
adjudicatory system, its participants, and those wishing access
thereto. Stern warnings accompanying justified extensions have
had good success in curtailing lawyers' requests for additional
time.

9. Joint consideration of cases with common issues.

Whenever practicable and fair, cases involving common questions
of law or fact should be consolidated and heard jointly.
Consolidation could include unification of schedules, briefs, case
files and hearings.

10. Use of telephone conferences and hearings. Presiding
officers should take full advantage of telephone conferences as a
means to hear motions, to hold prehearing conferences, and even
to hear the merits of administrative proceedings where
appropriate. While telephone conferences may be either employed
regularly for handling selected matters or limited to a case-by-
case basis at the suggestion of the presiding officer or counsel,
experience suggests that maximum benefits are derived when
telephone conferences are made presumptive for certain matters.

11. Intra-agency review. Any subsequent intra-agency
review of an initial adjudicative decision should generally be

36 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

conducted promptly pursuant to flexible, preestablished time
guidelines and review standards.

12. Training. Agencies should offer, and presiding officers
seek, training in case management, mediation, negotiation and
similar methods, and should be alert to take advantage of them.
The training should be carried out with the advice and aid of
other federal agencies and groups with expertise.

OFHCIAL RECOMMENDATIONS 37

RECOMMENDATION 86-8:

ACQUIRING THE SERVICES OF "NEUTRALS" FOR

ALTERNATIVE MEANS OF DISPUTE RESOLUTION

The Administrative Conference has repeatedly encouraged
agencies to take advantage of mediation, negotiation, minitrials,
binding arbitration and other alternative means of dispute
resolution ("ADR").^ While some agencies have begun to employ
these methods to reduce transaction costs and reach better results,
many disputes are still being resolved with unnecessary formality,
contentiousness and delay. This recommendation is aimed at
helping agencies begin to explore specific avenues to expand their
use of ADR services.

A key figure in the effective working of various modes of
ADR, including negotiated rulemaking, is the "neutral" — a person,
usually serving at the will of the parties, who generally presides
and seeks to help the parties reach a resolution of their dispute.

^ In Recommendation 86-3, the Conference called on agencies,
where not inconsistent with statutory authority, to adopt
alternatives to litigation and trial-type hearings such as mediation,
minitrials, arbitration and other "ADR" methods. Agencies' Use of
Alternative Means of Dispute Resolution, 1 CFR § 305.86-3. In
the rulemaking sphere. Recommendations 82-4 and 85-5 have
been instrumental in promoting agency experimentation with
negotiated rulemaking, which involves convening potentially
interested parties to negotiate the details of a proposed rule.
Procedures for Negotiating Proposed Regulations, 1 CFR
§§ 305.82-4 and .85-5. See also. Negotiated Cleanup of
Hazardous Waste Sites Under CERCLA, 1 CFR § 305.84-4;
Resolving Disputes Under Federal Grant Programs, 1 CFR
§ 305.82-2; and Case Management as a Tool for Improving Agency
Adjudication, 1 CFR § 305.86-7.

38 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

These neutrals, often highly skilled professionals with considerable
training in techniques of dispute resolution, can be crucial to
using ADR methods with success. ^ For agencies to use ADR
effectively, they should take steps to develop routines for deciding
when and how these persons can be employed, to identify
qualified neutrals, and to acquire their services.

The diversity of roles played by neutrals and the uncertainty
as to certain applicable legal requirements present complications
for agencies considering uses of ADR. Neutrals may be specially
trained and accredited, or may simply hold themselves out as
having certain expertise, experience or credibility. They may be
called on to make binding decisions, consistent with applicable
statutory and regulatory requirements, when opposing positions
cannot be reconciled, or they may simply render advice to the
parties. Time may be of the essence in acquiring their services, as
in many arbitrations, but in some instances may be a minor
consideration. Costs of using outside neutrals may range from a
few thousand dollars (for the services of a minitrial advisor) to
six figures (for convening and facilitating a large-scale negotiated
rulemaking). These differences render specific advice difficult to
give in advance. Agencies, Congress, courts, and others who
employ ADR methods or review their use should nonetheless
observe certain guidelines intended to accomplish the following
goals:

■ Supply. Broadening the base of qualified, acceptable
individuals or organizations, inside and outside the government, to
provide ADR services.

■ Qualifications. Insuring that neutrals have adequate skills,
technical expertise, experience or other competence necessary to
promote settlement, while avoiding being too exclusive in the
selection process.

■ Acquisition. Identifying existing methods, or developing
new techniques, for expeditiously acquiring the services of
neutrals at a reasonable cost and in a manner which (a) insures a
full and open opportunity to compete and (b) enables agencies to
select the most qualified person to serve as a neutral, given that
the protracted nature of the government procurement process is

2 See the Glossary in the Appendix for brief descriptions of
the roles of neutrals in various proceedings.

OFFICIAL RECOMMENDATIONS 39

often inconsistent with the goals of ADR and the need to avoid
delays.^

■ Authority. Minimizing any uncertainty under the
"delegation" doctrine or similar theories that may adversely affect
the authority of some neutrals to render a binding decision. This
consideration, however, should not prove troublesome where
neutrals merely aid the parties in reaching agreement (as in nearly
all mediations, minitrials and negotiated rulemakings).

These proposals are intended to help agencies meet the
challenge of reaching these goals in a time of reduced resources
and in a milieu in which many affected interests may oppose
change.

RECOMMENDATION
A. Availability and Qualifications of Neutrals

1. Agencies and reviewing bodies should pursue policies that
will lead to an expanded, diverse supply of available neutrals,
recognizing that the skills required to perform the services of a
dispute resolution neutral will vary greatly depending on the
nature and complexity of the issues, the ADR method employed,
and the importance of the dispute. Agencies should avoid unduly
limiting the pool of acceptable individuals through the use of
overly restrictive qualification requirements, particularly once
agencies have begun to make more regular use of ADR methods.
While skill or experience in the process of resolving disputes, such
as that possessed by mediators and arbitrators, is usually an
important criterion in the selection of neutrals, and knowledge of
the applicable statutory and regulatory schemes may at times be
important, other specific qualifications should be required only
when necessary for resolution of the dispute. For example:

3 While there may be situations in which agencies can obtain
the services of a qualified outside neutral without following
formal procurement procedures, acquisitions of neutrals' services
are generally governed by the Competition in Contracting Act,
Pub. L. No. 98-369, Title VII, 98 Stat. 1175, which mandates full
and open competition for contracts to supply goods and services to
the federal government, and the Federal Acquisition Regulation,
48 CFR Chapter 1, Parts 1-53, which sets forth detailed
procedures for conducting competitive procurements.

40 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

(a) Agencies should not necessarily disqualify persons who
have mediation, arbitration or judicial experience but no specific
experience in the particular ADR process being pursued.

(b) While agencies should be careful not to select neutrals who
have a personal or financial interest in the outcome, insisting upon
"absolute neutrality"--^.g., no prior affiliation with either the
agency or the private industry involved--may unduly restrict the
pool of available neutrals, particularly where the neutral neither
renders a decision nor gives formal advice as to the outcome.

(c) Agencies should insist upon technical expertise in the
substantive issues underlying the dispute or negotiated rulemaking
only when the technical issues are so complex that the neutral
could not effectively understand and communicate the parties'
positions without it.

2. Agencies should take advantage of opportunities to make
use of government personnel as neutrals in resolving disputes.
These persons may include agency officials not otherwise involved
in the dispute or employees from other agencies with appropriate
skills, administrative law judges, members of boards of contract
appeals, and other responsible officials. The Administrative
Conference, Federal Mediation and Conciliation Service ("FMCS"),
the Department of Justice (particularly the Community Relations
Service ("CRS")) and other interested agencies should work to
encourage imaginative efforts at sharing the services of federal
"neutrals," to remove obstacles to such sharing, and to increase
parties' confidence in the selection process.

3. Congress should consider providing FMCS, CRS and other
appropriate agencies with funding to train their own and other
agencies' personnel in the particular skills needed to serve in
minitrials, negotiated rulemakings, and other ADR proceedings.

4. The Administrative Conference, in consultation with
FMCS, should assist other agencies in identifying neutrals and
acquiring their services and in establishing rosters of neutral
advisors, arbitrators, convenors, facilitators, mediators and other
experts on which federal agencies could draw when they wished.
The rosters should be based, insofar as possible, on full disclosure
of relevant criteria (education, experience, skills, possible bias,
and the like) rather than on strict requirements of actual ADR
experience or professional certification. Agencies should also
consider using rosters of private groups {e.g., the American
Arbitration Association). The Conference, FMCS or another

OFFICIAL RECOMMENDATIONS 41

information center should routinely compile data identifying
disputes or rulemakings in which neutrals have participated so
that agencies and parties in future proceedings can be directed to
sources of information pertinent to their selection of neutrals.

5. Agencies should take advantage of opportunities to expose
their employees to ADR proceedings for training purposes, and
otherwise encourage their employees to acquire ADR skills.
Employees trained in ADR should be listed on the rosters
described above, and their services made available to other
agencies.

B. Acquiring Outside Neutrals' Services

1. In situations where it is necessary or desirable to acquire
dispute resolution services from outside the government, agencies
should explore the following methods:

(a) When authorized to employ consultants or experts on a
temporary basis (e.g., 5 U.S.C. § 3109), agencies should consider
utilizing that authorization in furtherance of their ADR or
negotiated rulemaking endeavors.

(b) Agencies contemplating ADR or negotiated rulemaking
projects involving private neutrals should, as part of their
acquisition planning process pursuant to the Federal Acquisition
Regulation ("FAR") Part 7,^ periodically give notice in the
Commerce Business Daily and in professional publications of their
needs and intentions, ^ so as to allow interested organizations and
individual ADR neutrals to inform the agency of their interest and
qualifications.

(c) Where speed is important and the amount of the contract
is expected to be less than $25,000, agencies should use the
streamlined small purchase procedures of Subpart 13.1 of the

4 48 CFR Part 7.

5 Agencies are required to give Commerce Business Daily notice
for all contract solicitations in which the government's share is
likely to exceed $10,000. 15 U.S.C. § 637(e); 48 CFR § 5.201(a).
For procurements between $10,000 and $25,000 in which the
agency reasonably expects to receive at least two offers, no such
notice is required. Pub. L. No. 99-591, October 18, 1986, Title
IX, Section 922.

42 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Federal Acquisition Regulation^ in acquiring the services of
outside neutrals, particularly minitrial neutral advisors, mediators
and arbitrators.

(d) Agencies that foresee the need to hire private neutrals for
numerous proceedings should consider the use of indefinite
quantity contracts as vehicles for identifying and competitively
acquiring the services of interested and qualified neutrals who can
then be engaged on an expedited basis as the need arises.
Agencies should, where possible, seek contracts with more than
one supplier. In fashioning such indefinite quantity contracts,
agencies should take care to comply with the following:

(1) Agency contracts should specify a minimum
quantity, which could be a non-nominal dollar amount
rather than a minimum quantity of services.*^

(2) Negotiation of individual orders under the contract
is desirable, but should generally adhere to the personnel,
statements of work, and cost rates or ceilings set forth in
the basic indefinite quantity contract, so as to minimize
"sole source" issues.

(e) Agencies should also consider:

(1) Entering into joint projects for acquiring neutrals'
services by using other agencies' contractual vehicles.

(2) Using other contracting techniques, such as basic
ordering agreements and schedule contracts, where
appropriate to meet their needs for neutrals' services.

(3) Proposing a deviation from the FAR or amending
their FAR supplements, where appropriate.

(f) Agencies should evaluate contract proposals for ADR
neutrals' services on the qualifications of the offeror, but cost
alone should not be the controlling factor.^

6 48 CFR Subpart 13.1. This Subpart allows agencies to make
purchases in amounts less than $25,000 without following all of
the formalities prescribed in the FAR for ordinary procurements.
If the procurement is for less than $10,000, the agency need not
advertise it in advance in the Commerce Business Daily. 48 CFR
§ 5.201(a). None of these provisions relieves the agency of its
mandate to obtain competition.

7 48 CFR § 16.504(a)(2).

8 4a CFR § 15.605(c).

OFFICIAL RECOMMENDATIONS 43

2. The Civilian Agency Acquisition Council and Defense
Acquisition Regulatory Council should be receptive to agency or
Administrative Conference proposals for deviations from,^ or
amendments to, the FAR to adapt procurement procedures to the
unique requirements of ADR processes, consistent with statutory
mandates.

3. In the absence of appropriate considerations suggesting a
different allocation of costs, in minitrials and arbitration the
parties customarily should share equally in the costs of the
neutrals' services.

Glossary

Mediator. A mediator is a neutral third party who attempts
to assist parties in negotiating the substance of a settlement. A
mediator has no authority to make any decisions that are binding
on either party.

Convenor /Facilitator. Negotiated rulemakings generally
proceed in two phases, one using a "convenor" and the other a
"facilitator." In the first (convening) phase, a neutral called a
convenor studies the regulatory issues, attempts to identify the
potentially affected interests, and then advises the agency
concerning the feasibility of convening representatives of these
interests to negotiate a proposed rule. If the agency decides to go
forward with negotiating sessions, the convenor assists in bringing
the parties together. In the second (negotiating) phase, a neutral
called a facilitator manages the meetings and coordinates
discussions among the parties. When the parties request, a
facilitator may act as a mediator, assisting the negotiators to reach
consensus on the substance of a proposed rule. The roles of
convenor and facilitator sometimes overlap, and often both
functions are performed by the same person or persons. Neither a
convenor nor a facilitator has authority to make decisions that are
binding on the agency or on the participating outside parties.

Neutral Advisor. A minitrial is a structured settlement process
in which each party to a dispute presents a highly abbreviated
summary of its case before senior officials of each party
authorized to settle the case. In this recommendation, it is

9 48 CFR § 1.402,

44 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

presumed that the government is one party to the dispute. In
some (but not all) minitrials, a neutral advisor participates by
hearing the presentations of the parties and, optionally, providing
further assistance in any subsequent attempt to reach a settlement.
Typically, a neutral advisor is an individual selected by the
parties. Duties of a neutral advisor may include presiding at the
presentation, questioning witnesses, mediating settlement
negotiations, and rendering an advisory opinion to the parties. In
no event does a neutral advisor render a decision that is binding
on any party to a minitrial.

Arbitrator. An arbitrator is a neutral third party who issues a
decision on the issues in dispute after receiving evidence and
hearing argument from the parties. Arbitration is a less formal
alternative to adjudication or litigation, and an arbitrator's
decision may or may not be binding. Arbitration may be chosen
voluntarily by the parties, or it may be required by contract or
statute as the exclusive dispute resolution mechanism.

BACKGROUND REPORTS

FOR

RECOMMENDATIONS

86-1 THROUGH 86-8

BACKGROUND REPORT FOR RECOMMENDATION 86-1

NONLAWYER ASSISTANCE TO INDIVIDUALS IN FEDERAL MASS JUSTICE
AGENCIES: THE NEED FOR IMPROVED GUIDELINES

Zona Fairbanks Hosteller
Attorney at Law
Washington, DC

Report to the Administrative Conference of the United States
June 1, 1986

48 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

TABLE OF CONTENTS

I . Summary

II. Large Numbers of Individuals Involved in Federal
Mass Justice Agency Proceedings Have Unmet Needs
for Assistance

III. Nonlawyer Professionals Currently Meet Many of the

Needs for Assistance of Individuals Involved in Mass
Justice Agency Proceedings and as a Class are
Competent to Do So

IV. Federal Mass Justice Agencies Have Authority to
Authorize Nonlawyer Assistance in Administrative
Proceedings

V. Federal Law and Mass Justice Agency Regulations
Do Not Maximize the Potential for Increased
Nonlawyer Professional Assistance Because They Do
Not Adequately Protect Nonlawyer Professionals from
State Unauthorized Practice Laws

VI. Federal Mass Justice Agency Authorization for

Increased Nonlawyer Professional Assistance Can Be
Accomplished in a Manner That is Consistent With
Agency Needs to Regulate Competence and Ethical
Conduct of Practitioners

VII. Conclusion

NONLAWYER ASSISTANCE 49

I. Summary

At the request of the Administrative Conference of the United States
(ACUS), a study was undertaken of so-called "mass justice" agencies - that
is, agencies having a high volume of individual and family claims,
applications or disputes. The purpose of the study was to make findings and
recommendations with respect to mass justice agencies on the following
matters:

1. To what extent individuals are not assisted or represented by
anyone (exclusive of agency personnel) and the resulting
ramifications for efficient and fair agency process;

2. To what extent individuals are assisted or represented by
nonlawyers and to what extent by lawyers; the skills, training and
experience each group is required by agency rules to have and in
fact possesses; the functions each group performs; and the
differing results, if any.

3. To what extent agency rules encourage or discourage nonlawyer
assistance and representation and what the justifications are for
such rules.

A. To what extent federal and state laws or professional codes of
ethics encourage or discourage nonlawyer assistance and
representation to those involved in federal agency proceedings,
and the underlying rationale for them.

Two mass justice agencies were selected for intensive study: The
Social Security Administration and the Immigration and Naturalization
Service. In addition, relevant procedures of the Veterans Administration
and the Internal Revenue Service were also examined for comparison
purposes.^ Interviews of participants in federal agency proceedings were
largely conducted in the ten-month period between May 1, 1985 and February
28, 1986. These included interviews of federal agency officials as well as
interviews with a nxunber of private nonprofit legal aid and social services

1 Although the focus of this study is mass justice agencies, reference
has also been made as appropriate to existing literature on nonlawyer
assistance in non-mass justice agency proceedings (such as Professor
Jonathan Rose's unpublished study for ACUS on economic regulatory
proceedings entitled Representation by Nonlawyers in Federal Administration
Agency Proceedings: An Expanded Role, submitted to ACUS April 9, 1984).

50 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

agencies which, directly or indirectly, provide lawyer and nonlawyer
professional assistance in mass justice agency proceedings.^

A considerable amount of material bearing on the subject of this
study has been published in the past. In order not to duplicate past
effort, this study has collated and drawn extensively upon the
investigations of others, most notably, the survey of federal agencies
published in February, 1985 by the American Bar Association's Standing
Committee on Lawyers' Responsibility for Client Protection and The
American Bar Association Center for Professional Responsibility. A copy of
the American Bar Association report is attached to this draft as Appendix A.

This study has resulted in the following findings and conclusions:

(1) A large number of individuals involved in federal mass justice
agency proceedings have unmet needs for assistance at all levels of agency
process, but particularly assistance with filling out forms and attending
informal interviews and conferences prior to any formal proceeding where a
formal appearance of counsel or representative is made. From an agency
point of view, persons who are unassisted at the early stages are more
likely than not to cause a loss of agency efficiency because they are likely
to require more time, effort and help on the part of the agency's staff than
those who are otherwise assisted. The existing pool of lawyers is
inadequate to meet either all the early stage needs for assistance or the
later stage needs for representation of low and moderate income persons.
The absence of adequate assistance and representation resources is

2 Interviews were conducted with the directors and a cross section of
nonlawyer professional staff members of the following private non-profit
organizations: AYUDA; Alien Rights Project of the Washington Lawyers'
Committee; Migrant Legal Action Project; American Association of Retired
Persons' Legal Counsel for the Elderly Department; National Senior Citizens
Law Center; National Council for Senior Citizens; George Washington Law
School Paralegal Institute for Seniors; George Washington Law School clinics
on disability benefits and immigration matters; Neighborhood Legal Services
Program; The Legal Aid Society; Family and Child Services; lona House;
Antioch Law School clinics on paralegal advocacy, government benefits, and
immigration matters; Women's Legal Defense Fund; Catholic University legal
services clinic; District of Columbia Citizens Complaint Center; National
Paralegal Association (volunteer program); Pro bono Coordinator's office of
the D.C. Bar; Lawyer Referral and Information Service of the D.C. Bar;
Disabled American Veterans; American University Law School Clinic on
Veterans Laws; National Organization of Social Security Claimants'
Representatives .

Assistance in collecting statistical and other agency data and in
interviewing participants in federal agency proceedings was provided by
Majel Stein, who was a law student at the time at George Mason Law School
and is currently a law student at the University of Virginia Law School.

NONLAWYER ASSISTANCE 51

particularly acute for working poor and moderate income persons who
ordinarily do not qualify for free assistance from legal aid organizations,
and who are frequently unable to afford the prevailing market fees of
lawyers .

(2) Statistical evidence indicates that in agency hearings
unrepresented persons are less likely to obtain favorable decisions than
those who are represented. Those individuals in mass justice agency
hearings who are currently represented by nonlawyers achieve results only
slightly less favorable than those achieved by individuals who are
represented by lawyers, and they achieve results which are significantly
more favorable to them than those individuals who are completely
unrepresented. This evidence, together with subjective opinion evidence
that in mass justice agency proceedings nonlawyers generally perform the
same functions at many levels of the agency process as lawyers, and perform
them well, leads to the conclusion that nonlawyer professionals as a class
are able to provide competent assistance to individuals at many levels of
mass justice agency proceedings.

(3) Mass justice agency regulations and practice do not entirely
prohibit nonlawyer assistance, but neither do they encourage nonlawyer
assistance as much as they might, consistent, of course, with legitimate
agency interests in regulating the qualifications and ethical conduct of
agency practitioners. In some agencies, nonlawyer assistance is encouraged
only when it is provided free of charge (usually to relatives, friends, or
poor persons). These agencies fail to maximize the potential for increased
nonlawyer professional assistance to working poor and moderate income
persons who can afford to pay modest fees because they fail to provide
nonlawyer professionals with adequate protection from prosecution under
state unauthorized practice laws. State unauthorized practice laws, and the
fear of prosecution under those laws, were found by this study to be the
single most chilling deterrent to the development of an increased pool of
nonlawyer professionals to assist moderate income individuals involved in
mass justice agency proceedings.

While nonlawyer professionals who provide assistance for fee to
moderate income persons are adequately protected against state prosecution
for unauthorized practice under the regulations of some agencies (the
Internal Revenue Service, for example) they are not protected at all under
other agency regulations (for example, those of the Immigration and
Naturalization Service). In addition, even when agency regulations permit
nonlawyer practice for a fee (as do those of the Social Security
Administration) the long history of unauthorized practice enforcement in the
states, and the uncertainty about the federal government's policy towards
that enforcement, has acted as a practical deterrent to the development of
nonlawyer professional practice.

(A) Under the federal preemption doctrine articulated by the Supreme
Court in Sperry v. Florida ex rel Florida Bar, 373 U.S. 379 (1963),
nonlawyers can be protected from prosecution under state unauthorized

52 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

practice laws for their federal agency practice activity, but only if agency
regulations unambiguously authorize the activity to be carried on in the
respective states. This federal preemptive protection is particularly
needed for those nonlawyer professionals who are, or might be, willing to
provide assistance for fee to moderate income persons.

(5) Individual mass justice agencies probably have implied authority
to issue regulations authorizing increased nonlawyer representation. Even
if they do not have implied authority, it is probable that Section 555(b) of
the Administrative Procedure Act provides sufficient legislative authority
for agencies to authorize increased nonlawyer representation. However,
given the uncertainty and fears about the enforcement of state unauthorized
practice laws, and the fact that Section 555(b) is not crystal clear
facially, it may be prudent and useful to amend the language of Section
555(b) itself to emphasize that nonlawyer agency practice is authorized
under the Administrative Procedure Act. It may also be helpful to amend
Section 555(b) to make it unambiguously clear that those nonlawyers who are
admitted to practice by an agency are authorized to do all that is necessary
and incidental to that practice in their respective states.

(6) Federal mass justice agencies currently utilize a range of
admission criteria and other measures to ensure that individual nonlawyer
practitioners meet agency standards of competence at various stages of
agency process according to the particular objectives and needs of the
respective agencies. These mechanisms are generally workable and should be
left, as they now are, to individual agency determination, according to each
agency's own particular objectives and needs. Agencies should be urged,
however, to review their regulations governing competence towards the goal
of increasing the pool of nonlawyer representatives who can competently
provide assistance at all levels of agency proceeding where nonlawyer
assistance is determined by an agency to be feasible.

(7) Agencies should review their rules of practice that deal with
attorney misconduct (such as those dealing with negligence, fee gouging,
fraud, misrepresentation and representation when there is a conflict of
interest) to ensure that similar rules are made applicable to nonlawyers.
In addition, agencies should ensure that effective agencies procedures are
established for adequate enforcement of those rules of practice including
agency procedures for receiving complaints from the public.

NONLAWYER ASSISTANCE 53

TI. Large Numbers of Individuals Involved in Federal Mass Justice
Agency Proceedings Have Unmet Needs for Assistance

The principal engagement between an ordinary citizen and a federal
agency concerning a claim, application or dispute is most likely to occur in
a mass justice agency. From the viewpoint of the ordinary citizen or
resident seeking disability or retirement benefits, adjustment of alien
status to citizenship, or refund of taxes, each mass justice agency decision
affecting his claim or dispute is of great personal importance. And from
the individual's point of view, assistance from knowledgeable sources in
presenting the claim or application, or pressing the individual's side of
the dispute, may also be of great importance. In fact, there is statistical
evidence that represented individuals in mass justice agency proceedings are
more likely to prevail than unrepresented ones.-*

^ For a statistical study concluding that represented individuals are
more likely to prevail than unrepresented ones in informal nonadversarial
proceedings of agencies dispensing disability benefits, and for a discussion
of some of the costs and benefits of providing that representation, see
Popkin, The Effect of Representation in Nonadversary Proceedings - A Study
of Three Disability Programs. 62 Cornell L.Rev. 990 (1977) (This 1977 study
found, for example, that in Federal Employees' Compensation Act proceedings,
represented claimants had an advantage of up to 28% at the hearing stage.)

More recent statistical data compiled by the Social Security
Administration reveals that in fiscal year 1983, unrepresented persons
prevailed in IA.4% fewer request for hearing matters than those who were
represented. See Office of Hearing Appeals' survey: Participant
Involvement in Request for Hearing Cases For Fiscal Year 1983, May 1984,
attached to this paper as Appendix B, and discussion of that survey, in the
text at note 42, infra.

Veterans Administration data also reveals that unrepresented persons
are slightly less likely to prevail before the Board of Veterans Appeals
than those, represented by attorneys or nonprofit service organizations which
prevail in 3% to 1.5% more matters respectively. These Veterans
Administration statistics are cited in the Supreme Court's decision in
Walters v. National Association of Radiation Survivors, 105 S.Ct. 3180, 3193
(1985). (Win rates before the Veterans Board of Appeals by any category of
representative are significantly lower than those before review boards of
other agencies, ranging only between 15% and 18%. By statute, there is no
judicial review of Veterans Board decisions.)

By statute, no one may charge veterans a fee of more than $10 in
disability benefit proceedings. 32 U.S.C. 3404(C). The Walters case, id.,
involved a challenge to the $10 fee cap on the ground that the cap
effectively precluded availability of lawyers to provide representation as a

54 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

At the same time, from the viewpoint of government policymakers, the
federal mass justice agency decision system is on overload, and there seems
to be no end in sight to the ever mounting numbers. The Social Security
Administration, for example, in fiscal year 1983 experienced a 13% caseload
increase over fiscal year 1982 at all levels of hearings and appeals,
resulting in a total of 362,223 requests for hearings. Federal court
litigation also increased by 97% over the previous year as 23,690 new cases
were filed. (Disability litigation comprised 98% of the new litigation.)
Non-litigated applications for social security benefits have also increased
as several hundred thousand new beneficiaries have been added to the rolls,
bringing the total beneficiaries from 35.6 million in 1982 to an estimated
36.3 million in 1984.^ The Veterans Administration decides approximately

practical matter and was, therefore, unconstitutional. The court upheld the
fee limitation because it found that the record did not demonstrate that
veterans were harmed by nonlawyer representation in administrative agency
proceedings before the Veterans Administration. Justice Stevens dissented
and argued that whether or not lawyers would be more successful in those
proceedings, the fee limitation interfered with the free choice of
representative, and that that interference was both harmful and an
unconstitutional infringement of individual liberty.

The Immigration and Naturalization Service does not maintain records
concerning representation in INS proceedings. Knowledgeable persons in non-
profit agencies serving aliens stated that it was their experience that
represented persons more often prevailed than those who were unrepresented.
(See note 2 supra for a list of agencies surveyed.)

Unrepresented litigants are also less likely to prevail in judicial
proceedings. A study of 87 "conventional" civil actions filed by indigents
in the United States District Court for the District of Columbia between
1960 and 196A showed that those indigent civil plaintiffs who represented
themselves were twice as unlikely than represented indigents to survive a
motion to dismiss on the pleadings and almost nine times less able to
achieve a settlement. Moreover, these pro se plaintiffs had no chance of
obtaining discovery and were not among the four plaintiffs who reached a
trial on the merits. See Schmertz, The Indigent Civil Plaintiff in the
District of Columbia; Facts and Commentary, 27 FED. B.J. 235, 2A1-43
(1967). Another four-city study found that civil defendants represented by
counsel are almost six times more likely to succeed than those unable to
obtain counsel. See Johnson, Thrown to the Lions, A Plea for a
Constitutional Right to Counsel for Low-Income Civil Litigants, A Bar Leader
17 (ABA 1978).

^ Department of Health and Human Services, Social Security
Administration, Social Security Administration 198A Annual Report to
Congress at 15, 33, A8-A9.

NONLAWYER ASSISTANCE 55

800,000 claims a year for service-connected disability benefits and pension
claims, and about 66,000 of the claims which are denied are contested in
administrative proceedings.^ The 1983 Annual Report of the Attorney General
states that 223,000 petitions for adjustment of status were considered, and
the Service reported an annual caseload of 90,000 litigated matters, from
administrative reviews through the federal court system."

Given the size of mass justice agency caseloads, and the widely
varying factual circumstances presented in the cases, it is, of course,
exceedingly difficult for agencies to reach uniformly accurate and fair
decisions at all stages. Errors will inevitably occur, often requiring
under our present system not only administrative corrections, amendments and
appeals, but also judicial review. Moreover, in some areas - disability
claims, for example -the facts may change many times, thus necessitating new
claims and reviews for each change in circxamstance. '

Sources of knowledgeable assistance for the individuals involved in
mass justice agency proceedings can make the correction process more
efficient and fairer for both individuals and agencies. In this connection,
it should be noted that individuals dealing with federal mass justice
agencies need help both at the very early, nonadversarial, stages of agency
process when information is collected, forms are filled out, and questions
answered, and also at subsequent more formal hearing and adversarial stages.
In fact, it was the consensus of those interviewed (see note 2, supra) that
the greatest volume of need is in the early stages, well before there is any
requirement for formal appearance of counsel or representative. There was
also general agreement that if an individual presenting a claim or
application has competent assistance at the outset, even before forms are
submitted, the amount of agency time required to consider it can be reduced
considerably. Ascertaining and resolving factual issues is the major part
of a mass justice agency's workload, and when the individual has the benefit
of knowledgeable assistance in presenting the facts clearly and in a format
that is familiar to the agency, the administrative process is accelerated
and the decision-maker helped to reach a correct decision initially. A
clearer record is also established for any administrative review that does

Data contained in the 1978 report of the Legal Services Corporation
and introduced into the record of Walters v. National Association of
Radiation Survivors, supra, at 3183, the Court noting that evidence before
the Court indicated that the figures remain fairly constant from year to
year.

^ Annual Report of the Attorney General (1983), 157.

For a critical view of this multiplicity of review and expression of
alarm over "astronomical" caseloads in social security disability
proceedings, see Dixon, The Welfare State and Mass Justice; A Warning From
the Social Security Disability Program. 1972 Duke L.J. 681 (1972).

56 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

ensue, thus making it easier for the administrative reviewer to determine
speedily the correctness of the initial decision.

Almost 25 years ago, Allanson Willcox, General Counsel of what was
then the Department of Health, Education and Welfare, acknowledged the
efficacy of legal representation in administrative process generally when he
addressed the 1963 annual meeting of the Virginia State Bar Association. He
candidly stated:

The fact that a citizen can retain (a lawyer) to represent him
goes a long way towards assuring that he will receive the
treatment to which he is entitled at the hands of a government
agency. * * * I say this despite my conviction that the officials
who administer local, state and federal programs would stand
toward the top in competence and dedication to duty. But no one
would deny that administrative agencies can and do make mistakes;
as with any group, no official is infallible, and some are more
fallible than others. And not infrequently a lawyer can bring out
facts or considerations that the administrator with the best will
in the world would otherwise overlook.

Counsel Willcox' s comments focused on the help that lawyers can and
do give their clients. Today there is serious debate in many quarters over
the question of whether lawyers are the only professionals who can provide
assistance or representation in administrative proceedings. ° There is also

° Lay advocates who counsel and assist citizens with their
administrative problems have been used with considerable success in other
countries. A notable example are the 750 Citizen Advice Bureaus widely used
in Great Britain. These neighborhood offices handle each year some three
million requests for information and advice and are providing an increasing
amount of nonlawyer representation in administrative appeal proceedings.
See Sloviter, Let's Look at Citizens Advice Bureaux, 65 American Bar
Association Journal 567 (1979); Zucker, Citizen's Advice Bureaus, paper
presented at the Conference on the Extension of Legal Services to the Poor,
Department of Health, Education and Welfare, Washington, D.C. November 12,
196A. A few comparable examples can be found scattered throughout this
country. For example, the Women's Legal Defense Fund in Washington, D.C.
employs nonlawyers to provide assistance and representation before
administrative, prosecutorial and judicial branches of the D.C. government
in cases involving battered women. Annual Report of the Women's Legal
Defense Fund (198A) on file with the District of Columbia Bar Foundation.
Many commentators have urged an increased use of nonlawyer professionals to
provide assistance to citizens who have a wide range of administrative
agency problems and also to those who have non-administrative agency
disputes such as those ending up in small claims courts. See, e.g. , Sparer,
Thorkelson & Weiss, The Lay Advocate, A3 U.Det.L.J. A93 (1966); Zander,
Legal Services for the Community (1978); Bellow, "Legal Services to the
Poor: An American Report," chapter in Access to Justice and the Welfare

NONLAWYER ASSISTANCE 57

continuing debate over the question of whether the traditional adversarial
methods employed by lawyers are the only methods for resolving disputes
(either in administrative or judicial settings.)

It is not necessary to discuss here the pros and cons of these
relatively global topics. It is sufficient to focus in this paper on the
fact that lawyers, even if they are to be preferred in administrative agency
proceedings, are not available in adequate numbers to meet all the needs for
assistance in mass justice agencies. As we shall see, there are large gaps
in representation even at the hearing and adversarial stages of mass justice
agency review, and there was uniform agreement among agency participants
interviewed that the gaps are even larger at the more informal application
and consultation stages. This does not reflect an inadequate supply of
lawyers in the country but, rather, reflects an inadequate supply of lawyers
under our current legal service delivery systems, to provide the assistance
that poor and moderate income persons can afford for their everyday, not
very remunerative (for lawyers), mass justice agency claims and
applications . ^^

State, 49 (Capeletti ed. 1980); Statsky, Paralegal Advocacy Before
Administrative Agencies; A Training Format, 4 Toledo L.Rev. 439 (1973).

^ The need to explore differing methods of resolving legal disputes as
an alternative to traditional adversarial methods has been a matter of well
publicized discussion in recent years. See generally Goldberg, Green and
Sander, Dispute Resolution (Little, Brown and Co. 1985). The American Bar
Association and several courts systems, including that of the District of
Columbia, are currently fostering experiments with mediation, voluntary and
mandatory arbitration, and other nonadversarial programs, some of them as
part of an ABA funded pilot "multidoor courthouse" program. See Edelman,
Institutionalizing Dispute Resolution Alternatives, 9 Just.Sys.J. 134
(1984). The Administrative Conference of the United States adopted a
recommendation in 1982 urging federal agencies to undertake experiments with
mediation techniques in rulemaking procedures. As a result, several federal
agencies, including the Environmental Protection Agency and the Federal
Trade Commission, have done so. See ACUS Recommendation 82-4; Harter,
Negotiating Regulations; A Cure For Malaise, 71 Georgetown L.J. 1 (1982).

According. to experts in the field of alternative disputes, trained
nonlawyer professionals are an integral part of the current development of
nonadversarial alternatives. Interviews with Michael Lewis, Deputy
Director, National Institute for Dispute Resolution; Linda Singer, Executive
Director of the District of Columbia Center for Community Justice.

■'■^ Former president Carter characterized the distribution of legal
services in the nation with the much publicized statement that "We are
overlawyered but underrepresented." Speech to the Los Angeles County Bar
Association on the occasion of its centennial celebration, 1978.

58 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Legal services in the administrative agency field have historically
been available to those who could afford to pay for them. (Those seeking a
television license or an airline route, for example, have been heavy users
of available legal resources.) For many years, little attention was paid to
the fact that low and moderate income persons were developing increased
contacts with federal and state administrative agencies and needed
assistance. In the mid-1960s, attention was focused on this phenomenon and
particularly on the impact of administrative decisions on the poor.
Professor Edward Sparer, the director of a legal services program and a
leader in the movement to provide free legal aid to the poor, wrote in 196A
that :

No longer is the primary contact of the poor man with the law
in the ordinary courtroom (criminal or otherwise) but in the
anteroom of a city, state or federal agency as he awaits a
determination of vital significance to him and his family. ^^

With increased national attention on the needs of the poor in the
mid-1960s, new efforts were made both by government and by private social
welfare agencies to provide legal aid and paralegal assistance to those who
were at the bottom of the economic scale. Neighborhood legal aid programs,
with monies provided by the federal Legal Services Corporation, were
established in every state. However, as Derek Bok, President of Harvard
University, has pointed out: "Even in its palmiest days, the Corporation
was only empowered to help the poor and had money enough to address but a
small fraction of the claims of even this limited constituency."^^ (Other
studies, and this author's interviews with legal aid groups, confirm that
legal assistance organizations serving the very poorest cannot meet all the

^^ Sparer, The New Public Law; The Relation of State Administration
to the Legal Problems of the Poor, paper presented at the Conference on the
Extension of Legal Services to the poor sponsored by the Department of
Health, Education and Welfare, Washington, D.C., Nov. 12, 196A. See also
Reich, The New Property, 73 Yale L.J. 731 (1964); Hostetler, "Poverty and
the Law," chapter in Poverty As A Public Issue (ed. Seligman), p. 177 (Free
Press-MacMillan) 1965.

^^ Bok, Law and Its Discontents; A Critical Look at Our Legal System,
37th Annual Cardozo Lecture, 38 Record of the Association of the Bar of the
City of New York (No. 1) 12, 18 (1983). The Legal Services Corporation had
estimated in 1978 that, nationally, no more than one out of seven persons
qualifying under the Corporation's income standard for free legal assistance
was assisted by federally funded legal service programs. The Legal Services
Corporation and the Activities of its Grantees; A Fact Book (Legal Services
Corporation; Spring 1979). The cuts in federal funding for the Corporation
since 1978 have reduced legal aid office budgets by 25% and thus exacerbated
the problem of inadequate resources for indigents.

NONLAWYER ASSISTANCE 59

requests for help and must frequently close their doors for intake of new
cases - sometimes for months at a time.)

At the same time, the legal needs of the working poor and moderate
income groups have never been met by federally funded legal aid programs,
and they continue to be largely ignored by federal and state policymakers
(although there are some evolving experiments in the private sector with
prepaid legal services and high volume clinics). As Harvard President Bok
observed generally with regard to the millions of people with modest
incomes, "the cost of legal services grows much faster than the cost of
living * * * [and] [i]n practice most people find their legal rights
severely compromised by the cost of legal services. .. ."■'■^ The president of
the American Bar Association recently wrote that "Many middle- income
Americans . . . find themselves unable to assert their legal rights because
they cannot afford to do so. According to some estimates, as many as 100
million Americans find themselves in this position". ■'•^ The high cost of
lawyers is a factor frequently cited in public opinion polls as to why
citizens do not make greater use of lawyers, and complaints about excessive
fees comprise the largest single category of client complaints against
lawyers lodged with bar disciplinary entities. ■'•°

As a result of the high cost of legal assistance, many of those who
are neither very poor (and thus eligible for federally subsidized legal aid)
nor very affluent (and thus in a financial position to purchase lawyers'
services at prevailing market rates) do without legal assistance for many
kinds of legal problems, including problems with administrative agencies.
The American Bar Foundation conducted a survey of over 2,000 families in the
mid-1970s to assess the personal, nonbusiness problems encountered by the
public and their use of lawyers' services to aadress these problems. The
survey revealed that overall less than one out of two persons who reported
having had a "serious personal (nonbusiness) difficulty with a government
agency" had consulted a lawyer. The survey revealed that lower- income
persons were even less likely to consult a lawyer; and that over 50% of all

^-^ Report of the Committee on Civil Legal Services of the Judicial
Conference of the District of Columbia (1980) p. 13; interview with Ann
Barker, Director of Public Service Activities, District of Columbia Bar.

1^ Bok, Note 12 supra, at 13.

^5 Falsgraf, "Access to Justice in 1986", ABA Journal, Feb. 1, 1986.

^° Interview with Thomas H. Henderson, Jr., Deputy Bar Counsel, Board
on Professional Responsibility, District of Coltombia Bar.

60 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

income groups thought that lawyers charged more for their services than they

were worth

While the extent of national unmet needs for assistance with legal
problems generally, or with administrative problems specifically, cannot be
calculated with mathematical precision, there was widespread agreement among
persons interviewed for this report that the studies and estimates of need
discussed above are generally accurate and that at least a substantial
number of individuals who are involved in mass justice agency proceedings
have unmet needs for assistance, particularly at the very early stages where
forms need to be filled out and rules explained. ° In the immigration area,
estimates of need ranged between 50% and 80%. (An example of this is
illustrated by a visit in connection with this report to a local office of
the Immigration and Naturalization Service. Over one hundred persons, most
of whom were non-english speaking, were milling around and trying to find
out which of two lines to stand in to obtain or process various INS forms.
It took approximately two hours or more to reach the head of the line, at
which time one could finally ask whether one was in the correct line. If
the individuals mistakenly stood in the wrong line (which was a common
happenstance) they would then have to start all over again at the end of the
other line. Several families and their children were observed to have been
there nearly all day. Only one person in the room appeared to have the
assistance of an English speaking advocate. There was no information or
assistance desk provided either by INS or by a nonprofit agency.^'

Similarly, it is not known how many individual applicants for social
security insurance or social security disability benefits need, but do not
receive, assistance at the early stages of filling out forms and amassing
relevant employment, medical, and other documentary evidence. It is known
that at the hearing stage, 38% of Social Security claimants were
unrepresented in 1983, and that agency statistics indicate that

^ ' The Legal Needs of the Public; Final Report of a National Survey
(ed. Curran), American Bar Foundation (1977) at pp. 115-lAO; 2A0-249.
Interestingly, over 75% of all income groups thought that many things
lawyers handle could be done as well and less expensively by nonlawyers.

^° A 1980 study of the District of Columbia Court system disclosed an
exceptionally high number of unrepresented persons in "mass justice" court
proceedings. For example, the study disclosed that 98% of tenants in
landlord- tenant court were unrepresented and that in divorce, support and
custody cases, at least one party was unrepresented in 85% of the cases.
Report of the Committee on Civil Legal Services of the D.C. Judicial
Conference, Note 13, supra.

. At one time, an information and assistance desk was staffed by
local nonprofit agencies, but the INS required it to be moved some months
ago because of a lack of space in the room. Interviews with staff of AYUDA,
note 2 supra.

NONLAWYER ASSISTANCE 61

unrepresented claimants are less likely to prevail at that stage than those
who are represented. ^

By way of contrast, in the Internal Revenue Service (where federal
policy has long encouraged free choice of representative, including
nonlawyers) there is a whole continuum of help available to the public
ranging from free assistance to all taxpayers from the IRS itself or to
indigents from legal aid agencies - to tax preparation services for the
middle income groups at modest fees, such as those operated by H. Se R. Block
and Sears Roebuck - to the more sophisticated and relatively costly help of
enrolled agents, certified public accountants and lawyers - to the most
rarified (and usually expensive) specialty tax law firms.

Because of what appears to be a significant volume of unmet needs for
assistance in mass justice agencies, and because the Internal Revenue
Service model has proven to be a highly successful method for delivering
administrative agency assistance across a broad economic spectrum,
increasing numbers of administrative agency officials and practitioners have
suggested that the potential for increased nonlawyer assistance in mass
justice agencies should be explored. Some of the suggestions have given
rise to this study. ■^^

^^ See note 3, supra. Some unrepresented claimants, of course, are
capable of representing themselves at hearings (and at earlier stages) and
certainly all persons are entitled to do so if they so choose. In addition,
some unrepresented claimants may have such frivolous appeals that no
professional would be willing to provide assistance. Notwithstanding these
factors, it is likely that a significant portion of those unrepresented in
agency hearings would welcome assistance but are unable to obtain it at an
affordable price.

Conversely, in the area of Veterans benefits, there is a long tradition
of free service to veterans provided by service organizations such as the
American Legion, the Disabled American Veterens and the American Red Cross.
(The Veterans Administration provides free office space to those
organizations.) Only 12% of claimants in V.A. hearings proceed pro se and
it is generally assumed that a large portion, if not all of them, prefer to
represent themselves. See Popkin, note 3, supra, and Walters v. National
Ass'n of Radiation Survivors, note 4, supra, at 318A, and discussed further
at note 5A of- this report.

See, for example, comments by several speakers at the 29th Plenary
Session of the Administrative Conference of the United States held on
December 6 and 7, 1984, urging the Conference to study the issue of
nonlawyef representation in administrative procedure generally and in the
area of mass justice particularly. 1984 Report of the Administrative
Conference of the United States, at 36 (May 1984).

Another possible alternative for providing increased assistance to

62 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

It has also been suggested that an increased supply of nonlawyer
professional assistants will bring down the cost of lawyers' fees.'^^ This
proposition is open to question - it is not apparent that "uptown" corporate
law firms specializing in tax matters have reduced their hourly rates in
recent years as a result of competition from H. & R. Block and Sears
Roebuck. Whether or not this prognosis would prove to be true, however, it
does seem likely that alternative sources of lower cost assistance will be
utilized by low and moderate income persons who do not currently employ
lawyers. A similar result appears to have occurred in legal areas such as
divorce cases and will preparation in the aftermath of Supreme Court
decisions allowing lawyer advertising.^-^

those who are currently unrepresented is for the federal government to
encourage an expanded use of lawyers. One way to accomplish this would be
for the federal government to increase the budget of the Legal Services
Corporation and, in addition, make moderate income persons eligible for its
funded services. Another way would be for the federal government to provide
additional attorney fee awards in mass justice proceedings in the
expectation that this would draw increased numbers of private attorneys.
However, neither of these approaches, even if they are desirable, is
economically or politically viable at this time in light of the current
national efforts to reduce federal budget expenditures.

Even though some attorney fee awards - those in social security
disability cases, for example - can be paid out of amounts due claimants,
rather than out of the public purse (except when attorney fee awards are
made under the Equal Access to Justice Act), there is no pool of claimant
money when the claimant is unsuccessful, when the government is seeking to
recover funds from the client (as in a social security overpayment case for
example) or in proceedings not involving money claims such as those in the
immigration field.

^^ See, for example, Morgan, The Evolving Concept of Professional
Responsibility, 90 Harv. L.Rev. 702 (1977).

^■^ Although a Federal Trade Commission study in 1984 attempted to show
that lawyers' fees came down following Bates v. Arizona State Bar, A33 U.S.
350 (1977) and progeny, the study in fact demonstrated only that lower
priced services were available in the communities studied and not that
particular lawyers had lowered their fees for their existing services, or
that services requiring equivalent expertise and time were being offered for
less. The real benefits that appear to have resulted from the Supreme
Court's lawyer advertising decisions are (1) they allowed those lawyers
already offering reduced fees (often newly minted law school graduates) to
advertise that fact; and (2) they encouraged the development of new legal
service delivery systems - that is, high volume, low-cost clinics - to serve
low and moderate income persons who before then usually had to choose
between high-cost lawyer services and doing without legal assistance.

NONLAWYER ASSISTANCE 63

In any event, a broadened range of assistance for individuals
involved in mass justice agency proceedings - and the right to free choice
of assistance at an affordable price - are likely to foster improved
perceptions of fair procedure on the part of the citizenry. This is
particularly true when those who are represented are more likely to prevail
in agency proceedings than those who are unrepresented."^^

^^ See note 3, supra.

64 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

III. Nonlawyer Professionals Currently Meet Many of the Needs for
Assistance of Individuals Involved in Mass Justice Agency
Proceedings and As a Class Are Competent to Do So

Results of this investigation reveal that not all proceedings in mass
justice agencies are so difficult or specialized that they require the
specially trained skills of a lawyer. To the contrary, they reveal that
many early stage proceedings are sufficiently non-complex and informal that
in order to provide competent assistance, one need only be intelligent,
well-versed in the subject matter and procedures of the agency in question,
and experienced in providing assistance to the agency's constituency. This
investigation further revealed that even in many of the later stages of
agency proceedings, including adversarial proceedings, experienced
nonlawyers can and do perform competently.

To begin with, investigation disclosed that nonlawyers already
practice to a modest extent in almost all federal administrative agencies
and do so to an even greater extent in all four of the mass justice agencies
excimined.^^ For example, while the Social Security Administration does not
maintain statistics on nonlawyer assistance at all levels o^ agency process,
its Office of Hearing Appeals has published data showing that in 1983
nonlawyers entered appearances as sole representatives for social security
claimants in 11.2% of all request for hearing matters. (In another l.A% of
the matters, nonlawyers appeared jointly with lawyers. )'^°

The Immigration and Naturalization Service does not maintain
statistics on categories of representatives, but agency officials reported
that nonlawyers regularly practice in the agency at all stages, including
hearings, and that applicants for adjustment of status are regularly
referred by INS to social service agencies which are staffed primarily by
nonlawyers."^' The Veterans Administration statistical data shows that

25 See survey conducted by the American Bar Association Standing Committee
on Lawyers' Responsibility for Client Protection and the American Bar
Association Center for Professional Responsibility, attached to this paper
as Appendix A. Similar findings are set forth in Professor Rose's study for
the Administrative Conference, Note 1, supra.

■^" Office of Hearing Appeals, Social Security Administration,
Participant Involvement in Request for Hearing Cases for Fiscal Year 1983,
May 198A. A copy of this statistical report is attached to this paper as
Appendix B.

^' Interviews with Yolanda Sanchez, Acting Director, Outreach Program,
and J. Hurwitz, Board of Immigration Appeals for the Immigration and
Naturalization Service; also see American Bar Association Committee Report,
note 22, supra, set forth in Appendix A.

NONLAWYER ASSISTANCE 65

nonlawyers appear in representative capacities in 86% of all cases involving
claims for disability benefits and appear at all stages of agency review. ^°
(There is no judicial review of agency decisions.) While the Internal
Revenue Service does not maintain statistical data on the category of
representatives in its proceedings, it reports that several hundred thousand
nonlawyers are entitled to appear before the Service, and that in fact a
very large number of nonlawyers (ranging from H.R. Block tax preparers to
certified public accountants) regularly appear every year. (Nonlawyers who
pass an examination may also represent taxpayers in the Tax Court. )^^

Investigation also revealed that nonlawyers in the four agencies
examined appear at all levels of agency proceedings, both adversarial and
nonadversarial, and were reported to perform at each of these levels the
identical functions that lawyers perform. -^^ (Although there was no
statistical data available, it was reported that nonlawyers sometimes, but
not always, withdraw in favor of lawyers in some representational
proceedings, such as deportation cases and tax cases involving charges of
criminal fraud, even though agency rules do not require withdrawal. )-^^
Although the mass justice agencies examined do not maintain statistical data
on categories of representatives at all levels of agency process, there was
uniform agreement by government officials interviewed that by far the
greatest volume of nonlawyer assistance takes place at the very early
stages. Much of this assistance takes place before a claim or application
is filed with an agency.

Statistical data on representation in the Veterans Administration
was part of the record and cited in the Supreme Court's opinion in Walters
V. National Association of Radiation Survivors. 105 S.Ct. 3180, 318A (1985).

2^ As of January 31, 1983, there were 28,077 enrolled agents on the
roster of the Internal Revenue Service. In addition, certified public
accountants (of whom there are some 200,000 belonging to the American
Institute of Certified Public Accountants) are entitled to appear before the
IRS. Also an unknown number of persons working for tax preparation services
such as H.R. Block and Sears Roebuck regularly appear before the Service in
connection with returns they have prepared. (H.R. Block maintains 7,672
offices in nearly every town and city in the country, according to a
Business Week report dated June 17, 1985, (p. 89).) The IRS data is largely
obtained from -Professor Rose's study, note 1, supra at 51-54. It was
confirmed by interviews with the Internal Revenue Service and by results of
the survey conducted by the American Bar Association, note 25, supra (and
set forth in Appendix A).

Similar findings of performance of identical functions in non-mass
justice agency proceedings such as those performed in the patent office were
made in the Rose study, note 1, supra, at 51.

3 1

Rose, id. at 53; INS interview with Sanchez, note 27, supra.

66 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Nonprofit agencies specializing in assisting low-income persons with
social security claims or immigration problems also stated in interviews
that the great majority of their work involved the early non-adjudicative
stages of agency practice - that is, assisting persons with preparation of
applications and other forms, gathering of supporting materials, explaining
to them agency rules and procedures, and sometimes accompanying them to
initial interviews and conferences. ^ For example, AYUDA, a legal aid
organization in the District of Columbia serving a largely Hispanic
population, estimated that 80% of the agency's immigration caseload of some
2,000 cases involved providing assistance with routine applications for
adjustment of status (primarily because of a relationship to a U.S. citizen)
and other relatively non-complex matters such as applications for
citizenship or extensions of stay. The agency reported further that this
work was currently performed primarily by the agency's nonlawyer staff. -^-^

Similarly, the Legal Counsel for the Elderly Program, a federally
funded legal assistance progrcim specializing in social security and other
matters affecting elderly persons, reported that it relies primarily on
nonlawyers to visit nursing homes and hospitals, and to assist elderly and
disabled clients in filling out application forms for social security and
other welfare benefits. The lawyer director of the program stated that it
was his experience that the agency's nonlawyers did a better job than law
students (whose work he sometimes reviewed) because the law students were
either less well-trained or less inclined to spend long hours going over
medical records, interviewing doctors, co-workers and employers to establish
medical disability, and pulling together other essential facts needed to
fill out forms properly. He also noted that nonlawyers are generally better
trained, more skillful, and more patient than lawyers, in interviewing those
clients who are ill, confused, illiterate or handicapped.-^^

That there are literally hundreds of thousands of low- level tasks of
a non-adjudicative nature in administrative practice is, of course, well-
known. In 1969 Justice Douglas stated the rationale for permitting
nonlawyer assistance at these levels:

See note 2, supra, for a list of non-profit agencies interviewed.

^^ Interview with Yvonne Vega, Executive Director of AYITDA, in
Washington, D.C. AYUDA has "recognized" status under INS regulations, and
the Outreach Program of INS has described AYUDA as having "a highly
qualified staff" which "has an outstanding reputation for relying on the law
to assist clients." Letter dated March 29, 1985 from the acting director of
the Outreach Program of INS, Yolanda Sanchez, on file with the District of
Columbia Bar Foundation.

^^ Interview with Michael Schuster, Legal Counsel for the Elderly, in
Washington, D.C.

NONLAWYER ASSISTANCE 67

[I]t is becoming abundantly clear that more and more
of the effort in ferreting out the basis of claims and the
agencies responsible for them and in preparing the almost
endless paperwork for their prosecution is work for laymen.
There are not enough lawyers to manage or supervise all of
these affairs; and much of the basic work done requires no

-J c

special legal talent. -*

More recently. Justice Rehnquist expressed similar views in the Court's
plurality opinion upholding nonlawyer assistance to veterans in disability
benefit proceedings under a statutory fee limitation of $10 that had the
practical effect of discouraging legal counsel for fees. Walters v.
National Ass'n of Radiation Survivors. 105 S. Ct. 3180, 319A (1985).^^
Justice Rehnquist added with regard to the issue of innate skills of lawyers
and nonlawyers that it was "less than crystal clear why lawyers must be
available to identify errors in medical judgement." (Id. , emphasis by the
Court . )

Some of the early stages of administrative proceeding involve
informal conferences or interviews, at which time many claims and disputes
are resolved. These proceedings were deliberately designed to be informal
in order to facilitate easy access to the agency by nonlawyers. Even in
adjudications, formal rules of evidence and procedure are largely
inapplicable.-^' In addition, many of the issues resolved by mass justice
agencies are commonly thought of either as "non-complex" or "largely
factual" and, therefore, matters that neither require lawyers to present
them nor lawyers to adjudicate them. (Internal Revenue Service and Veterans
Administration appeals are sometimes said to be in this category. )-^°

Of course, the questions of what is a "complex" matter or a matter
"fraught with legal ramifications" are not easily answered, and they have
been a matter of ongoing debate between lawyers and nonlawyers for many

^5 Johnson v. Avery, 393 U.S. A87, 151 (1969) (concurring op.)(The
Court held that in the absence of lawyers, the state could not validly bar
nonlawyers -in this instance, prison inmates - from furnishing legal
assistance. )

See note 5A for a discussion of Walters.

^' Gellhorn, Qualifications for Practice Before Boards and
Commissions, 15 U.Cin.L.Rev. 196, 200-202 (19A1).

^° Walters v. National Association of Radiation Survivors, supra
(plurality of opinion of Justice Rehnquist at 319A with respect to veterans
appeals); Rose, note 1 supra, at 27 et. seq.; Morgan, The Evolving Concept
of Professional Responsibility, 90 Harv.L.Rev. 702 (1977); Comment,
Representation of Clients Before Administrative Agencies; Authorized or
Unauthorized Practice of Law?, 15 Valparaiso L.Rev. 567 (1981).

68 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

decades. It is not the purpose of this paper to resolve this sometimes
metaphysical debate. It will suffice to observe what is apparent: that
there are many non-trial type functions in non-courtroom settings which
today can be, and are, performed competently by lawyers and nonlawyers
alike, and this is so notwithstanding the fact that legal consequences
affecting rights and obligations of parties may flow from the performance of
any one of them. Indeed, casebooks are replete with judicial decisions
allowing nonlawyers to undertake a variety of activities (such as real
estate settlements, creation of trusts, and tax return preparation) even
though these same activities are also performed by lawyers - even
specialized in by some lawyers - and have legal consequences.-^'

Interviews with mass justice agency personnel revealed a high level
of satisfaction with nonlawyer representatives, not only at the early stages
of assisting with forms and informal conferences, but also at later stages
of agency proceedings. Similar findings of agency satisfaction with
nonlawyer performance in administrative proceedings generally were made in
the American Bar Association Committee survey set forth in Appendix A to
this paper, and by Professor Rose in his study for the Administrative
Conference. ^^ The overwhelming majority opinion is that there is little
perceived difference in the quality of help between lawyers as a class and
nonlawyers as a class. ^^ Viewpoints on competence and quality of work are,
of course, necessarily subjective. However, investigation reveals that
agency staff perceptions (that nonlawyers as a class perform as competently
as lawyers as a class at virtually all stages of administrative agency
proceeding) are supported by the agencies' statistical data.

^^ Conversely, courts have also found at various times that the
identical activities constitute the practice of law and can be performed
only by lawyers. See discussion in the text at notes 81-8A. In barring
nonlawyers from practice before state administrative agencies, state courts
have tended to over-emphasize the extent of the legal skills and training
required without considering the objectives of the administrative agency and
the informal nature of its proceedings. This thesis emerges from a study of
state unauthorized practice decisions concerning practice before state
administrative agencies. See Comment, Valparaiso L.Rev. , supra, note 38, at
590.

^^ Rose, note 1, supra, at 54, 92.

^^ The ABA survey, note 25, supra, discloses that most agencies
reported that nonlawyers did not pose any special practice problems, and
that of those voicing complaints, nearly all said that the problem
encountered most frequently was nonlawyer unfamiliarity with procedural
rules and tactics. (It appears that responses to the ABA survey may not
have been limited to nonlawyer representatives but may also have included
complaints about nonlawyer claimants appearing pro se. )

NONLAWYER ASSISTANCE 69

For example. Social Security Administration data for 1983 shows that
nonlawyers made a significant difference when they represented claimants in
hearings. Claimants represented by nonlawyers were appreciably more likely
to win their cases than they were if unrepresented. Moreover,
representation by nonlawyers resulted in reversal rates after hearings that
were almost as high as those achieved by lawyers. The 1983 data reveals
that those who were unrepresented obtained reversals in only 43.7% of their
cases. Representation by a nonlawyer increased the reversal rate to 54.5%
as compared to a reversal rate in lawyer represented cases of 59%.'^^ Thus,
nonlawyers increased their clients' chances of reversal by 10.8% over those
who were unrepresented, but persons represented by a lawyer were successful
in only 4.5% more cases than persons represented by nonlawyers.

Similarly, the record in Walters v. National Association of Radiation
Survivors, supra, at 3193, established that in disability review proceedings
of the Veterans Administration, persons represented by nonlawyers were
nearly as likely to prevail on appeal to the agency's Board of Veterans
Appeals as those represented by lawyers. (The agency's statistics
demonstrated that veterans represented by laypersons employed by non-profit
service organizations such as the American Legion prevailed in approximately
16% of the appeals, and that veterans represented by privately retained
lawyers and nonlawyer agents prevailed in 18% of the appeals.)^-'

Even in agencies where the subject matter can be technical or
complex, there is empirical evidence to demonstrate that nonlawyers can
provide effective assistance. The processing of patent claims before the

^^ Participant Involvement in Request for Hearing Cases for Fiscal
Year 1983, supra, note 3. See also Popkin, The Effect of Representation in
Nonadversary Proceedings -- A Study of Three Disability Programs, 62 Cornell
L.Rev. 989 (Aug. 1977). This in-depth study of three federal agency
disability programs found that representation significantly increased
chances of reversal of initial adverse agency rulings. The study did not
focus its attention on the differences between attorney and nonattorney
representation or the ensuing results. It did incidentally disclose,
however, that in social security disability hearings, attorneys were no more
likely than nonlawyers to request new hearings (although the author's
sampling suggested that they were more likely to present new evidence).

^^ Several non-profit agencies and the District of Columbia Bar
provide intensive training courses and materials for nonlawyers in
disability benefits law and in immigration matters. Interviews with the
training directors for those programs elicited the universal estimate that
the success rates of their intensively trained nonlawyers were very high.
Interviews with Schuster, note 32, supra. Vega, note 31, supra, and Leslie
Long O'Leary of the District of Columbia Bar. It should be noted that the
success rates of nonlawyer employees of nonprofit organizations are no doubt
enhanced by training programs and also (when it is provided) by supervision
and assistance by staff lawyers.

70 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Patent Office, for example, is not within the technical expertise of most
persons - lawyers or nonlawyers. As the Supreme Court observed in Sperry v.
Florida ex rel Florida Bar, 373 U.S. 379 (1962) "(d)rafting of the
specifications and claims of the patent application. . .this Court long ago
noted ' const itute[s] one of the most difficult legal instruments to draw
with accuracy,' Topliff v. Topliff, 1A5 U.S. 157, 171." The Sperry Court
went on to note:

And upon rejection of the application, the
practitioner may also assist in the preparation of
amendments. . .which frequently requires written argument to
establish the patentability of the claimed invention under
the applicable rules of law and in light of the prior art.

Notwithstanding the legal difficulties alluded to by the Court, the Court
unanimously concluded that the activities involved in patent law practice
could be performed by nonlawyers as well as lawyers. Moreover, the Patent
Office has consistently reported a high degree of satisfaction with the
quality of representation provided by nonlawyer patent agents. '^^ Other
federal agencies also allow nonlawyer representation, notwithstanding the
fact that the subject matter of the representation requires considerable
technical legal expertise. (Examples include the Internal Revenue Service
and the Interstate Commerce Commission.)^-*

A number of the non-profit agencies interviewed for this report
stressed that their nonlawyer employees and volunteers were specially and
intensively trained to fill out administrative agency forms and to answer
questions concerning agency rules and procedure.^" They opined that it was
their experience that lawyers had rarely, if ever, received any training in
these functions as part of their law school curricula. Others noted that it
was their experience that nonlawyers could be trained to perform well
virtually all functions in administrative agency proceedings, including
representation in adversarial hearings, and that a part of this training
stresses the need to compile an adequate record for any eventual judicial
review.^'

Commentators have undertaken to analyze the various skills commonly
thought of as "lawyers' skills" (including skills such as negotiating
techniques, analytic abilities, powers of written and oral communication,
reasoning, and judgment) and concluded that some or all of these skills are

^^ Sperry v. Florida ex rel Florida Bar, supra, at 402.

^5 See 31 CFR 10. 3-. 8 (IRS) and A9 CFR 1100.9 (ICC).

^° See note 43 supra.

^' See Statsy, Paralegal Advocacy Before Administrative Agencies; A
Training Format, 4 Toledo L.Rev. 439 (1973). But see note ... supra.

NONLAWYER ASSISTANCE 71

also possessed by many nonlawyer professionals. ° This study has not
attempted to parse finely here the particular skills involved in each stage
of each mass justice agency proceeding. However, one common theme that was
recurrently heard in interviews and confirmed by observations of mass
justice agency proceedings was that those professionals (lawyers and
nonlawyers) who are trained and experienced in particular functions do them
relatively well and vice-versa. Conversely, having a law degree (or other
degree) was no guarantee of proficiency in all administrative agency
functions. This appears to be as true at the most advanced representational
functions in agency proceedings as it is often recognized is true in
courtroom proceedings.^^

In preparing this report, it was useful to examine for comparison
purposes the proceedings of the Internal Revenue Service. It was found that
nonlawyers regularly assist taxpayers at the earliest stages of simple tax
return preparation all the way through the various levels of the Service,
including audits and appeals. In addition, a nonlawyer may, by an
examination procedure, become qualified to practice even before the U.S. Tax
Court. ^^ While only lawyers, certified public accountants,* and those who
pass examinations ordinarily provide representation at the highest levels of
agency proceedings, nonlawyers who are not in any of these categories are
also entitled to appear and assist taxpayers in connection with tax returns
that they prepare. ^^

While some of the nonlawyers providing assistance are highly skilled
and trained in tax law, including certified public accountants, others - for

^° See Morgan, note 22 supra; Rhode, note 81 infra.

^^ Chief Justice Burger, in a famous Fordham University speech, stated
his opinion that one third to one half of the lawyers who appear in serious
cases before the courts are not really qualified to render fully adequate
representation. Burger, The Special Skills of Advocacy, A2 Fordham L.Rev.
227, 234 (1973). Also see Bazelon, The Defective Assistance of Counsel, A2
U.Cin. L.Rev. 1 (1973). Criticism of deficiencies in trial representation
led to the appointment of a Committee to Consider Standards to Practice in
the Federal Courts (chaired by Chief Judge Devitt of Minnesota) and fourteen
federal courts engaged in a resulting pilot proposal requiring examination,
minimum trial experience, and peer review. See Winter, Federal Courts
Implement Devitt Proposals, 67 ABA J. 550 (1981).

See note 27, supra; 31 CFR 10. 3-. 8,

^^ One may become an enrolled agent by passing a rigorous examination,
This enables the person enrolled to advertise to the public that he or she
is an enrolled agent and to provide representation in any matters. This
procedure, however, does not preclude others who are not lawyers, CPAs, or
enrolled agents from providing the same services in connection with their
own clients whose tax returns they have prepared.

72 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

example, those persons who receive minimal training and work for high volume
clinics such as those operated by H.R. Block, or who conduct their own
individual tax services - may be distinctly less so and frequently do not
have bookkeeping, accounting or legal experience. Internal Revenue Service
officials who were interviewed reported that the Service does not maintain
statistical data on comparative success rates by lawyers and
nonlawyers but they expressed views similar to those interviewed at the
Social Security Administration and INS: that there is little discernible
difference in effectiveness between lawyers and nonlawyers as groups.
Rather, the differences lie in the relative intelligence and skills of the
particular individual.

It is important to note that agency officials interviewed for this
study did not suggest that a lawyer might never be able to perform any
representational functions "better" than a nonlawyer. It was further
recognized that even the preparation of a simple tax return, an application
for disability benefits or a petition for adjustment of non-resident status
can be fraught with peril for the client if poorly done and not corrected.
The importance in many proceedings of establishing a record for possible
future judicial leview was also acknowledged. Nonetheless, agency personnel
stressed that in their experience there was no guarantee that any given
lawyer would necessarily provide better representation than any given
nonlawyer.

Thus, it would appear that the relevant inquiry is not whether a
particular lawyer can provide better representation in a given matter than a
nonlawyer, or might have a slightly higher statistical chance of obtaining
reversal or administrative review, but whether all lawyers as a class
perform better than the class of nonlawyers. The statistical data
concerning success rates in mass justice agencies and the subjective data
elicited in interviews suggest that the answer to the latter question is
negative.

Moreover, this author suggests that the most important question in
mass justice agencies is not whether a given lawyer will or will not do a
better job of representation at every stage of the proceeding than a
nonlawyer, or will build a better record for judicial review, but whether
sufficient numbers of proficient lawyers are able and willing to provide the
assistance that is needed and desired by large numbers of ordinary citizens
with their everyday, not very remunerative, claims and disputes before the
agencies, and to provide that assistance for fees that the individuals can
afford. The evidence discussed in Part II above compels the conclusion that
they are not available to meet the needs.

As we shall see in the succeeding sections of this report, the
Administrative Procedure Act (as well as several statutes governing specific
agencies) empower federal administrative agencies to authorize lay
representation in proceedings before them. However, mass justice agencies
fail to do as much as they might under these statutes to encourage that
representation. In addition, although federal statutes (and some agency

NONLAWYER ASSISTANCE 73

regulations) provide a measure of protection to lay representatives against
prosecution under state unauthorized practice laws, that protection needs to
be strengthened if significant numbers of additional nonlawyers are to be
encouraged to provide assistance, particularly assistance in the open market
to moderate income persons who can afford to pay modest fees .

74 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

IV. Federal Mass Justice Agencies Have Authority to Authorize
Nonlawyer Assistance in Administrative Proceedings

Representation by nonlawyers in formal federal agency proceedings, as
well as nonlawyers giving advice and assistance with forms prior to formal
appearance is not a novel concept. Indeed, from the earliest days of
federal agencies, nonlawyers have provided representation - even in trial
type adjudications in many agencies. ^^ In fact, nonlawyer practice at all
levels of agency action has been the norm from the inception of the Patent
Office, the Internal Revenue Service and the Interstate Commerce Commission,
among others. -^-^

One of the earliest provisions for nonlawyer representation involved
veterans benefits. In 1862, Congress provided that both lawyers and
nonlawyer agents could assist Civil War veterans seeking disability
benefits, a provision that has been extended to cover other war veterans and
has continued to this day.-*^

^^ For contrasting views as to the merits of this historical
development, see generally Von Baur, The Practice of Non- lawyers Before
Administrative Agencies, 15 Fed. B.J. 99, 113-115 (1955) and Gellhorn,
Qualifications for Practice Before Boards and Commissions, 15 U.Cin. L.Rev.
196 (19A1).

-'■^ The Patent Office's first admission requirements were issued in
1869 and provided that "any person of intelligence and good moral character
may appear as the attorney in fact or agent of an applicant...." Rules and
Directions for Proceedings in the Patent Office, Sec. 127 (Aug. 1, 1869).
Although there were many efforts between 1898 and 1938 to limit Patent
Office practice to lawyers, Congress steadfastly refused to bar nonlawyers.
A more complete discussion of the legislative history on this point is
contained in Sperry v. Florida ex rel Florida Bar, supra at 388-396. See
also Hull V. United States, 390 F.2d 462, 46A-465 (D.C. Cir. 1968) for a
discussion of efforts after 1938 to limit nonlawyer practice in the patent
office.

5^ Act of July lA, 1862, 12 Stat. 568, amended by Act of July A, 186A,
13 Stat 389. It is an interesting footnote to federal agency history that
the original 1862 Veterans Disability Benefits statute reflected outright
antipathy to lawyers. That Act set a $5 fee cap (changed two years later to
$10) for providing assistance to Civil War Veterans seeking disability
benefits. The $10 fee cap is still in effect. It is generally acknowledged
that even though the fee limitation is applied to both lawyers and
nonlawyers, "the limitation was designed to protect the veteran from
extortion or improvident bargains with unscrupulous lawyers." Walters v.

NONLAWYER ASSISTANCE 75

For some agencies, there is explicit legislative authority for
nonlawyer practice.-'-' In other agencies, nonlawyer practice has simply
evolved without express statutory authority. There has been some judicial
recognition of the notion that an agency's authority to govern practice
before it may be implied from its general powers to prescribe its rules of
procedure irrespective of specific legislative authority to regulate
practice.^" In any event, it is well accepted that Congress has authority
to empower federal agencies to issue rules governing practice before them,
and courts have not attempted to interfere with that legislative
authority.^'

National Association of Radiation Survivors, supra. Note 5 at 3210
(dissenting op. Justice Stevens) and see historical references cited therein
at 3210, note 5. Justice Stevens presents a persuasive argument that the
fee limitation provision was not originally intended to exclude all lawyer
representation (which is its near effect today as a practical matter). He
notes that a $10 fee in 1864 is equivalent to $580 today and that it is more
likely that Congress intended to impose that amount as a reasonable fee cap
than to exclude lawyers from representation of veterans altogether. (Id. )
In any event, the practical effect of the fee cap is to limit all
representation for fee - from both lawyers and nonlawyers.

The majority in Walters upheld the $10 fee limitation against a
challenge that it unconstitutionally precluded representation by lawyers.
The majority found that the record did not show that veterans were harmed by
nonlawyer representation. Justice Stevens dissented and argued that whether
or not lawyers would be more successful in veterans proceedings than
nonlawyers, the fee limitation limits the free choice of representative and
that limitation is both harmful and an unconstitutional infringement of
individual liberty.

^^ For example the Patent Act, 35 U.S. C. 31 expressly authorizes the
Patent Office to issue rules admitting lawyers and nonlawyers and the
Attorney Practice Act, 5 U.S.C. 500 expressly entitles certified public
accountants to practice as a matter of right before the Internal Revenue
Service. In addition, the enabling statutes for some welfare programs
expressly provide for representation by nonlawyers.

^^ See Goldsmith v. United States Board of Tax Appeals, 270 U.S. 117,
122 (1926); Herman v. Dulles, 205 F.2d 715 (D.C. Cir. 1953). In Sperry v.
Florida ex rel Florida Bar, supra, the Supreme Court, in discussing
Congressional ratification of prior agency practice, appears to acknowledge
the implied authority of agencies to regulate practice before them. See
discussion, infra, at text of note 60.

'^' Conversely, not all state courts have agreed that state
legislatures have authority to empower state administrative agencies to
permit lay representation. See Comment, 15 Valparaiso Univ. L. Rev., supra,
note 38.

76 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The legislative history of the Administrative Procedure Act reveals
that at the time of its enactment in 1946, Congress continued to believe
that agency practice should not be limited solely to lawyers in spite of the
fact that by then administrative agency decisions had proliferated and there
were increased urgings by the organized bar to exclude nonlawyers.

The Chairman of the American Bar Association's Committee on
administrative law had testified in 19A5 before the House Judiciary
Committee Hearings on proposed bills dealing with administrative procedure
that:

"(T)here is a great deal of protest from the
committees on unauthorized practice of the law in various
State, local and municipal bar associations who are just as
vehement in saying that these measures fail to recognize that
legal procedure must be confined to lawyers. °

In fact, the extent to which nonlawyers should be allowed to practice before
federal administrative agencies was vigorously debated both in and out of
Congress for more than a decade. As early as 1941, the Attorney General's
Committee on Administrative Practices examined the need for various reforms
in administrative agencies. Its report stated that "(e)specially eimong
lawyers' organizations there has been manifest a sentiment in recent years
that only members of the bar should be admitted to practice before
administrative agencies. The Committee doubts that a sweeping interdiction
of nonlawyer practitioners would be wise..."-'^

The debate over the role of nonlawyers in federal agency practice
continued throughout the deliberations leading to the passage by Congress of

-*° Hearings before House Committee on the Judiciary on Federal
Administrative Procedure, 79th Cong., 1st Sess. (Serial No. 19) 33-3A,
Legislative History of the Administrative Procedure Act, S.Doc. No. 2A8,
79th Cong., 2d Sess. 79-80.

-*^ Attorney General's Committee on Administrative Procedure, Final
Report 12A (1941) (quoted in Sperry v. Florida ex rel Florida Bar, supra, at
396).

A more recent example of the belief that agency practice should be
restricted to lawyers occurred during comments to the proposed rules of the
Immigration and Naturalization Service to revise its procedures concerning
the accreditation of nonprofit agencies to assist persons in INS
proceedings. The agency reported that the most severe adverse comments came
from those who expressed the view that agency practice should be limited
entirely to lawyers. Department of Justice Summary of Final Rule, Request
for Recognition: Accreditation of Representatives, 49 Fed. Reg. (No. 214)
44085, Nov. 2, 1984. Final Rule published in 8 C.F.R. Pt. 292.2 (Dec. 3, 1984)

NONLAWYER ASSISTANCE 77

the Administrative Procedure Act in 1946.°^ The final outcome, as stressed
by the Supreme Court in its unanimous Sperry decision was that "(d)espite
protests of the bar. Congress in enacting the Administrative Procedure Act
refused to limit the right to practice before the administrative agencies to
lawyers. "^^ Rather, as the Court noted. Congress determined that it would
continue in effect the then existing practice of allowing each agency to
determine for itself whether, and under what conditions, nonlawyers would be
admitted to the bar of the agency. ^^ Accordingly, Congress provided in

^^ During house debates on the matter of lay representation, the
following illustrative exchange occurred. (92 Cong.Rec. 2156; Legislative
History of the Administrative Procedure Act, S.Doc. No. 248, 79th Cong., 2d
Sess. 316-317):

"Mr. Austin: [I] notice... in the section to which the
Senator is referring, this language:

'Nothing herein shall be construed either to grant or to deny
to any person who is not a lawyer the right to appear for or
represent others before any agency or in any agency proceeding.'

Is it not a fact that somewhere in the bill the distinguished
Senator has reserved the right to a non-professional -- that is, a
man who is not a lawyer --to appear, if the agency having
jurisdiction permits it? For example, take a case where a
scientific expert would better represent before the Commission the
interests involved than would a lawyer. The right to obtain that
privilege is granted in the bill somewhere, it is not?

Mr. McCarran: The Senator is correct; and in connection with
that I wish to read from the Attorney General's comment, as
follows:

'This subsection does not deal with, or in any way qualify,
the present power of an agency to regulate practice at its bar.""*
Control over this matter remains in the respective agencies."

^1 Sperry v. Florida ex rel Florida Bar, supra, at 388. A review of
the legislative history of the Administrative Procedure Act provision
dealing with nonlawyer representation is contained in Sperry at 396-399.
Also see The Attorney General's Manual on the Administrative Procedure Act,
particularly pp. 62, 65, discussed in the text at note 63, infra.

^^ Congress also determined at the time of enactment of the APA to
continue to allow federal agencies to establish requirements for the
admission of lawyers (even though bar groups had objected to this practice)
and it defeated an amendment to the Administrative Procedure Act introduced
on the floor of the House which would have abolished agency admission

78 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Section 6(a) of the 19A6 Act dealing with "ancillary matters" that agencies
could, in their discretion, authorize nonlawyer representation. The current
version of this provision is not substantively different from the original
6(a) and is now set forth in Section 555(b) of the Administrative Procedure
Act, 5 U.S.C. 555(b) (1977). It provides as follows:

A person compelled to appear in person before an
agency or representative thereof is entitled to be
accompanied, represented, and advised by counsel or, if
permitted by the agency, by other qualified representative.

requirements for lawyers. See Attorney General's Manual, supra, p. 65.
Subsequently, many agencies discontinued the practice of imposing admission
requirements on licensed attorneys, and in 1965 Congress enacted the Agency
Practice Act. 5 U.S.C. 500, which admits attorneys as a matter of right to
practice before all federal agencies with the exception of the Patent and
Trademark Office. (Certified pubic accountants were also entitled to a
right to practice before the Internal Revenue Service.)

In enacting the Agency Practice Act Congress also provided that
agencies could continue to set admission requirements for nonlawyers and
reaffirmed the earlier Congressional intention set forth in 5 U.S.C. 555(b)
to give agencies discretionary authority over the question of nonlawyer
admission. Thus, the Attorney Practice Act expressly provides that the
statute "does not grant or deny to an individual [who is not a lawyer or a
C.P.A.] the right to appear for or represent a person before an agency or in
an agency proceeding." The agencies retain their authority under the Agency
Practice Act to regulate the conduct and impose discipline on both attorneys
and laypersons after their admission to practice. Sen. Comm. on the
Judiciary, Report to Accompany S. 1758, S.Rep. No. 755, 89th Cong., 1st Sess
(1965); House of Representatives Comm. on the Judiciary, Report to Accompany
S. 1758, H.R. Rep. No. IIAI, 89th Cong., 1st Sess (1965) reprinted in 1965
U.S. Code Cong, and Admr. News, 89th Cong., 1st Sess. at A170.

Bar groups have objected to federal agency authority to discipline
lawyers, but thus far agencies have retained this authority. A committee of
the Administrative Conference of the United States stated in a report that
"agencies ought to have authority to discipline attorneys to maintain the
integrity of their own proceedings...." Administrative Conference Comm. on
Government Processes, Report Concerning Discipline of Attorneys Practicing
Before Federal Agencies, 1982 ACUS (Vol. II) 488 (198A). Also see Cox,
Regulation of Attorneys Practicing Before Federal Agencies, Report to the
Administrative Conference of the U.S., 34 Case Western Reserve L.Rev. 173
(1984). The Conference adopted a statement in 1982 that any problems
concerning attorney discipline before federal agencies were not of such a
magnitude as to require changing the statutory authorization or adoption of
uniform federal standards. 1 C.F.R. 310.8.

NONLAWYER ASSISTANCE 79

This subsection does not grant or deny a person who is
not a lawyer the right to appear for or represent others
before an agency or in an agency proceeding.

The Attorney General's Manual on the Administrative Procedure Act,
published in 1947, is the principal guide to the legislative intent of the
APA. The Manual explains the legislative intent regarding Section 6(a) as
follows:

The phrase "or, if permitted by the agency, by other
qualified representative" refers to the present practice of
some agencies of permitting appearance or representation in
certain matters by nonlawyers, such as accountants. The
phrasing of this clause, together with the last sentence of
the subsection, makes it clear that nothing in the first
section was intended to change the existing powers of
agencies in this respect.

'k 'k -k

The last sentence of section 6(a) provides that
"Nothing herein shall be construed either to grant or to deny
to any person who is not a lawyer the right to appear for or
represent others before any agency or in any agency
proceeding." The question of the extent to which nonlawyers
should be permitted to practice before administrative
agencies was deliberately left to the determination of the
various agencies, as heretofore. House Hearings (1945) p. 34
(Sen. Doc. p. 80); H.R.Rep. p. 32 (Sen. Doc. p. 265).^^

°-^ Although the Attorney General's Manual notes that the first
sentence of Section 6(a) dealing with the right of a party to counsel "does
not extend to persons who appear voluntarily," the provision as a whole is
generally interpreted to authorize lay representation in all proceedings,
including "voluntary" appearances to apply for government benefits or
grants, if lay representation is permitted by the agency. This broad
interpretation is in accord with the expressed legislative intent noted by
the Attorney General not to change the then existing practice of nonlawyer
representation in a wide range of agency proceedings, which included at the
time "voluntary" patent applications and applications for veterans
disability benefits.

Even in cases presenting the issue of whether a party is entitled to
counsel, rather than the right of practice before the agency, the provision
has often been broadly and liberally interpreted to require an agency to
permit representation of choice in a broad range of administrative
proceedings. See, for example, Coyle v. Gardner, 298 F.Supp. 609 (D.Hawaii

80 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

In accordance with the general authorization provided in Section
555(b) of the Administrative Procedure Act (and, in some cases, under the
additional authority of specific statutes, such as those authorizing
nonlawyer practice before the Internal Revenue Service and the Social
Security Administration) the great majority of federal agencies today permit
at least some degree of nonlawyer representation in both adversarial and
nonadversarial proceedings. ^ As we shall see in the following section of
this report, however, nonlawyer representation does not occur frequently as
a matter of actual practice.

Some commentators have noted that one historical rationale for
admitting nonlawyers to practice before agencies such as the Patent Office
and the Internal Revenue Service was the belief that certain categories of
nonlawyers had highly specialized skills and knowledge enabling them to
provide especially competent representation, and indeed, were often more
likely to have the requisite specialized knowledge than were lawyers."^
Senator Austin's statement in the debates on the APA that sometimes "a
scientific expert would better represent before the Commission the interests

1969) (applicant for social security benefits entitled under this section to
choice of counsel, his wife, at hearing before examiner). The Court in
United States v. Smith, 87 F.Supp. 293 (D.C. conn. 19A9) expressed the view
that since the section

"is intended to establish uniform standards of fairness for
dealings of administrative bodies with the citizens, courts
should prefer a broader interpretation where two
interpretations are possible of this section, one of which
would narrow, the other broaden, the categories of the
citizens touched by the administrative process to which the
protection is extended."

Conversely, the Immigration and Naturalization Service takes the position
that in those proceedings where persons are not "compelled" to appear, they
are not entitled as a matter of right to assistance of a nonlawyer and
hearing officers may exercise discretion in deciding whether to admit a
nonlawyer representative.

°^ See 198A Survey of Nonlawyer Practice Before Federal Administrative
Agencies, a survey by the standing Committee on Lawyers Responsibility for
Client Protection and the American Bar Association Center for Professional
Responsibility, a copy of which is attached to this report as Appendix A. A
similar survey of agencies was conducted by Professor Jonathan Rose and
included as an Appendix to his report to the Administrative Conference. See
Note 1 , supra.

Rose, note 1, supra at 26, and notes cited therein,

NONLAWYER ASSISTANCE 81

involved than would a lawyer" reflect that sentiment. ° This "highly
specialized competence" explanation is not as apt, however, with respect to
the early authorization for lay representation in mass justice agencies such
as the Veterans Administration where specialized competence in helping
veterans apply for disability benefits was not a factor in the statutory
encouragement of nonlawyer assistance.

Another plausible explanation for the early admission of nonlawyers
to federal agency practice is that bar groups did not at first vigorously
resist the use of lay practitioners because large numbers of lawyers had not
yet themselves developed specialized federal agency practices (and perhaps
did not view representation before agencies as "lawyering")."'

Still another explanation for the historical admission of nonlawyers is
that many agency proceedings were viewed in their earliest days as offering
essentially informal, non-legalistic and often nonadversarial processes where
formal rules of evidence and procedure would be largely inapplicable. °° Early
evaluations of federal agency procedures as essentially informal non- legal
processes have, of course, been substantially modified as many agency

"° See note 60, supra. This view finds some support in the history of
the earliest agencies. As early as 1915, the Commissioner of Patents wrote
in his Annual Report:

"Fundamentally, knowledge of the invention is more
important than knowledge of the rules and is often possessed
by men of a type of mind which does not acquire legal
knowledge readily."

Commissioner of Patents, Annual Report xiv (1915), quoted in Sperry v.
Florida ex rel Florida Bar, supra, at 392.

This view has also been expressed occasionally in court decisions. For
example, in Auerbacher v. Wood, 53A.2d 800, 802 (N.J.Eq. 19A7) aff 'd 59 A. 2d
813 (N.J.Eq. 1948), a case involving an industrial relations consultant's
practice before the National Labor Relations Board, the court opined that
factual knowledge of industry is often more important in labor relations
than legal knowledge.

°' Many commentators have been highly critical of the Bar's efforts
during this century to limit administrative agency practice to lawyers and
see in these efforts a bald attempt to establish a laywer's monopoly. See
Rose, note 1 supra, at 2; Morgan, The Evolving Concept of Professional
Responsibility, 90 Harv.L.Rev. 702 (1977); Comment: Unauthorized Practice
of Law: Supreme Court Holds States Cannot Restrict Activities on Nonlawyer
Patent Office Practitioner, 1964 Duke L.J. 190; Rhode, note 81, infra.

"° See Gellhorn, Qualifications for Practice Before Boards and
Commissions, 15 U.Cin.L.Rev. 196 (1941).

82 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

proceedings have in fact become considerably more complex, as the doctrine of
property rights in governmental benefits has developed ( see e.g. , Goldberg v.
Kelly, 397 U.S. 25A (1970)); as lawyers have become increasingly involved in
federal agency practice and as that practice has spawned an ever increasing
volume of judicial review. Notwithstanding these developments, the federal
statutory framework has continued to accommodate nonlawyer representation -
both through Section 555(b) of the Administrative Procedure Act and through
other statutes authorizing lay representation before specific agencies.""

In mass justice agencies particularly, accommodation of nonlawyer
representatives - at least at lower levels of agency decision-making - continues
to make practical sense in light of the fact that many proceedings in those
agencies are still fairly routine and informal. Even in proceedings where the
issues are somewhat more complex, or are a mixture of fact and law, and even
where the proceedings are adversarial, this study has determined (as
discussed above in Part III) that nonlawyers can provide competent
representation .

"^ See note 55 supra.

NONLAWYER ASSISTANCE 83

V. Federal Law and Mass Justice Agency Regulations Do Not Maximize
The Potential For Increased Nonlawyer Professional Assistance
Because They Do Not Adequately Protect Nonlawyer Professionals
From State Unauthorized Practice Laws

Despite Congressional authority to permit nonlawyer representation in
administrative proceedings, agencies have not uniformly encouraged that
representation, and there has been little guidance in the matter from either
Congress or the Executive offices. As a result, even though most agencies
permit nonlawyer representation as a matter of principle, in only a handful
of agencies is nonlawyer assistance common as a matter of actual practice.
This finding emerges from three sources: interviews and statistical data
obtained in connection with this study; interviews and statistical data
siimmarized in a 1984 study by the American Bar Association's Standing
Committee on Lawyers' Responsibility for Client Protection and the American
Bar Association Center for Professional Responsibility (hereinafter referred
to as the American Bar Association Committee report); and interviews and
statistical data obtained by Professor Jonathan Rose and set forth in his
unpublished report to the Administrative Conference of the United States on
April 9, 1984.'^ A copy of the American Bar Association report is attached
to this paper as Appendix A.

The American Bar Association Committee received responses from 97% of
the thirty-three federal agencies surveyed. Most of the agencies responding
reported that they permit nonlawyer representation, at least in some
circumstances, and they also reported that they permit nonlawyer
representation in both adversarial and non-adversarial proceedings.'^
Nonetheless, the American Bar Association Committee found that while the
great majority of agencies allow nonlawyer representation in principle,
"most of them seem to encounter lay practice very infrequently."''^
Nonlawyer practitioners were reported to appear overall in only 5% of
adjudications.'-^ In general, mass justice agencies reported higher levels
of nonlawyer representation than did other agencies.'^

70 The American Bar Association Committee report was published in
February, 1985. Professor Rose's study, note 1, supra, focused on nonlawyer
representation in economic regulatory proceedings. It identified fourteen
federal agencies which did not permit any nonlawyer representation.

at 1.

71 American Bar Association Client Protection Committee Report, supra,

72 Id^

73 Id.

Id,

84 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The findings of the American Bar Association Committee with respect to
mass justice agencies are generally consistent with those of the Rose
report. Note 1, supra and with those obtained in connection with this
report. The findings for the agencies examined in this report can be
summarized as follows:

Internal Revenue Service

As noted in Section III of this report, the Internal Revenue Service
does not maintain statistics on the category of representatives in
proceedings before it, but it reports that a very large number of nonlawyers
are registered to practice before the agency, and that in fact nonlawyer
representation is very common. ^

The Veterans Administration

As also noted previously in this report, the statutory $10 fee cap on
veterans' disability benefit claims has effectively deterred lawyers from
providing representation in these matters. (This is the largest category of
cases requiring assistance in the Veterans Administration.) The $10 fee cap
also deters nonlawyers from providing representation for fees. The Veterans
Administration reports that there is a long tradition of free assistance to
veterans provided by military service organizations and other nonprofit
agencies such as the American Red Cross, and that these organizations
provide assistance in 86% of the disability claims cases.'"

The Immigration and Naturalization Service

The Immigration and Naturalization Service does not maintain
statistics on representation, but agency personnel report that while there
is a substantial amount of assistance provided by nonlawyers, the nonlawyers
are all employees of nonprofit agencies or relatives and friends appearing
without fee on a one-time basis. It is widely estimated that large numbers
of persons in INS proceedings are completely unrepresented.''

The Social Security Administration

The Social Security Administration permits nonlawyer representation
in both adversarial and nonadversarial proceedings. Nonlawyer
representatives are also entitled to receive fee awards. However, nonlawyer
representation constituted only 11.2% of the representation in all social
security requests for hearing matters in 1983. (Another l.A% of the matters
included nonlawyers appearing jointly with lawyers.) Lawyers provided

'-^ See text at note 29, supra.

76 See note 28, supra.

77 See note 27, supra.

NONLAWYER ASSISTANCE 85

representation in 50.5% of the matters, and claimants in approximately 38%
of the matters were unrepresented. ° Although the Social Security
Administration does not maintain data on the employment status of
nonlawyers, persons interviewed in connection with this study generally
agreed that the overwhelming majority of nonlawyers were relatives and
friends appearing without fee on a one-time basis or paralegals and other
employees of nonprofit organizations.

The principal reason for the low incidence of lay representation
overall, and the virtual non-existence of lay representation for fee in mass
justice agencies (with the exception of the Internal Revenue Service) is
that many agencies have not issued clear regulations or adopted other
measures to implement the authority of Section 555(b) of the Administrative
Procedure Act and to encourage nonlawyer representation, particularly
representation for fee.'^ Section 555(b) is not self -executing. The right
of nonlawyers to practice before each agency must be determined by reference
not only to Section 555(b) of the Administrative Procedure Act but also "by
reference to the statute and regulations applicable to the particular
agency." Sperry v. Florida ex rel Florida Bar, supra, at 397. While the
APA authorizes agencies to allow nonlawyer representation (and, as we have
seen, it was not the intention of Congress to discourage that
representation), each agency ordinarily has the final decision on whether -
and to what extent - nonlawyers will be permitted or encouraged to provide
representation before it since few agencies are governed by statutes
compelling or banning legal representation. °^

Most importantly of all, if agency regulations and other agency
measures do not unambiguously authorize laypersons to practice before the

'° These statistics were prepared by the Social Security
Administration's Office of Hearing Appeals, and published in May, 198A in
Participant Involvement in Request for Hearing Cases for Fiscal Year 1983.
A copy of this report is attached to this paper as Appendix B.

'^ Implementation of the statute can include, in addition to the
issuance of clear regulations, measures such as the establishment of
registers, administration of examinations, imposition of experience
criteria, imposition of fee award criteria, and licensing or certification
procedures. A few agencies, including the Internal Revenue Service and the
Patent Office,- have adopted some of these others measures. The Immigration
and Naturalization Services has imposed competence criteria but only for
employees of nonprofit organizations. See discussion in text at notes 109-
111, infra.

°^ There are a few instances in which a federal statute affects the
scope of an agency's authority to govern practice before it. For example,
the Attorney Practice Act, 5 U.S.C. 500, entitles CPAs to practice before
the Internal Revenue Service (and lawyers to practice as a matter of right
before all federal agencies except the Patent Office).

86 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

agency, including all activity leading up to and incidental to that
representation, nonlawyers attempting to provide assistance may be in
jeopardy of prosecution under state laws and court rules prohibiting
unauthorized practice of law. Agency failure to provide protection against
state unauthorized protection laws has been the single most chilling
deterrent to the development of nonlawyer specialists to assist low and
moderate income persons in the immigration and social security fields. This
problem cannot be overstated. One cannot address the problem of inadequate
numbers of lay assistants to help low and moderate income persons in mass
justice agencies and ignore the very real problem of the adverse impact on
lay representation of state unauthorized practice laws, and the equally real
problem of fear of prosecution under those laws.

The longstanding conflict between state bar unauthorized practice
committees and nonlawyer groups over what constitutes the "practice of law"
is well-known and this paper will not dwell unduly on that subject. Suffice
it to say that numerous nonlawyers and nonlawyer entities, including real
estate brokers, collection agencies, banks, accountants, publishing houses,
title companies, insurance companies, and social workers, among others, have
all been subiected at one time or another, in one jurisdiction or another,
to charges of unauthorized practice of law.°^ One knowledgeable observer
has written that appearances before specialized administrative agencies are
one of the "five or six major areas [which] continue to be the primary
source of controversy . "°^ A 1980 survey of state bar unauthorized practice
enforcement committees revealed that lay representation before
administrative agencies (state and federal) accounted for 5% of bar
committee investigations in 1979 and for 10% of the reported judicial
decisions between 1970 and 1980. (Only two decisions were reported in the
decade between 1970 and 1980 recognizing a right to lay representation
before administrative agencies. )°^

°^ Many articles have been written critically examining the volumes of
state unauthorized practice decisions. See, for example, Rhode, Policing
the Professional Monopoly; A Constitutional and Empirical Analysis of
Unauthorized Practice Prohibitions, 3A Stan. L. Rev. 1 (1981); Christensen,
The Unauthorized Practice of Law; Do Good Fences Really Make Good Neighbors
- Or Even Good Sense? 1980 Am. B. Found. Research J. 159; Comment, 15
Valparaiso L.Rev., supra, note 38; Weckstein, Limitations on the Right to
Counsel; The Unauthorized Practice of Law, 1978 Utah L.Rev. 6A9; Morgan,
The Evolving Concept of Professional Responsibility, 90 Harv. L.Rev. 702
(1977); Johnstone, Unauthorized Practice Controversy, A Struggle Among Power
Groups, A Kan. L.Rev. 1 (1955); See generally, J. Fischer & D. Lachman,
Unauthorized Practice Handbook; A Compilation of Statutes, Cases and
Commentary on the Unauthorized Practice of Law (1972).

82 Morgan, id, at 708.

83 Rhode, note 81, supra, at 78.

NONLAWYER ASSISTANCE 87

The struggle between lawyers and nonlawyers has been longstanding,
and exceedingly difficult to resolve. In significant part, this is because
of the inherent difficulties in arriving at a definition of what constitutes
"the practice of law."°^ In order to reach an accommodation with some of
the country's major non-legal entities, the American Bar Association in 1969
published a book of agreements between the Association and ten professional
groups. ^ The preamble to the agreement with the Council of Certified
Public Accountants testifies to the difficulty in separating the "practice
of law" from other non- legal activities - in this particular case, tax
accounting:

In our complex society, the average citizen conducting a
business is confronted with a myriad of governmental laws
and regulations which cover every phase of human endeavor
and raise intricate and perplexing problems. These are
further complicated by the tax incidents attendant upon all
business transactions. As a result, citizens in increasing
numbers have sought the professional services of lawyers

°^ The Stanford Survey of reported unauthorized practice decisions
between 1970 and 1980 found that the reasoning in those cases was circular
or conclusory or both. Id. , at 97. Because of the extreme difficulty in
arriving at a definition of the practice of law, some courts have simply to
define the practice of law generally. This has often led to confusing and
inconsistent results. Compare, for example, Clark v. Austin, 101 S.W.2d
977, 982 (1937) (layperson appearing before state public service commission
was engaged in unauthorized practice) with Auerbacher v. Wood, 53 A. 2d 800,
801 (N.J. Eq. 19A7), aff'd. 59 A. 2d 863, 86A (N.J. Eq. 194) (industrial
relations consultant appearing before National Labor Relations Board was not
practicing law but only using his legal knowledge incidentally to provide
non-legal services.) For a discussion of these and other cases, see Rhode,
Id. , and Comment, 15 Valparaiso L. Rev., supra, note 38.

°-* The American Bar Association Statements of Principles with Respect
to the Practice of Law Formulated by Representatives of the American Bar
Association and Various Business and Professional Groups (1969). These
statements of Principles were subsequently withdrawn because of antitrust
concerns. See Rose, note 1 supra at ...; Interview with H. William Allen,
Chairman of the American Bar Association's Committee on National Conference
Groups. The Statements of Principles are discussed in Comment, Valparaiso
Univ. L. Rev. , supra, note 38.

It is interesting to note that, as a general matter, nonlawyers who
are members of organizations with the wherewithal to contest unauthorized
practice laws - e.g., banks and insurance companies - over the years have
worked out accommodating arrangements with bar groups. Nonorganized
individuals attempting to assist low and moderate income persons before
state mass justice agencies have generally not fared as well. See, for
example, cases discussed at note 88, infra, and see text at notes 88-89, infra.

88 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

and certified public accounts. .. Frequently the legal and
accounting phases are so interrelated and interdependent
and overlapping that they are difficult to distinguish.
Particularly is this true in the field of income taxation
where questions of law and accounting have sometimes been
inextricably intermingled.

The statement on unauthorized practice in Ethical Consideration 3-5
of the American Bar Association's Code of Professional Responsibility, which
was adopted by most of the states after its promulgation in 1969, and is
still in effect in many states, adds little to the definition of the
practice of law. It states:

It is neither necessary nor desirable to attempt the
formulation of a single, specific definition of what
constitutes the practice of law. Functionally, the
practice of law relates to the rendition of services for
others that call for the professional judgment of a lawyer.

The Model Code's Disciplinary rule, D.R. 3- 10(A) subjects a nonlawyer to
disbarment or other discipline if the lawyer provides "aid to a nonlawyer in
the unauthorized practice of law." The American Bar Association revised its
Model Code and adopted new Model Rules of Professional Conduct on August 2,
1983. The new Model Rules drop the text of Ethical Consideration 3-5 and no
longer attempt even a general definition of the practice of law. The new
Model Rules continue, however, to subject lawyers to discipline if they
"assist a person who is not a member of the bar in the performance of any
activity that constitutes the unauthorized practice of law." (Model Rule
5. 5). 86

86 The new Model Rules also continue the old Model Code ban on a
lawyer forming a partnership with a nonlawyer if any part of the partnership
consists of "the practice of law." Compare Model Rule 5.A(b) and
Disciplinary Rule 3-103(A) of the Model Code.

The "Legal Background" section to ABA Model Rule 5.5 reviews the
exceptions "in which an unlicensed individual is permitted to engage in an
activity that clearly constitutes the practice of law and would otherwise be
prohibited if engaged in by an unlicensed individual. Examples of such
activity include. . .activities authorized by federal law e.g., Sperry v.
Florida...." The Legal Background section commentary notes that the
excepted activity would not be considered the unauthorized practice of law
and conclvdes: "Accordingly, the ABA Model Rules do not prohibit a lawyer
from assisting an unlicensed individual in one of these authorized
activities. "

Unfortunately, the effectiveness of this statement is undercut by the
fact that the ABA's introductory section on the scope of the Model Rules
stresses that the Legal Background notes "have not been adopted, do not

NONLAWYER ASSISTANCE 89

Similarly, while the Model State Administrative Procedure Act permits
lay representation, it does so only if the representation is not prohibited
under state unauthorized practice laws. The Model Act does not attempt to
define unauthorized practice, but, rather, leaves it to the various states
to determine. ^ While many states do allow lay practice before state
administrative agencies, a number do not.°° A 1980 study focused on
representation before particular kinds of state administrative agencies and
surveyed all fifty states. With respect to Workers' Compensation Boards,
the survey disclosed that only twenty of fifty Boards permitted lay
representation. The same study found that except in California, every state
court to consider the issue between 1970 and 1980 had denied nonlawyers the
right to practice before Workers' Compensation Boards. °"

Federal administrative agency practice has not been spared from state
court litigation over the issue of what constitutes the practice of law and
whether it extends to practice before federal agencies. Practice before the
United States Patent Office and the Internal Revenue Service were among the

constitute part of the Model Rules, and are not intended to affect the
application or interpretation of the Rules...." Neither the relatively more
authoritative "Comment" to the Rules, nor the Rules themselves, state that
authorized federal agency practice is not the unauthorized practice of law.

85 See Model State Administrative Procedure Act, Sec. 4-203(b) and
Comment (1981).

88 Compare Florida Bar v. Moses, 380 So. 2d A12, A17 (1980) which
permitted lay representation (contract negotiator for school board in public
employees relations commission hearing) with Chicago Bar Ass'n v. Goodman,
366 111. 346, 8 N.E.2d 941, cert, denied 302 U.S. 728 (1937) which barred
lay representation (before the state's industrial commission dealing with
workmens' compensation issues.)

Some state courts have insisted that because control over the
practice of law is inherently a function of the state's judicial branch,
only the state's supreme court can authorize practice before state
administrative agencies. See e.g. , West Virginia State Bar v. Earley, 109
S.E. 2d 420, 435 (W.Va. 1959) (statute authorizing state compensation
commissioner to adopt rules of procedure did not authorize him to issue
rules permitting nonlawyer practice.) A critical appraisal of this case and
other similar state cases is set forth in Comment, Valparaiso Univ. L. Rev.,
Note 38, supra.

89 Rhode, Note 81, supra at 78. (The study also found that only
eleven of fifty public utility commissions permitted lay representation
generally. Another twenty-two commissions permitted only corporate counsel
or agents of participating utilities and other companies.)

90 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

early subjects of unauthorized practice litigation in state courts. ^
However, the unauthorized practice debate over representation in federal
agencies has now subsided with respect to practice before several of the
federal administrative agencies. This has happened where the agencies have
issued clear regulations permitting lay representation, and as state courts
have increasingly recognized the authority of the federal agencies to do so
under the Administrative Procedure Act and Supreme Court preemption
decisions .

The leading Supreme Court preemption decision in the area of
nonlawyer practice before federal agencies is Sperry v. Florida ex rel
Florida Bar, 373 U.S. 379 (1963). The Sperry case involved a 1952 federal
statute, 35 U.S.C. 31, which provided generally that the Commissioner of
Patents

(m)ay prescribe regulations governing the recognition and
conduct of agents, attorneys or other persons representing
the applicants or other parties before the Patent
Office

Pursuant to this general statutory authority, the Commissioner issued
regulations allowing an applicant for patent to be represented by an
attorney or agent and also established two separate registers, one for
attorneys and one for nonlawyer "agents."

The Florida Bar brought suit against a patent agent who maintained an
office in Florida and held himself out to the public as available to preoare
patent applications even though he was not a member of the Florida Bar.^^
(The record revealed that of the 73 patent practitioners in Florida at the

90 See, e.g. , Sperry v. Florida ex rel Florida Bar, supra (reversing
the Florida supreme Court's finding of unauthorized practice against a
nonlawyer patent agent; Ginsburg v. Kovrak, 139 A. 2d 889, appeal dismissed,
79 Pa. Sup. Ct. 95 (1958) and Petition of Kearney, 63 So. 2d 630 (Fla. 1953)
(refusing to allow attorneys admitted to federal courts but not to state
courts to practice "tax law"). For a discussion of state efforts to bar
practice before federal agencies, see Rose, note 1, supra; Simonelli, State
Regulation of a Federal License to Practice Law; Unauthorized Practice or
Federal Supremacy, 31 Fed. Bar News & J. 128 (1984); Comment, Unauthorized
Practice of Law; Supreme Court Holds States Cannot Restrict Activities of
Nonlawyer Patent Office Practitioner, 196A Duke L.J. 190.

91 The patent agent had also advertised himself as a "patent
attorney," but he had ceased to do so and the issue of whether he could call
himself a patent attorney rather than patent agent was not before the Court.
Subsequently, U.S. Patent Office rules have made it clear that nonlawyers
may not advertise themselves to be attorneys.

NONLAWYER ASSISTANCE 91

time, 62 were not members of the Florida Bar.)"^ The record established
that Mr. Sperry prepared legal documents, rendered opinions as to
patentability, and filed applications in the U.S. Patent Office. The
Florida Bar contended that these actions constituted the unauthorized
practice of law. In a unanimous decision, the Supreme Court held that the
state was preempted from interfering with the agent's practice, including
that part of the practice in Florida which was incidental to the preparation
and prosecution of patent applications before the Patent Office, because of
the Court's longstanding interpretation of the Constitution's Supremacy
Clause that state laws must yield when incompatible with lawful federal
legislation.^-' The Supreme Court found that the Patent Commissioner's
action in issuing regulations and establishing a register under the general
authority of the federal statute constituted preemptive action by the
federal government. Moreover, the Sperry opinion implies that even in the
absence of a Congressional statute expressly authorizing nonlawyer practice,
an agency has discretionary authority to permit that practice so long as it
is not prohibited by Congress. The opinion does not expressly discuss the
doctrine of implied authority or the inherent powers of agencies, but it
does refer specifically to the historical practice of federal agencies to
govern conduct of practitioners and the legislative history of the
Administrative Procedure Act in which Congress evidenced its intention not
to interfere with that longstanding practice.

The Supreme Court did not attempt in Sperry to delineate the outer
limits of the federal government's authority to allow federal agency
practice in the several states, noting in a footnote that it was not
necessary to do so in the case before it.^^ Nonetheless, the Court made it
quite clear in the text of its opinion that the federal authority could not
be as narrowly circumscribed as the Florida Bar attempted and that there are
some activities incidental to federal agency practice that are "inevitable."
Thus, the Court stated that preparation and prosecution of patent
applications:

inevitably requires the practitioner to consider and
advise his clients as to the patentability of inventions
under the statutory criteria. . .as well as to consider the
advisability of relying upon alternative forms of
protection which may be available under state law. It also
involves his participation in the drafting of the
specifications and claims of the patent application. .. (one
of the most difficult legal instruments to draw with
accuracy) .. .And upon rejection of the application, the

92 Sperry v. Florida ex rel Florida Bar, supra at 401, note A4.

93 The Sperry Court based its holding on the Supreme Court's former
seminal supremacy clause ruling in Gibbons v. Ogden, 9 Wheat 1, 211.

94 Id., at 402, note 47.

92 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

practitioner may also assist in the preparation of
amendments. . .which frequently requires written argument to
establish the patentability of the claimed invention under
the applicable rules of law and in light of the prior art."
(Citations omitted) (Emphasis supplied)^-'

The Court found that these kinds of activities were inevitable in carrying
out the federal practice even though under state law those same activities
"constitute the practice of law" and "in the absence of federal legislation,
[the state] could validly prohibit nonlawyers from engaging in
this. . . practice. "^^

In the footnote commenting that the Court was not called upon to
determine the ultimate limits of the federal authority, the Court also
stated:

We note, however, that a practitioner authorized to prepare
patent applications must of course render opinions as to
the patentability of the inventions brought to him, and
that it is entirely reasonable for a practitioner to hold
himself out as qualified to perform his specialized work,
so long as he does not misrepresent the scope of his
license. (Emphasis added. )^'

Finally, the Court rejected the Florida Bar's contention that the
federal authority extended only to activities performed on federal property
or in the District of Columbia. The Court noted that "The bulk of
practitioners are now scattered throughout the country" and that "As a
practical matter, if practitioners were not so located, and thus could not
so easily consult with the inventors with whom they deal, their
effectiveness would often be considerably impaired. "^°

The Court's decision in Sperry does not give federal agency
practitioners a license to practice law generally. (Patent agents are
clearly not authorized to draw up wills and trust instruments, for example.)
In fact, the Court expressly stated that the State "maintains control over
the practice of law within its borders except to the limited extent

95 Sperry, id. , at 383. The Florida Court's injunction had
permanently enjoined Sperry from "rendering legal opinions, including
opinions as to patentability .. .preparing, drafting and construing legal
documents. . .holding himself out in this state, as qualified to prepare and
prosecute applications for letters patent...."

96 Id^

97 Id^ at 402, note A9.

98 Sperry, supra at 389-90.

NONLAWYER ASSISTANCE 93

necessary for the accomplishment of the federal objective.""^ The Court's
overall decision, and the language of its opinion quoted above, make clear,
however, that the "limited extent necessary for the accomplishment of
federal objectives" cannot be too narrowly circumscribed by the state and
"of course" and even "inevitably" encompasses reasonable advertising,
advice, analysis of applicable federal laws (and of comparable alternative
state laws), preparation of legal documents, and conduct of appeals,
including written argument under the applicable laws. ^^

It is important to note that it was not Congressional enactment of
the Patent Act that brought about the federal preemption decision in Sperry.
Rather, it was the Patent Office's issuance of regulations and the
establishment of a register under the general authority of that statute that
constituted the preemptive action. ■'■^^ Similarly, Section 555(b) of the
Administrative Procedure Act authorizing nonlawyer representation, the terms
of which are not substantively dissimilar to the Patent Act provision at
issue in Sperry, is not itself preemptive of state regulatory action but,
rather, is dependent upon agency implementation.

In addition to the Patent Office, a number of other federal agencies
have clearly acted to preempt. The Internal Revenue Service, the National
Labor Relations Board, and the Interstate Commerce Commission were among the
early examples of agencies which issued regulations, established rosters.

99 Id. at A02,

100 Some commentators have focused on the Sperry Court's phrase
"limited extent necessary for the accomplishment of the federal objective"
and concluded that the activities necessary to carry out the federal
agency's objectives may themselves be "limited" by the state unless the
federal agency expressly authorizes a broad range of activity. See, e.g. ,
Rose, note 1 supra; Simonelli, note ... supra. This focus and conclusion is
probably too narrow and stringent, however, since the Court's opinion as a
whole makes it clear that so long as the federal agency practice itself is
generally authorized by the agency, there is a broad range of protected
activity which is inevitably necessary and incidental to carry out that
practice. Moreover, the Sperry Court plainly authorized that range of
activity even though it recognized that the same activity, absent the
federal authorization, could under state law constitute the "practice of
law." Notwithstanding this broadened reading of Sperry, it may well be
prudent for federal agencies to spell out in some detail the extent of
authorized activities in view of the continuing vigor of state unauthorized
practice laws and the continuing concern of laypersons about prosecution
under them. See discussion in the text at notes 107 et. seq., infra.

101 The Patent Act provision at issue in Sperry, 35 U.S.C. 31 merely
empowered the Patent Office, if it so chose, to issue regulations governing
the admission and conduct of lay representatives before it. See text at
note 91, supra.

94 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

and took other action to recognize lay practitioners. ^^^ In general, where
the federal government has clearly provided for lay representation, state
courts in recent years have increasingly allowed the representation under
the federalism doctrine set forth in Sperry. In addition, where an agency
has issued unambiguous regulations authorizing lay practice before it, the
courts have taken a broadened view since Sperry of what activity is
"incidental" to the federal agency representation. ^-^ Finally, as some
federally endorsed lay activities - preparation of patent applications and
tax returns, for example - have in recent decades become the livlihood of
large numbers of laypersons (who have also developed political power), the
courts and the state bars have relaxed their earlier hostility to the

activities.

lOA

It must be stressed, however, that where a federal agency has not
clearly acted to preempt (by issuing clear regulations, etc.) state courts
may continue to prohibit lay assistance to persons involved in the agency's
proceedings. This is illustrated by the recent case of State Bar of Texas
v. Cortez, 67A S.W. 2d 803 (1985).

Mr. and Mrs. Cortez advertised that they had thirty-five years of
experience in immigration matters and offered to provide services to
Hispanics seeking assistance before the Immigration and Naturalization
Service. The record revealed that the most common activity of the Cortez 's
was the selection and completion of the 1-130 Form (Petition to Classify
Status of Alien Relative for Issuance of Immigrant Visa) by interviewing
them and helping them fill out the form according to the instructions
provided by INS.^^-* They also completed several other forms less frequently
required such as applications for citizenship. The Cortez 's also assisted
in gathering and storing supporting documentation and preparing the alien
for his or her embassy interview. The Cortez 's charged a fee for their
services, usually $A00. The Texas Supreme Court affirmed the decision of
the trial court enjoining Mr. and Mrs. Cortez from continuing their business
on the ground that their acts constituted the unauthorized practice of law
since it required special legal skills to know which forms, if any, should

102 An extensive list of federal agency regulations permitting lay
practice and court decisions and articles concerning those regulations is
set forth in Rose, note 1, supra.

^^■^ See Rose, note 1, supra.

^^^ See text at note 90, supra.

105 This is the form most commonly filled out by laypersons employed
by nonprofit agencies assisting aliens. AYUDA, for example, reported that
approximately 80% of its immigration caseload involved preparation of this
and similar forms. See text at note 33, supra.

NONLAWYER ASSISTANCE 95

be filed, and what information to impart to the INS that would enable the
alien to obtain a visa but not be subject to deportation. ■'^^°

A similar case arose in 1984 in North Carolina involving a client of
Public Citizen, a public interest law firm. The client, Frances Lane, was a
former nonlawyer employee of the Immigration and Naturalization Service who
wished to provide for modest fees services similar to those provided in the
Cortez case (and currently provided by laypersons employed by nonprofit
agencies throughout the country).

The State Bar's unauthorized practice committee threatened to
prosecute her for unauthorized practice of law if she did so.^^'
Subsequently, following Ms. Lane's retention of counsel, the state bar
entered into a settlement agreement allowing her to conduct her immigration
practice so long as her advertising deleted any reference to paralegal
services or immigration law.-'-^°

It would not seem that filling out routine adjustment of status and
citizenship forms for the Immigration and Naturalization Service should be
any more subject to state unauthorized practice prosecution in Texas than is
the preparation of patent applications in Florida which was upheld by the
Supreme Court in Sperry.

Both Sperry and Cortez involved the following similar activities:

1. Preparation of papers for submission to a federal agency on the
basis of an understanding of a discrete body of federal rules and how those
rules applied to the facts presented by their respective clients.

2. Giving advice to their respective clients regarding the
applicability of federal rules to their particular fact situations (the
patentability of an invention in one case and the adjustment of status in
another), both of which may involve advice as to which of several
alternatives to follow.

Similar holdings that preparation of immigration forms requires
legal training and skills were handed down by the Florida Supreme Court in
The Florida Bar v. Moreno-Santana. 322 So. 2d 13 (1975) and in The Florida
Bar V. Retweta-Cabrera. 322 So. 2d 28, 29 (1975).

^^' Comments of Alan Morrison, Executive Director of Public Citizen,
at a meeting of the Committee on Regulation of the Administrative Conference
of the United States, September 7, 1984, as reflected in the nonverbatim
minutes of the meeting.

1^^ Letter from Frances Lane to Public Citizen, July 9, 1984.
Typically, investigations of unauthorized practice, and their resulting
prosecutions or settlements, are unpublished. See note 113, infra.

96 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

3. Conduct of their activities in their own offices in the states
where they lived, rather than in the District of Columbia or in any federal
facility.

h. Imposition of fees for their services (the amounts of which were
not characterized in either case as grossly excessive).

5. Advertisement of their availability to provide the services in
question.

There was no question raised in either case of any special competence
to perform the activities in question other than the charge by the state bar
committees that they were not trained to be lawyers. (In the North Carolina
case involving Francis Lane, it should be noted that Ms. Lane was formerly
an employee in good standing of the Immigration and Naturalization Service.)

The principal reason for the different treatment of the lay
practitioner in Cortez from that accorded the patent agent in Sperry is that
the Immigration and Naturalization Service has not implemented its authority
under Section 555(b) of the Administrative Procedure Act to authorize
nonlawyers to provide assistance in routine immigration matters for fees.
Under INS regulations, nonlawyers may provide repeat representation only if
they are employed by nonprofit organizations and providing free services to
indigents or other persons eligible for their assistance. ^^" Fee paying
cases are restricted to lawyers. (There is no limit on the fees that a
lawyer may charge, and unlike fee awards in social security disability
cases, the fees are not subject to agency approval).

In accordance with the Attorney Practice Act, 5 U.S.C. 500, any
lawyer may be admitted to practice before the Immigration and Naturalization
Service without application of any special examination or other competence
criteria. Conversely, the INS imposes strict competence criteria and
admission requirements on nonlawyers who are employed by nonprofit agencies
providing free assistance (primarily to indigents) . ^^^

The current director of AYUDA, a nonprofit organization accredited by
INS and recipient of commendations from INS for its outstanding INS work,
(see note ... , supra. ) reports that she received certification from the INS
to provide lay representation in INS proceedings several years ago when she
was employed as a member of AYUDA 's staff. She reports that she was
required to show employment by AYUDA, submit letters of recommendation and
other evidence as to her knowledge of INS rules, experience with INS

^^^ ^ C.F.R. 292.1 A nonlawyer is also permitted under INS
regulations to appear on a one-time basis, without fee, on behalf of a
relative, friend or other person with whom there is a personal relationship,

110 Id. 292.2

NONLAWYER ASSISTANCE 97

matters, and good character. She reports further that she was personally
interviewed by an officer of the INS, that the agency itself was subject to
a field investigation, and that, in addition, INS agents interviewed her
neighbors and friends concerning her character. Notwithstanding this rather
rigorous certification procedure, Ms. Vega reports that when she
subsequently left the nonprofit agency for a period of time, she lost her
certification because she was no longer employed by a nonprofit
organization. Thus, she was not permitted to charge fees for her services
in the open market. She then went to work for a lawyer specializing in
immigration matters and performed work on his cases for which he charged
clients the usual legal fees. Now that she has returned to AYUDA as its
director she is once again eligible to be certified (although she has not
yet applied for it).^-'--'-

Similarly, Frances Lane, the North Carolina layperson desiring to
provide assistance in routine immigration matters for a modest $100 fee was
an employee in good standing of the Immigration and Naturalization Service
before her retirement. Notwithstanding her acknowledged experience and
competence, she is not authorized to charge fees for her services under
current INS regulations, and, as a result, is faced with prosecution under
the law of many states if she attempts to do so.-'-^^ The INS regulations
contrast sharply with those of the Internal Revenue Service which
automatically permits former nonlawyer IRS agents who have completed six
years of IRS employment to provide representation before the Service at all
levels .

From the perspective of would-be nonlawyer practitioners, the Cortez
and Lane cases are not isolated incidents in a climate otherwise favorable
to their practice before federal mass justice agencies. Quite to the
contrary, interviews reveal that they appear to nonlawyer s to be only the

■'•^^ Interview with Yvonne Vega, Executive Director of Ayuda, in
Washington, D.C. Ms. Vega noted that while her personal interview focused
on her good character, other lay employees of nonprofit agencies have been
examined as to their knowledge of INS rules.

At the time Ms. Vega applied for certification, the certification
procedure was handled from the outset by the various district offices of INS
located throughout the country, although final approval was given by the
Board of Immigration Appeals in Washington, D.C. In December, 1984, the BIA
revised its procedures and provided that applicants for certification should
apply directly to BIA. Certification is now largely granted on the basis of
written documentation as to knowledge, experience and good character,
although the district offices may still conduct an investigation as they
deem appropriate. (District offices have 30 days in which to recommend
approval of the application to the BIA.) 8 C.F.R. 292.2 (198A); Interviews
with INS officials, Sanchez and Hurwitz, note 27, supra.

112 See note 106, supra and accompanying text.

98 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

latest examples of a confusion in application of state unauthorized practice
laws to federal agency practice at best, and an ongoing antagonism to
nonlawyer practice at worst. In any event, nonlawyer professionals who were
interviewed, perceived a less than clear interface between state
unauthorized practice laws and federal policy concerning practice before
federal administrative agencies. ^^^ Significantly, they did not perceive
any clear signal from federal mass justice agencies that nonlawyer
representation for a fee is encouraged. Conversely, interviewees pointed to
what they saw as signals that nonlawyer representation is encouraged by the
federal government only if it is to be made available free of charge to the
very poorest who cannot afford fees.

Interviewees noted, for example, that federally funded legal aid
organizations are generally barred from taking a fee generating case, unless
they first attempt to find legal assistance from the private bar and no
lawyer in private practice can be found who is willing to handle the
matter. ^^^ Interviewees noted that federally subsidized legal aid
organizations are not required to ascertain the availability of nonlawyer
practitioners.

Interviewees also noted that while listings of nonprofit
organizations are sometimes maintained by mass justice agencies, these
referral lists are often of use only to the very poorest claimants who are
eligible for free services under the guidelines of the nonprofit
organizations.

Interviewees point to the fact that INS regulations allow lay
representation only when no fees are charged. They surmised that opposition
to lay representation before INS has contributed to the agency's failure to
allow lay representation for fees. (It will be recalled that in December,
198A, INS revised its rules relating to accreditation of nonprofit agencies
and certification of laypersons working for those agencies. The INS summary

^^^ It is difficult to obtain detailed information concerning the
extent to which nonlawyer professionals are required or pressured, directly
or indirectly, to cease activities which state bars consider unauthorized
practice. A survey of state bar unauthorized practice enforcement
committees revealed that 80% of the 1,669 complaints processed by them
nationwide during 1980 resulted in informal, unpublished agreements, and
that nearly all of the five percent of their cases which terminated in
judicial findings of unauthorized practice were unreported. Only three
judicial decisions concerning unauthorized practice were published in the
nation during all of 1979 and only three others in 1980. See Rhode, Note
81 , supra.

^^^ Interviews with Willie Cook, Executive Director Neighborhood Legal
Services Program, and with Leslie Long O'Leary, Pro Bono Coordinator,
District of Columbia Bar. Legal service programs are allowed to handle
social security claims of eligible clients, however.

NONLAWYER ASSISTANCE 99

to the final rules notes that it received a largely favorable public
response to its proposed rules but "drew the most severe criticism" from
those "who expressed the view that the growing complexity of
immigration. .. law and procedure necessitated the elimination of nonattorneys
in this area altogether. "^^^)

Nonlawyer professionals providing assistance in social security
disability cases as employees of nonprofit organizations noted that while
the Social Security Administration regulations permit nonlawyer
representation, they do not unambiguously stress that nonlawyer
representatives may hold themselves out in the states as social security
agents and charge fees in the marketplace for their services. Moreover,
they note, while the enabling legislation for Social Security benefit claims
provides that attorney fees may be deducted by SSA from a claimant's award
and paid directly by the agency to attorneys, there is no similar proviso
for nonlawyer representatives. ■'^■'•" This suggests to them that it was not
contemplated that fee awards to nonlawyer practitioners would be routine or
frequent .

In fact, it is remarkable that even the existence of financial
incentives (that is, fee awards in social security disability cases) has not
resulted in a large pool of nonlawyer practitioners for those cases. Social
Security Administration personnel estimated that the overwhelming majority
of lay practitioners in the 12% of hearing request matters handled solely by
them were paralegals working for legal aid and other nonprofit
organizations. At the same time, the availability of fee awards in
disability cases has significantly contributed to a dramatice increase in
lawyer representation from 36.8% in 1977 to 6^-. 2% in 1983. ^^^

Thus, notwithstanding the fact that lay representation is permitted
by the Social Security Administration, and lay practitioners may even
receive awards, there has not developed any visible, readily identifiable
cadre of social security disability "representatives" or "agents." No
descriptive word even exists in popular parlance to describe such persons
akin to the description of Patent Agents who practice before the Patent
Office or Enrolled Agents who practice before the Internal Revenue Service.
There are no readily identifiable organizations of such persons either. The
National Organization of Social Security Claimants Representatives (NOSSCR) ,
the largest organization of persons providing representation in Social

^•'•^ Also see text at note 59, supra.

116 See 42 U.S.C. 406(a) (1983); 20 C.F.R. 404.975(b) (1976). (Agency
may help an attorney collect a fee by deducting up to 25% of a claimant's
past due award. )

11^ See Appendix A and Appendix B. The growth of legal service
programs to assist indigents has also helped to increase both lawyer and
nonlawyer representation.

100 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Security Administration proceedings, reports that approximately 400 of its

2,A00 members are nonlawyers but that virtually all of them are paralegals

employed by legal aid and other nonprofit organizations.^^** Although Social

Security Administration personnel and staff of NOSSCR stated that they were

aware of a handful of lay practitioners in the Social Security Field who

were not employed by nonprofit organizations, they were not on any roster or

referral list and thus their names and addresses could not be made available

either to this author or to claimants seeking assistance. NOSSCR maintains

a referral listing for persons needing assistance in Social Security

matters, but it is unable to refer fee paying cases to anyone other than its

' 1 1 Q
lawyer members because it has no listing of lay practitioners.^^'

Similarly, there are no visible and well known neighborhood offices
for social security representatives akin to the H.R. Block and Sears Roebuck
offices in the tax practice field. There are neighborhood legal aid and
social service agency offices visible in most communities, but their
services, as noted earlier, are ordinarily available only to indigents, and
these agencies report that they cannot meet even all of their needs. ^•^^ A
review of the fifty pages of lawyer advertising in the yellow pages of the
District of Columbia telephone book revealed several thousand lawyers' names
(under specialty headings such as "social security matters") but no listings
of private lay practitioners for social security matters could be located.
Names of lawyers can be obtained from bar association lawyer referral
services, but there are no similar referral mechanisms for the working poor
or moderate income groups who might desire to employ nonlawyers.

Nonlawyer professionals who were interviewed also noted that while
training programs in social security disability law and other subjects of
federal agency practice are offered to nonlawyers by bar associations, law
schools and nonprofit organizations, as well as by the federal government,
none of these organizations will assign or refer a client to them
directly. ^^^ Rather, cases are assigned to lawyers or to supervising

^^° Interview with staff. National Organization of Social Security
Claimants' Representatives.

119

Id.

^20 See Note 13, supra.

1^^ Several organizations offering training programs to laypersons in
federal agency subjects such as social security and immigration law were
surveyed for purposes of this report. They included: the District of
Columbia Bar's public service office; the Legal Counsel for the Elderly
Department of the American Association of Retired Persons; the Immigration
and Naturalization Service's Voluntary Outreach Program; the George
Washington University's Senior Paralegal Institute; Antioch Law School's
Paralegal Institute; and the federally funded Neighborhood Legal Services
Program.

NONLAWYER ASSISTANCE 101

lawyers in nonprofit organizations. Organizations offering the training
confirmed this practice and stated a principal reason for it was the need to
protect the program against bar charges of unauthorized practice. For
example, the District of Columbia Bar's public service office confirmed that
even though federal law permits lay representation in social security
matters, cases coming through the Bar's referral service are always referred
to lawyers and never to nonlawyers. (They may, however, be referred to
recent graduates of law schools whose only training in the subject area has
been the same training program offered the nonlawyers. ■'^^•^)

Even nonprofit agencies surveyed which employ legal personnel as well
as nonlawyers reported that all cases are assigned internally to supervising
lawyers rather than to nonlawyer professionals on the staff. These
organizations were visibly proud of their nonlawyer staff. Nearly all
nonlawyer staff were reported to be college graduates and many had graduate
degrees as well. They were reported to have come from a variety of skilled
backgrounds and experiences (some of them having come to the nonprofit
agencies upon retirement from their careers). Some were said to have had
backgrounds and experience in social security or immigration law before
coming to the nonprofit agencies. Notwithstanding these qualifications,
staff directors uniformly stated that it was the policy of their
organizations never to assign cases to nonlawyer professionals on the staff.
Rather, cases were always assigned to supervising lawyers. Although a
variety of organizational reasons were cited by the differing groups,
including the desire of the lawyer directors in several of the organizations
to ensure "quality control," a principal reason cited by every single
organization was the need to protect its program against charges of
unauthorized practice. ^^-^

^^^ Interviews with Leslie Long O'Leary and Ann Barker of the District
of Columbia Bar's Public Service Office.

^^•^ The practice of the American Association for Retired Persons'
Legal Counsel for the Elderly Department is instructive. That agency has
received one of three grants from the Social Security Administration to
conduct training programs in social security law for nonlawyer employees of
nonprofit organizations throughout the country. The agency has developed
extensive training manuals. One of the training manuals in the District of
Columbia reviews the District's unauthorized practice laws. It notes that
many federal agencies have granted laypersons the right to appear before
federal administrative agencies in a representative capacity. The manual
concludes, however, with a set off and boldface warning that
"notwithstanding a paralegal's authority to represent a client.... it is LCE
policy that all paralegals must have their work supervised by a staff
attorney. .. [in order to] ensure quality legal work and prevent any possible
unauthorized practice of law." Training Materials: What Constitutes the
Unauthorized Practice of Law in the District of Colximbia? Legal Counsel for
the Elderly Continuing Legal Education Seminar.

102 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The directors of the nonprofit organizations reported that they
devote an extensive portion of their training sessions and training
materials to the subject of state unauthorized practice rules and the need
of nonlawyers to comply with them. (They also pointed out the extreme
difficulty of teaching nonlawyers how to draw the line between authorized
and unauthorized practice when lawyers, courts, and drafters of model codes
have been unable to do so. See discussion in text at notes 83-87 supra. )

Perhaps as a result of the emphasis on unauthorized practice in staff
training, perhaps as a result of the long history of unauthorized practice
battles in the states, or a combination of the two, interviews with
nonlawyer professionals working for social service agencies in the fields of
social security and immigration laws disclosed that not a single one of them
would consider opening a private social security or immigration practice.
The predominant reason given was fear of state bar unauthorized practice
charges. ^^^

In sum, even when mass justice agency rules allow nonlawyer practice,
and even when it would appear that the authorized practice is probably
protected against state unauthorized practice laws under the federal
preemption doctrine, nonlawyer professionals are extremely skittish about
getting into the "business" of agency representation (with the exception of
the business of tax preparation where the practice has been well-established
for decades and accepted by state bars). This seems to be due to the
cumulative effect of past and ongoing organized bar opposition to nonlawyer
practice before federal administrative agencies; the continuing ban on
nonlawyer representation in many state administrative agencies; the
conflicting decisions from state to state over what constitutes the
unauthorized practice of law, including the conflicting and confusing state
court decisions on whether practice before administration agencies
constitutes unauthorized practice; the continuing state prosecution of some
federal agency practice (illustrated by the Cortez case); the continuing
prohibition in lawyer codes of ethics against assistance to laypersons
engaged in unauthorized practice; the half -heartedness with which nonlawyers
practice is encouraged by some federal agencies (exclusion of nonlawyer
practice for fees, for example); and the continuing general antipathy of
many state bars to nonlawyer legal practice generally. All of these past
and ongoing factors have created an atmosphere of uncertainty, confusion and
fear on the part of nonlawyer professionals who might otherwise be a source
of assistance for the many persons now unrepresented in federal mass justice
agency proceedings.

The results of this empirical study suggest thai, wnile the issuance
of unam'biguous regulations as contemplated by Section 555(b) of the
Administrative Procedure Act is essential to establishing federal
preemption, agency regulations alone may not be sufficient to allay the

^^^ Twenty-five nonlawyer professionals working for the social
services agencies listed in note 2, supra were interviewed.

NONLAWYER ASSISTANCE 103

pervasive fears of the would-be lay practitioners. Agencies that wish to
encourage increased nonlawyer assistance may have to do more than merely
issue regulations; they may have to take such measures as certifying
nonlawyer practitioners, creating rosters and referral lists, and announcing
very clearly the incidental activity to be encompassed in the authorized
nonlawyer professional practice.

In addition, although it is likely that agencies have implied
authority to admit nonlawyers to practice before them, and although it is
probable that even if they do not have implied authority. Section 555(b) of
the APA authorizes agencies to admit nonlawyers, it may be prudent and
useful to amend the language of Section 555(b) itself to make it crystal
clear that such agency action is authorized. Further, it may be helpful to
amend Section 555(b) to make it unambiguously clear that those admitted to
practice before federal agencies are authorized to do all that is incidental
and necessary to that representation in their respective states, including
advertisement of their availability, giving advice as to applicable federal
rules, preparing relevant documents, and charging fees, keeping in mind that
in its unanimous Sperry decision, the Supreme Court opined that these
activities are an "inevitable" part of federal agency practice. ■'•^^

^^^ See text at note 95 supra.

104 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

VT . Federal Mass Justice Agency Authorization for Increased
Nonlawyer Professional Assistance Can Be Accomplished in
a Manner that is Consistent with Agency Needs to
Regulate Competence and Ethical Conduct of Practitioners

Federal agency rules and practice which, directly or indirectly,
limit the supply of nonlawyer representatives are largely grounded in
protective notions - that is, that some or all of the persons affected by
the agency's proceedings will be subject to exploitation and harm by
incompetent or unscrupulous persons acting as their representatives. ^
This survey found that there was uniform agreement, both within and without
government, that there are indeed unscrupulous persons who take advantage of
some mass justice agency participants, particularly the non-English
speaking, the physically and mentally disabled, the uneducated, and other
vulnerable persons. Interviewees had legions of "horror stories" about so-
called "immigration experts" or "social security experts" who were
completely without knowledge of INS or Social Security rules and who
succeeded in obtaining wedding rings, lifetime savings, and other existing
assets from vulnerable persons on the promise that they would get a "green
card" or disability payments for life. One interviewee related a story
about one so-called "social security expert" who would round up a whole van
of elderly social security recipients on the day that their social security

checks arrived in the mail and take them to his own bank for deposit of the

1 9S
checks into his own account. •^^-'

However, the "horror stories" were not by any means limited to
nonlawyers. Complaints against unscrupulous lawyers were also frequently
cited as a major problem, particularly complaints of fee gouging. A recent
Time magazine article highlighted the problem of exploitation of immigrants
by both lawyers and nonlawyers. It noted that five lawyers had been
convicted or sentenced in the past year on charges stemming from immigration
violations and reported that "INS officials are among the critics [of
lawyers]: they estimate that 30% of permanent resident petitions are
fraudulent with corrupt or incompetent lawyers often to blame. "^'^^
Conversely, INS officials interviewed could recall only two instances in the
past two years in which nonlawyers who had been accredited by the agency had
been the subjects of investigation for unethical conduct or incompetent
representation.^ (The agency does not maintain statistical data on

^^^ Similarly, protective notions are usually relied on by state
courts in upholding state unauthorized practice laws. For a critical
analysis of these decisions, and the reasoning threin, see the artciles
cited in note 79, supra.

'■^^ Interview with N. Schorr, note 116 supra.

^26 Time, July 8, 1985, p. 77.

^^' INS interviews, note 25, supra.

NONLAWYER ASSISTANCE 105

numbers of complaints or numbers of persons disbarred from agency practice
or otherwise disciplined.) Moreover, it is not apparent to this author that
the existing ban on representation in INS proceedings by a former staff
member (now director) of a nonprofit agency recognized by INS as having an
"outstanding reputation for assisting clients within the law" or by a former
INS employee who was in good standing in any way protects the public. 1^°

In sum, it would appear that while mass justice agencies are no doubt
justified in enacting regulations to control the conduct of practitioners in
order to prevent abuse of the public, there is no evidence that those
regulations need to be significantly different with respect to nonlawyers
than they are with respect to lawyers .

In this connection, it is noteworthy that the problem of protecting
the public from unscrupulous lay practitioners is not a new one for federal
agencies. Further, past history demonstrates that the remedy for the
problem need not be disqualification of all nonlawyers. For example, the
problem of unscrupulous nonlawyer patent agents at one time became a
national scandal and led to several Patent Office reforms. As the Supreme
Court noted in its Sperry decision:

Despite the early recognition of nonlawyers by the Patent
Office, these agents, not subject to the professional restraints
of their lawyer brethren, were particularly responsible for the
deceptive advertising and victimization of inventors which long
plagued the Patent Of f ice. ■'•'^^

What is instructive about the Patent Office experience is that even though
the great bulk of complaints of misconduct involved nonlawyer patent agents,
the Patent Office did not disqualify all lawyers as a group. Rather, it
tailored reform in the form of good moral conduct requirements and patent
examinations which could be complied with by both lawyers and nonlawyers.
The Patent Office system has been widely lauded as a highly workable one,
and one which has successfully rooted out incompetent and unscrupulous
patent agents without broadly disqualifying a whole class of persons (that
is, the class of nonlawyers). As the Sperry court noted:

So successful have the efforts of the Patent Office been that
the Office was able to inform the Hoover Commission that there is
no significant difference between lawyers and nonlawyers either
with respect to their ability to handle the work or with respect
to their ethical conduct .' ■'■-'^

^^° See discussion at ntoes 105, 109, supra.

^^^ Sperry v. Florida ex rel Florida Bar, supra, at 390.

130 Id. at A02.

106 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Moreover, the Patent Office has succeeded notwithstanding the fact that a
patent application is, in the words of two Supreme Court decisions, "one of
the most difficult legal instruments to draw with accuracy" and "frequently
requires written argument .. .under the applicable rules of law."^-^^

Similarly, other studies have disclosed that federal agencies which
admit nonlawyers to practice have generally not found unethical conduct of
nonlawyers to be a greater problem than that posed by unethical lawyers and
have not found the problem of regulating nonlawyer conduct to be greater
either. This was the conclusion of the American Bar Association Committee's
survey of thirty-seven federal agencies, and it was the conclusion reached
by Professor Rose on the basis of his interviews with federal agencies in
the economic regulatory area.^-^'^

There are, of course, fundamental ethical requirements that agencies
should impose on both lawyers and nonlawyers. Agencies are likely to have
these already in place, at least for lawyers. Provisions barring conflicts
of interest or criminal activity, for example, are near universal. Other
provisions barring gross negligence, or fee gouging, may or may not be
promulgated specifically by various agencies, but it would seem that where
adopted, they should apply with equal force to lawyers and nonlawyers.
These activities, and similar unethical conduct, are barred in the American
Bar Association's model codes of lawyer conduct which have been adopted by
nearly all federal agencies for the purpose of regulating the ethical
conduct of lawyers practicing before them.

The issue of nonlawyer competence can be treated simply as an ethical
matter (as it currently is in the ABA's model code provisions such as those
barring negligence and assumption of tasks beyond one's capabilities without
association of one who is more skilled). Or federal agencies can - and some
of them do - employ a wide range of additional methods to ensure that
nonlawyer practitioners meet agency standards of competence. The Patent
Office's administration of an examination to potential patent agents was
discussed above. A similar examination system is employed by the Internal
Revenue Service although it is used only for certain categories of

131

Id.

'■^^ See note 23, supra, and Rose, note 1, supra, at 58-69. For
example. Professor Rose's interviews with Interstate Commerce Commission
officials revealed that there had been no major disciplinary problems with
nonlawyer practitioners in fifteen years. Only in the Internal Revenue
Service were the total numbers of disciplined nonlawyers reported to be
significantly large. The Office of Practice reported that it had imposed
discipline against nonlawyers in approximately two-thirds of the 360
discipline cases arising in the five-year period between 1978 and 1983.
Hwever, these numbers were not viewed by IRS officials with alarm in light
of the extremely large numbers of nonlawyers authoriaed to practice before
the IRS (see note 27, supra) .

NONLAWYER ASSISTANCE 107

representatives. As noted earlier, the IRS system accomodates
representation to a limited extent from minimally trained H. & R. Block type
personnel who are not subject to examination as well as representation in
all matters from former IRS agents, certified public accountants and lawyers
who also are not subject to examination. (Lawyers and certified public
accountants are presumed by virtue of their training to be qualified and are
authorized under the Attorney Practice Act, 5 U.S.C. 500 to provide
representation.) Finally, the IRS permits representation of the general
public in all matters by nonlawyer "enrolled agents" who must pass stiff
examinations and meet continuing legal education requirements. ■'^■^•^ Ethical
restrictions against conflicts of interest, fraud, misrepresentation, and
other malfeasance are enforced against both lawyers and nonlawyers through
the Service's disciplinary machinery. The agency retains the ultimate
authority to disbar or otherwise discipline both lawyers and nonlawyers. -'■■^^

As is the case with the Internal Revenue Service, the Immigration and
Naturalization service employs a multi-tiered approach to assuring
competence among those representatives who do not charge fees.-'^-'-* (As noted
earlier in this study, nonlawyers, no matter how competent or experienced,
are not authorized under agency rules to provide representation if they
charge fees.) Nonlawyer friends, clergy, and neighbors appearing on a one
time basis without fee are not subject to any special competence or
experience requirements. Nonprofit organizations assisting the general
public, however, must be recognized by the Board of Immigration Appeals, and
individual employees therof must be accredited before they are permitted to
appear in representational capacities.^-'" Partial accreditation of
nonprofit organization employees who do not yet satisfy all the INS training
and experience criteria enables those employees to assist individuals in
filling out forms, but it does not allow them to appear as representatives
in INS proceedings. To be fully accredited, an individual employee of a
nonprofit organization must satisfy experience criteria as well as good
moral conduct standards. ■'^■^'

Other agencies, such as the Social Security Administration, have
historically not found it necessary to require nonlawyer representatives to
pass examinations, complete continuing legal education courses, or satisfy

l-^-^ See note A9, supra.

^^^ See ;iote 132, supra.

^^^ See notes 107 and 108, supra.

^■^" The Veterans Administration also requires that nonprofit
organizations desiring to provide representatoin to the general upblic in
V.A. proceedings be recognized by the agency.

137

See disucssion in text at note 109.

108 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

past experience or other competence criteria. ^•^° SSA officials reported,
however, that the agency is considering the adoption of stricter measures
than now exist to protect the public, including a procedure by which agency
claimants can complain to the agency about their representatives. Agency
officials pointed out that there is a degree of control over competence of
practitioners by virtue of the fact that attorney and agent fees must, by
statute, be approved by the agency in social security disability proceedings
and in some other benefits cases. (Data concerning fee awards to nonlawyers
has not been collated by the agency.)

As the foregoing discussion indicates, federal agencies currently
employ a variety of mechanisms to ensure competent representation by
practitioners, and they are not necessarily the same in every agency. This
study has concluded that there is no reason that competence criteria should
be uniform throughout government since each agency has its own particular
evils to prevent, differing skill needs to carry out the varied mandates of
the agencies, as well as differing cost benefit and other administrative
issues to consider. (It will be recalled that in enacting the
Administrative Procedure Act, Congress considered and clearly determined to
authorize federal agencies to continue their then existing practice of
imposing varied practice criteria according to the particular needs of the
respective agencies. This determination was reaffirmed in 1965 at the time
of enactment of the Attorney Practice Act.)^-^^

Finally, this study ascertained that enforcement of both competence
standards and ethical conduct standards varies from agency to agency in the
mass justice area as it does in other areas. The Office of Practice in the
Internal Revenue Service, for example, has an active progrsim of
enforcement.^^ On the other hand, while the Social Security Administration
maintains ethical standards and retains the authority to discipline and
disbar lawyers and nonlawyers, in practice the authority is rarely used.^^^
There have been numerous studies and articles on the subject of inconsistent
federal disciplinary rules and the inconsistent - and sometimes lax -
enforcement thereof. As one federal court wrote over thirty years ago,
"probably no subject has received more continuing effort, so far without
success, to accomplish by legislative enactment some uniformity and
desirable standards of admission and disciplinary action than has this

^^° Some regulatory agencies - for example the National Labor
Relations Board - have also historically adopted a laissaz faire approach to
pracititioner regurlation. See Rose, note 1, supra, and ABA Committee
Survey, note 23, supra.

1-^^ See discussion in text at notes 60 and 61, supra.

140

See note 132.

See text and note 138,

NONLAWYER ASSISTANCE 109

problem of practice before administrative agencies. "■'^^•^ Although the issue
of automatic admission of lawyers to practice before federal agencies has
been resolved in the intervening years with the passage of the Attorney
Practice Act, the issue of inconsistent enforcement of discipline remains.
Notwithstanding repeated efforts by bar groups to remove lawyer discipline
from agencies to state bar disciplinary entities. Congress has continued to
allow federal agencies to exercise discretion in the matter of practitioner
discipline for both lawyers and nonlawyers. The Administrative Conference
of the United States considered the issue in 1982 and concluded that any
problems concerning inconsistent attorney discipline before federal agencies
were not of such a magnitude as to require changing the statutory
authorization or adoption of uniform federal standards. ■'•^-^

It is not the purpose of this paper to revisit the long-lived
controversy over federal agency enforcement of practice rules. Nor is it
necessary to resolve the pros and cons of inconsistent discipline by federal
agencies in order to address the discrete issue of whether mass justice
agencies should be urged to admit more nonlawyers to practice in order to
alleviate the problem of insufficient numbers of representatives for the
overwhelming numbers of ordinary citizens having claims or disputes before
those agencies. In view of the finding that disciplinary problems caused by
nonlawyers in federal agency proceedings generally are not believed by
agency officials to be significantly greater than those caused by lawyers,
and in view of the finding that enforcement of good conduct rules against
nonlawyers is a manageable task even when large numbers of nonlawyers are
admitted to practice (as is the case in the Internal Revenue Service), this
paper concludes that the potential need to discipline errant nonlawyers
should not necessarily deter mass justice agencies from encouraging
increased nonlawyer representation. This is not to say, however, that
agencies should have no rules governing the ethical conduct of nonlawyers.
To the contrary, in order to protect the public, agencies should make
applicable to nonlawyers the existing rules dealing with lawyer malfeasance
such as negligence, fee gouging, fraud, misrepresentation and representation
when there is a conflict of interest. Moreover, agencies should ensure that
effective procedures are established for adequate enforcement of those rules
of practice, including procedures whereby the adversely affected public can
complain about misconduct of those nonlawyers admitted to practice before
the agencies.

1^^ Camp V. Herzog, 104 F.Supp. 13A (D.D.C. 1952). A more recent
discussion of the problem appears in Best, Shortcomings of Administrative
Agency Lawyer Discipline, 31 Emory L.J. 535 (1982).

^^^ See note 60, supra.

1 10 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Conclusion

This study has determined that a large number of individuals in mass
justice agency proceedings are unrepresented and that a source of assistance
that has not been fully tapped exists in the pool of skilled nonlawyer
professionals. It appears that guidance to mass justice agencies on the
subject of nonlawyer practice would be useful, and that it should encompass
encouragement to the agencies to review their regulations and policies with the
twin goals of increasing representation and maximizing the goal of free choice
of representative whenever feasible.

This study has further ascertained that in some federal mass justice
agencies, nonlawyer representation has not been particularly encouraged by
agency rules and policies, and in some instances it has been discouraged. This
has served to deter nonlawyer professionals from seeking to establish federal
agency practices because they believe they will be subject to prosecution under
state laws prohibiting the unauthorized practice of law. This study has
concluded that because the state unauthorized practice of law problem is so
pervasive, and because federal agency regulations must unambiguously preempt
state laws to provide protection to nonlawyer practitioners, mass justice
agencies should be urged to declare uncunbiguously their intention to preempt,
both with respect to representation during agency proceedings and with respect
to all activity incidental to that representation which may be performed in the
states. In so doing, the agencies should, of course, consult and coordinate
with states and other interested parties before adopting final regulations in
accordance with the recommendations on preemption promulgated by the
Administrative Conference in Recommendation 8A-5 on December 6, 1984.

Mass justice agencies should further be encouraged to tailor their
admission criteria narrowly so that particular issues of competence in agency
proceedings are addressed without overly broad disqualification of the entire
class of nonlawyers (or of nonlawyers who charge fees.) Given the evidence
that skills vary more from individual to individual than from class of lawyers
to class of nonlawyers, those agencies that desire to impose competence
requirements should be encouraged to focus on the particular functions to be
performed at varying levels of agency proceeding, and the particular skills,
training and experience needed to perform competently those particular
functions. (The Internal Revenue Service is a good model in this regard, as is
the partial and full accreditation scheme of the Immigration and Naturalization
Service for employees of nonprofit organizations.) In this connection,
agencies should determine carefully and narrowly whether there are proceedings
of a trial type nature that are so highly specialized that it is essential to
mandate representation only by those who are trained trial lawyers and familiar
with rules-^of evidence and hearings on a record leading to judicial review.

NONLAWYER ASSISTANCE 1 1 1

Finally, mass justice agencies should review their rules of practice that
deal with attorney misconduct (such as negligence, fee gouging, fraud,
misrepresentation and representation when there is a conflict of interest) to
ensure that similar rules are made applicable to nonlawyers as appropriate and
should ensure that effective agency procedures are established for adequate
enforcement of those rules of practice, including procedures for receiving
complaints from the adversely affected public.

112

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BACKGROUND REPORT FOR RECOMMENDATION 86-2

USE OF THE FEDERAL RULES OF EVIDENCE IN FEDERAL AGENCY

ADJUDICATIONS

Richard J. Pierce, Jr.

Report to the Administrative Conference of the United States

(Published in Administrative Law Review, volume 39, number 1, Winter 1987)

134 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

On June 20, 1986, the Administrative Conference adopted
Recommendation 86-2, Use of the Federal Rules of Evidence in
Federal Agency Adjudications. The vigorous debate that preceded
adoption of the recommendation focused on three primary goals. ^
First, the Conference expects the recommendation to produce
greater uniformity among agencies and among presiding officers in
their approach to evidentiary decision-making. Second, the
Conference hopes to discourage Congress from enacting in new
statutes or retaining in existing statutes^ provisions that
purport to mandate use of the Federal Rules of Evidence ("FRE")
in agency adjudications. Most of the exclusionary provisions of
the FRE, such as the hearsay rule and its many exceptions, 3 were
promulgated to control fact-finding by lay jurors;^ technical
application of these rules directly in agency adjudications is
unnecessary, inappropriate and counterproductive. Third, the
Conference hopes to encourage agencies to assist presiding
officers in their evidentiary decision-making by conferring clear
discretion to exclude evidence the presiding officer considers
unreliable, particularly when admission of such unreliable
evidence is likely to require an inordinate amount of valuable
hearing time.

The purpose of this study is to suggest the extent to which
federal agencies should rely upon the FRE in conducting
adjudicatory proceedings. At present, 1121 federal
Administrative Law Judges ("ALJs") apply 280 different sets of
evidentiary rules in the process of presiding over far more
adjudicatory proceedings each year than are resolved in the
federal courts. The evidentiary procedures now used in agency
adjudications vary substantially along a spectrum from no
reference to evidentiary rules at all,^ to hortatory reference to
the FRE as a source of guidance, ^ to mandatory incorporation of
the FRE. 8

FEDERAL RULES OF EVIDENCE 135

During the period from 1940 through 1911, scholars and
appellate judges engaged in a lively debate concerning the
appropriate role of formal evidentiary rules in agency
adjudications. Professor Davis devoted much of his scholarship
during this period to developing and supporting his thesis that
formal rules of evidence have no place in agency proceedings
because of the many differences between agencies and courts. ^
Dean Gellhorn later joined him in this effort by writing what
remains today the most complete statement of the case against the
application of evidentiary rules designed to govern jury trials
in agency adjudicatory proceedings . ^^ Federal appellate courts
declined to accept this thesis until the Supreme Court's 1971
opinion in Richardson v. Perales , ^^ overruling the "legal
residuum rule," seemingly invited agencies to admit evidence that
would be inadmissible in a court by holding that an agency could
predicate a finding of fact entirely on such evidence in some
circumstances .

Since 1971 scholars have devoted little attention to the
broad question of the evidentiary rules appropriate for use by
federal agencies. The relatively little scholarly writing in
this important area has been narrowly focused — either on the
reaction of the courts of a particular state to the Supreme
Court's holding in Richardson v. Perales^^ or on the unique
issues that arise when an agency is urged to apply a
constitutionally based exclusionary rule in an adjudicatory
proceeding. 13

It is important to revisit this significant issue at this
time. Agencies are being asked to play an increasingly important
role in the legal system, both as policy-makers and as

136 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

administrators of "mass justice. "^^ Their evidentiary regimes
differ significantly — sometimes as a result of congressional
decisions and sometimes as a result of voluntary adoption of
rules more stringent than Congress required. Since 1971,
Congress and the Court have adopted for the first time a complete
set of evidentiary rules applicable to federal courts. ^^ ALJs
apply agency evidentiary rules in an uneven manner, ^^ and
reviewing courts experience difficulty in their attempts to
review evidentiary rulings made under some of the rules of
evidence adopted by agencies or imposed on them by Congress. ^^

The study consists of three parts. Part I is a description
of the present state of the law, including the statutory
framework in which agencies select evidentiary rules, the
evidentiary regulations agencies have adopted, and judicial
decisions interpreting and applying those statutes and
regulations. Part II reports the results of a survey of ALJs
with respect to the extent of their reliance on the FRE and their
opinions concerning the relationship between the evidentiary
rules they apply and several criteria of the fairness, efficacy,
and efficiency of the adjudicatory proceedings over which they
preside. Part III of the study includes analysis of the issues
presented and recommendations concerning the appropriate role for
the FRE in agency proceedings.

I. THE PRESENT STATE OF THE LAW

Statutes

There are two potential sources of statutory constraints on
an agency's choice of evidentiary rules — the Administrative
Procedure Act (APA) and agency organic acts. The only provision
of the APA that relates to evidentiary issues is §556 (d):

Except as otherwise provided by statute, the proponent
of a rule or order has the burden of proof. Any oral
or documentary evidence may be received, but the agency
as a matter of policy shall provide for the exclusion
of irrelevant, immaterial or unduly repetitious
evidence. A sanction may not be imposed or rule or
order issued except on consideration of the whole
record or those parts thereof cited by a party and
supported by and in accordance with the reliable,
probative, and substantial evidence. 18

The language and legislative history of this provision leaves no
doubt that, while Congress intended to limit agencies' power to
base findings of fact on evidence of low quality, it also
intended to permit agencies' discretion to decline to apply the
rules of evidence that govern judicial trials. 1^

Many agency organic acts do not address evidentiary issues

FEDERAL RULES OF EVIDENCE 137

at all, except by incorporating the APA by reference. Of those
that do address evidentiary issues, most either recite the APA
standard verbatim or paraphrase that standard. 20 jn a few
statutes, however. Congress purported to limit the agency's
discretion to admit evidence that would not be admissible in
court. The statutory provision applicable to National Labor
Relations Board (NLRB) adjudications illustrates the nature of
the constraint most frequently imposed:

Any such proceeding shall, so far as practicable, be
conducted in accordance with the rules of evidence
applicable in the District Courts of the United States
under the Rules of Civil Procedure for the District
Courts of the United States, adopted by the Supreme
Court of the United States pursuant to section 2072 of
Title 28.21

Agency Regulations

There are 280 regulations that govern evidentiary decision-
making by federal agencies. Most agencies have a single
evidentiary regulation applicable to all adjudications, but some
distinguish among proceedings of different types or conducted
under different statutes. 22 Agency evidentiary regulations
differ considerably in their precise language, but they can be
divided initially into two general categories. The majority — 243
of 280 — make no reference to the FRE and appear not to impose any
constraints on the discretion of Administrative Law Judges to
admit evidence. Often these provisions either parrot the APA or
paraphrase it. The other 37 evidentiary regulations make some
reference to the FRE.

Of the agency evidentiary regulations that include a
reference to the FRE, most require use of the FRE "so far as
practicable." In the case of NLRB, 23 congress required the
agency to adopt such an evidentiary regulation. In other cases,
such as the Occupational Safety and Health Review Commission

(OSHRC) ,24 the Department of Interior (DOI),25 interstate
Commerce Commission (ICC), 26 and Federal Communications
Commission (FCC), 27 the agency apparently adopted the "so far as
practicable" ■ standard voluntarily. In a few cases, an agency's
evidentiary regulation refers to the FRE, but only as a source of
potentially useful guidance to ALJs. The Department of Labor's

(DOL) evidentiary regulation illustrates this approach. 28 dOL's
unusually long regulation begins with a general provision that
describes the role of the FRE in DOL adjudications:

(a) Applicability of Federal Rules of Evidence. Unless
otherwise provided by statute or these rules, and where
appropriate, the Federal Rules of Evidence may be
applied to all proceedings held pursuant to these
rules .

138 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The contrast between the permissive reference to the FRE in the
DOL regulation and the mandatory reference in the "so far as
practicable" standard is evident. The DOL regulation goes on to
paraphrase several Federal Rules, including Rule 103 (objections
and offers of proof) , Rule 402 (relevant evidence generally
admissible) , Rule 403 (exclusion of relevant evidence on grounds
of prejudice, confusion, waste of time, or undue delay), and Rule
1006 (summaries admissible) . The DOL regulation also expressly
authorizes ALJs to limit the number of witnesses who testify on
an issue and to limit the amount of cross-examination of
witnesses in order to avoid prolonging the hearing or burdening
the record — a power implicitly accorded federal judges by FRE
403.29

Judicial Interpretation of Statutes and Regulations

If an agency's statutory and regulatory provisions relating
to admissibility of evidence incorporate only the APA standard,
it seems impossible for an agency action to be reversed on the
basis that the agency erroneously admitted evidence. Courts
routinely decline to reverse agencies on this basis. ^0 The
converse does not follow, however. An agency action can be
reversed solely because it refused to admit evidence that is
admissible under the FRE. 31 This combination of holdings is
based on the sensible reasoning that, while the special
characteristics of agency proceedings justify admission of some
evidence that is not deemed sufficiently reliable to be
considered by lay jurors, there is no justification for agencies
to refuse to consider at all evidence that is deemed sufficiently
reliable to be considered even by lay jurors. ^2

Agencies that are bound by statute or regulation to adhere
to the FRE "so far as practicable" standard may be subject to
some judicially imposed constraints on their discretion to admit
evidence that would not be admissible under the FRE. Courts have
not interpreted and applied this standard in a consistent manner.
Indeed, courts called upon to apply this standard seem troubled
and confused in their responses. Their confusion is
understandable. What does Congress or an agency mean when it
mandates compliance with a detailed set of rules "so far as
practicable"? Who is to determine when compliance is
practicable — the ALJ, the agency, or a court? By what standards
is such a determination to be made? What sanction should a court
impose if an agency does not follow the FRE when a court believes
that it was "practicable" for the agency to follow the FRE? The
results of^ the cases decided under the "so far as practicable"
standard suggest implicitly that courts are resolving these
issues in very different ways, but none of the decisions to date
contain sufficient analysis of the issues to determine the basis
for the court's decision. Courts simply differ in result using
broad conclusory language and declining to acknowledge the

FEDERAL RULES OF EVIDENCE 139

existence of contrary decisions of other courts.

Three circuit court decisions illustrate the disparate
approaches taken in this area. In National Labor Relations Board
V. Process and Pollution Control Co. ,^^ the Tenth Circuit
reversed the agency action in part because the agency admitted
hearsay evidence inadmissible under the FRE when the court
believed it was practicable for the agency to follow the FRE. In
Helena Laboratories Corp. v. National Labor Relations Board , ^ 4
the Fifth Circuit dismissed a similar argument summarily, noting
only that the agency was required to follow the FRE only "so far
as practicable." The Eighth Circuit completed the circle in
National Labor Relations Board v. Addison Shoe Corp. ^^ The court
reversed the agency in part because it did not admit evidence
made inadmissible by the FRE. The court admonished the agency
for adhering to the FRE too strictly. Thus, some courts
apparently interpret the "so far as practicable" standard to
accord near total discretion to agencies. Other courts interpret
it as a mandate to comply with the FRE except in unusual
circumstances. Still others apparently view the standard as a
mandate to admit evidence made inadmissible by the FRE except
when unusual circumstances require application of the FRE.

Most disputes concerning agency decisions to admit or
exclude evidence that reach the appellate court level involve
admission or exclusion of hearsay; a few involve potential
application of the "relevance rules" (FRE 404-411) or the
"impeachment rules" (FRE 607-610). 36 in all of these evidentiary
contexts, the resolution of the dispute by a reviewing court
depends in part on whether the agency's evidentiary regulation
incorporates the APA standard or the "so far as practicable"
standard. In one important context, the standard adopted in the
agency's evidentiary regulation is irrelevant to the resolution
of the evidentiary dispute. Courts, agencies and commentators
seem to be in agreement that all agencies must recognize claims
of evidentiary privilege to the same extent that courts must
recognize such claims. ^^ This rule makes eminently good sense
because the reasons for recognizing evidentiary privileges differ
fundamentally from the reasons that support adoption of most
evidentiary rules. Evidentiary privileges exist not because they
further the truth-seeking function, but because forced disclosure
of some types of information will cause substantial harm to other
social values. 38 since the harm resulting from forced disclosure
of privileged information is identical whether the information is
disclosed in a judicial proceeding or an administrative
proceeding, the law of privileges should apply equally to both
types of proceedings.

It is important to distinguish between judicial constraints
on agency discretion to admit evidence that would not be
admissible in a federal court and judicial review of agency
findings of fact premised on such evidence. The Supreme Court

140 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

approved the relaxation of formal rules of evidence in agency
proceedings as early as 1904. ^^ In 1916, however, the New York
Court of Appeals announced the "legal residuum" rule in Carroll
V. Knickerbocker . ^^ That rule permitted agencies to continue to
admit and to consider evidence that would not be admissible in a
jury trial. The Court held impermissible, however, agency
reliance exclusively on such inadmissible evidence as the basis
for a finding of fact. An agency could base a finding in part on
evidence inadmissible in a jury trial, if but only if, it also
had a "residuum of legal evidence" in the record to support the
finding. 41 Until 1971, federal courts applied the "legal
residuum" rule in reviewing agency actions--af ter 1946 as an
integral part of the "substantial evidence" standard made
applicable by the APA to agency findings of fact adopted in
formal ad judications . ^2

The "legal residuum" rule was the subject of near universal
criticism both by evidence scholars and by administrative law
scholars. 43 jn 1971, the Court finally responded to this
criticism by abolishing the rule. In Richardson v. Perales ,44
the Court held that an agency can base a finding on hearsay
evidence that would be inadmissible in a jury trial, even when
that evidence is contradicted by admissible evidence, if the
evidence relied upon by the agency is of a type relied upon by a
reasonably prudent person in conducting his affairs. Federal
courts have applied this standard in reviewing agency findings of
fact ever since--independent of whether the agency's evidentiary
rule incorporates the APA standard of admissibility or the "so
far as practicable" standard. Scholars have reacted to the
abolition of the "legal residuum" rule with enthusiastic
approval . 45

II. SURVEY OF ADMINISTRATIVE LAW JUDGES

Since ALJs preside over the majority of federal
administrative adjudications, it seemed desirable to find out the
extent to which they rely upon the FRE as a basis for their
evidentiary ruling, as well as their opinions concerning the
effectiveness of the rules they must apply and the evidentiary
rules they would prefer to apply if they could change the rules
now in effect at their agencies. To this end, a questionnaire
was sent to 603 of the 1121 ALJs. Responses were received from
212 ALJs, for a response rate of 35%. The distribution of
responses by agency corresponded generally to the aggregate
distribution of ALJs. 46

The questionnaire included questions intended to elicit
information in four areas: (1) the AL J ' s experiential basis for
engaging in comparative evaluation of the evidentiary standard
adopted by the agency for which she presides; (2) the ALJ ' s
evaluation of the effectiveness of the evidentiary standard she
is required to apply in terms of fairness to the parties.

FEDERAL RULES OF EVIDENCE 141

discretion to admit evidence the ALJ considers reliable,
discretion to exclude evidence the ALJ considers unreliable,
discretion to exclude evidence in the interests of expediting a
proceeding, and sufficiency of guidance provided to permit
rulings to be made promptly and with confidence in their
accuracy; (3) the evidentiary standard the ALJ would prefer to
use as the basis for evidentiary rulings; and, (4) the extent to
which the ALJ uses the FRE as a source of guidance in making
evidentiary rulings.

The questionnaire results were divided into four groups for
purposes of evaluating the pattern of responses — (1) ALJs at
agencies other than the Social Security Administration (SSA) that
have adopted the APA evidentiary standard, (2) ALJs at SSA, (3)
ALJs at agencies that have adopted the FRE "so far as
practicable" standard, and (4) ALJs at DOL, where the agency's
evidentiary regulation refers to the FRE as a permissive source
of guidance and incorporates several of the FRE explicitly . "^7
ALJs at SSA were evaluated as a separate group to avoid potential
distortion of the evaluation of the responses of ALJs at other
agencies that have adopted the APA evidentiary standard.
Arguably, the nature and function of SSA adjudications differ
significantly from the nature and function of adjudicatory
proceedings at other agencies. 48 Unarguably, ALJs at SSA
constitute such a disproportionately large subset of total ALJs
that their responses would swamp the evaluation of total
responses. Of the 1121 federal ALJs, 760 preside at SSA.
Similarly, 113 of the 212 responses received came from SSA ALJs.
SSA dominates the group of ALJs who preside at agencies that have
adopted the APA evidentiary standard to an even greater extent —
113 of the 144 responses from this group came from SSA.

Before reporting these disaggregated results, it is useful
to note one generalization. A majority of ALJs in each of the
three groups expressed the opinion that the evidentiary standard
adopted by their agencies produced satisfactory results when
judged with reference to each of the performance criteria
mentioned on the questionnaire, and a majority of ALJs in each
group expressed a preference for the evidentiary standard adopted
by their agency. This result is ambiguous. It could give rise
to an inference that the present disparate pattern of evidentiary
regulations yields a near perfect matching of evidentiary regimes
with the unique functions of each agency, e.g., FCC and ICC
should rely much more heavily on FRE than should FERC or FTC
(although it is difficult to identify functional distinctions
among these agencies that would support this theory) .
Alternatively, the data could indicate merely that most ALJs,
like most people, prefer not to change the rules under which they
operate. I prefer the second explanation, in part because of
significant differences among the groups in the size of the
majority that expressed satisfaction with, and a preference for,
the status quo, and in part because of the low level of

142 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

experience with alternative evidentiary standards in all four
groups. Of the 212 respondents, only 16 (7.5%) reported that
their agency had changed its evidentiary standard during their
tenure, and only 53 (25.2%) had presided at other agencies with
different evidentiary standards.

The results of the survey are shown in the following tables

ALJS AT APA AGENCIES OTHER THAN SSA

satisfied not satisfied
fairness to parties 87.1% 12.9%

discretion to admit 96.8% 3.2%

reliable evidence

discretion to exclude 83.9% 16.1%

unreliable evidence

discretion to exclude evidence 80.6% 19.4%

to expedite a proceeding

guidance to permit prompt 86.7% 13.3%

and confident rulings

Preferred Rules

APA "so far as practicable" FRE
77.4% 22.6% 0%

Frequency of Use of FRE as Guidelines

always frequently occasionally rarely never
20.0% 40.0% 33.3% 3.3% 3.3%

FEDERAL RULES OF EVIDENCE 143

ALJS AT SSA

satisfied not satisfied
fairness to parties 85.5% 14.5%

discretion to admit 96.4% 3.6%

reliable evidence

discretion to exclude 65.5% 34.5%

unreliable evidence

discretion to exclude evidence 70.1% 29.9%

to expedite a proceeding

guidance to permit prompt 81.1% 18.9%

and confident rulings

Preferred Rules

APA "so far as practicable" FRE
62.7% 33.6% 3.6%

Frequency of Use of FRE as Guidelines

always frequently occasionally rarely never
8.1% 15.3% 32.4% 26.1% 9.0%

ALJS AT "SO FAR AS PRACTICABLE" AGENCIES

satisfied not satisfied
fairness to parties 98.0% 2.0%

discretion to admit 100.0% 0.0%

reliable evidence

discretion to exclude 100.0% 0.0%

unreliable evidence

discretion to exclude evidence 98.0% 2.0%

to expedite a proceeding

guidance to permit prompt 100.0% 0.0%

and confident rulings

Preferred Rules

APA "so far as practicable" FRE
4.4% 80.0% 15.6%

144 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Frequency of Use of FRE as Guidelines

always frequently occasionally rarely never

58.6% 34.5% 3.0% 0.0% 3.0%

ALJS AT DOL

satisfied not satisfied
fairness to parties 100.0% 0.0%

discretion to admit 100.0% 0.0%

reliable evidence

discretion to exclude 95.2% 4.8%

unreliable evidence

discretion to exclude evidence 90.5% 9.5%

to expedite a proceeding

guidance to permit prompt 100.0% 0.0%

and confident rulings

Preferred Rules

APA "so far as practicable" FRE
31.6% 47.4% 21.1%

Frequency of Use of FRE as Guidelines

always frequently occasionally rarely never
36.8% 36.8% 15.9% 10.5% 0.0%

The survey results support several other important
inferences. The evidentiary standard adopted by an agency
significantly affects the extent to which ALJs use the FRE as a
source of guidance in making evidentiary rulings. 93.1% of ALJs
at agencies with "so far as practicable" standards report that
they use the FRE as a source of guidance either "always" or
"frequently." This heavy reliance on the FRE contrasts sharply
with the sparing reliance of ALJs at SSA — only 23.4% report use
of the FRE "always" or "frequently." The degree of reliance
reported by ALJs at DOL and APA agencies other than SSA falls
between these two extremes, at 73.6% and 60.0%, respectively.

The results of the survey with respect to ALJs' satisfaction
with the evidentiary standard they are required to apply vary
substantially depending on the criteria of satisfaction employed,
ALJs in all groups report near unanimous satisfaction with the
adequacy of their discretion to admit evidence they consider
reliable — the satisfaction rate varied among the groups of ALJs
only from 96.4% to 100.0%. There was slightly greater variation

FEDERAL RULES OF EVIDENCE 145

in the rate of satisfaction reported with respect to an ALJ ' s
power to conduct a proceeding that is fair to the parties. As
measured by this criterion, the results ranged from 100.0%
satisfaction reported by DOL ALJs down to 85.5% satisfaction
reported by ALJs at APA agencies — a degree of variation that
probably is not significant in light of the relatively small
number of respondents in the two groups. '^^

The variation in reported satisfaction with respect to other
criteria is considerably greater. As measured by adequacy of
discretion to exclude evidence an ALJ considers unreliable, the
degree of satisfaction reported ranged from 65.5% to 100.0%.
Similarly, the range of responses with respect to adequacy of
discretion to exclude evidence in order to expedite a proceeding
varied from 70.1% to 98.0%, and with respect to adequacy of
guidance to make a prompt and confident evidentiary ruling the
variation was from 81.1% to 100.0%. With respect to each
criterion, ALJs at SSA and at other APA agencies reported the
lowest rate of satisfaction with the evidentiary standard they
are required to apply, while ALJs at DOL and at agencies with a
"so far as practicable" standard reported the highest rate of
satisfaction.

It is apparent from the survey results that ALJs prefer the
additional guidance and discretion to exclude evidence provided
by the "so far as practicable" standard or the DOL standard, both
of which refer to the FRE, to the open-ended APA standard. As
interpreted and characterized by several of the respondents, the
APA standard forces an ALJ to admit any evidence tendered even if
the ALJ considers it clearly unreliable. The responses to the
question asking ALJs which of three evidentiary standards they
would prefer to apply reinforces this conclusion. While a
majority of each group expressed a preference to retain the
status quo, the size of the majority varied from only 62.7% of
SSA ALJs who preferred to retain the APA standard adopted by that
agency to 80.0% of ALJs at "so far as practicable" agencies who
preferred to continue to apply that standard. Indeed, that
variation understates the preference for the guidance and
discretion to exclude provided by a standard that makes reference
to the FRE for two reasons. First, of the 20.0% of "so far as
practicable" 'ALJs who would prefer to apply a different standard,
almost all (15.6%) expressed a preference for strict application
of the FRE. Second, DOL ALJs were not given the option of
expressing a preference to continue to apply the evidentiary
standard unique to that agency. Had they been provided that
option, it is fair to infer from their extremely high rate of
reported satisfaction with the evidentiary standard they now
apply (90.5% to 100.0% satisfaction depending on the criterion
used) that they would have expressed near unanimous preference to
retain that standard.

The final step in deriving meaning from the survey results

146 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

is to attempt to infer reasons for ALJs' preference for an
evidentiary standard that includes either a mandatory or a
permissive reference to the FRE. The satisfaction responses
differed significantly with respect to three criteria--adequacy
of discretion to exclude evidence considered unreliable, adequacy
of discretion to exclude evidence in order to expedite a
proceeding, and adequacy of guidance to make prompt and confident
rulings. The latter two criteria relate to the managerial role
of judges and agencies--how can we resolve tens of thousands of
disputes in a timely manner with limited resources? This issue
is critically important to many judges and agency administrators
because of its direct relationship to the ability of any agency
to perform its mission ef f ectively , ^^ but it is too often ignored
by theorists.

The first criterion seems initially to reflect a different
type of concern entirely--that admission of unreliable evidence
will result in injustice through an erroneous finding of fact.
Upon analysis, however, the dissatisfaction expressed with
respect to this criterion also relates to the managerial side of
the administrative justice system. As several respondents noted
in their comments, there is no real danger that a finding will be
based on evidence an ALJ considers unreliable but feels compelled
to admit anyway, since the ALJ will simply decline to rely upon
such evidence in making findings. Several ALJs who expressed
dissatisfaction with the APA standard with respect to this
criterion explained in comments the basis for their
dissatisfaction. If an ALJ feels compelled to admit unreliable
evidence, she also feels compelled to provide the opponent of the
unreliable evidence a complete opportunity to demonstrate the
unreliability of the evidence through cross-examination and
presentation of rebuttal evidence. Thus, ALJ dissatisfaction
with the lack of discretion to exclude unreliable evidence
provided by the APA standard seems to be premised on potential
undue consumption of time.^l

III. ANALYSIS AND RECOMMENDATIONS

Three general types of evidentiary standards are now used by
federal agencies-- (1 ) the FRE "so far as practicable" standard,
(2) the wide-open APA standard, and (3) the DOL standard with its
permissive reference to the FRE and selective incorporation of
some federal rules. In this section, I will evaluate the
strengths and weaknesses of each, argue in support of adoption of
a standard of the type used by DOL, and suggest other changes in
agency practices that offer the promise of allowing ALJs to make
evidentiary rulings in a manner that will improve the quality of
administrative justice.

The "so far as practicable" Standard

The survey of ALJs identified the major advantages of the

FEDERAL RULES OF EVIDENCE 147

FRE "so far as practicable" standard. ALJs prefer this standard
to the open-ended APA standard because they perceive that it
accords them both the guidance and the discretion to exclude low
quality evidence. This in turn allows them to manage
adjudications more effectively with less need to devote valuable
hearing time to evidence they consider unreliable.

Adoption of the "so far as practicable" standard has two
major disadvantages, however. First, reviewing courts seem not
to know what to make of it. ^2 some interpret it to require
reversal of an agency if it admits evidence inadmissible in a
jury trial unless the agency meets an apparently heavy burden of
establishing that it was not "practicable" to follow the FRE in a
particular instance. Others seem to indulge in the entering
assumption that it is rarely "practicable" for an agency to
follow the FRE. Still others apparently consider it reversible
error for an agency to exclude evidence made inadmissible by the
FRE without explaining why it adhered to the FRE in the
circumstances. It is difficult to recommend a putatively
mandatory standard that is subject to such a wide range of
judicial interpretation.

Second, if the standard is interpreted in a manner that
effectively limits the discretion of agencies and ALJs to admit
evidence that is inadmissible in a jury trial, the standard makes
little sense. It is difficult for agency ALJs to apply the FRE
to resolve close evidentiary disputes. Imposition of mandatory
constraints on agency discretion to admit evidence serves no
conceivable purpose. Moreover, it is inappropriate to limit
expert agency decision-makers to consideration only of evidence
that can be considered by lay jurors.

The FRE are designed to further two goals — to avoid
decisions based on unreliable evidence by precluding decision-
makers from being exposed to such evidence and to promote
efficiency in the trial process by excluding evidence of such low
quality that the cost in the form of trial time required to
receive and consider the evidence exceeds substantially the value
of the evidence. 53 Thus, for instance, the 33 exceptions to the
hearsay rule either instruct a judge to consider the reliability
of the evidence directly or to base her ruling on characteristics
of the evidence that are believed to function as rough surrogates
for reliability . 54 jn contrast, FRE 403 provides a basis for
excluding evidence that will require more time at trial than its
value justifies. 54 a j^ this section, I will discuss only
exclusionary rules, like the hearsay rules, that are designed to
further the first goal. I will discuss FRE 403 and the second
goal in the next section. 55

As with any other area of law, application of the FRE
presents both easy and hard cases. A set of mandatory
exclusionary rules is totally unnecessary to permit ALJs to

148 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

resolve the easy cases. If an item of proffered evidence is
clearly unreliable, an ALJ does not have to be told to exclude
the evidence because it is inadmissible under the FRE; she needs
only the discretion to exclude it because it is unreliable. The
many hard cases are, by definition, difficult for federal judges
to resolve--particularly in the context of a trial in which a
judge may be called upon to resolve promptly scores of difficult
evidentiary controversies based on only a few minutes of argument
and thought devoted to each.

The risk that a judge will err in some close cases and
exclude items of evidence that are sufficiently reliable and
probative to warrant consideration is high. The cost of such
errors is also high--remand for further hearings or a decision
that is not based on all of the reliable evidence. Of course, we
require federal judges to take this risk routinely in jury
trials, so there are at least some circumstances when we consider
it a risk worth taking. The question then must be asked: is an
agency adjudication a context in which this risk is justified?

There are three reasons why it makes little sense to take
the risk of erroneous exclusion of reliable evidence through
application of highly technical exclusionary rules in the context
of agency adjudications. First, the cost of such errors is as
great in the agency adjudication context as it is in the trial
context--if the ALJ erroneously excludes reliable evidence, the
agency must either remand for further proceedings or decide the
case on the basis of an incomplete record. Second, the risk of
errors of exclusion is greater in the agency adjudication context
than in the context of a jury trial. Third, there are good
reasons to take this risk in the jury trial context that do not
exist in the case of agency adjudications.

Prompt resolution of difficult evidentiary issues under the
FRE presents even greater challenges and risks to agency ALJs
than to federal trial judges. To resolve close evidentiary
questions, a judge must focus specifically and with some care on
the issues in the proceeding and on the relationship between a
proffered item of evidence and those issues, for most such
questions must be answered by reference to the purpose for which
the evidence can be considered and its probative value when
considered for that purpose. ^6 yet, agency ALJs often have an
incomplete understanding of the issues at the time they must rule
on the admissibility of evidence. ALJs, unlike federal judges,
do not resolve cases subject only to possible appeal. Rather,
they issue initial decisions that are, for most purposes,
functionally equivalent to recommendations to agency decision-
makers. ^"7 Since the ALJ is not the final decision-maker, she
often has an imperfect understanding during the hearing of both
the issues the agency ultimately will consider important and the
probative value the agency will attach to various types of
evidence with respect to those issues.

FEDERAL RULES OF EVIDENCE 149

The extent of an AL J • s understanding of the issues at the
time of a hearing depends on the degree of specificity with which
Congress has identified those issues in the agency's organic act
and the extent to which the agency has increased that specificity
by promulgating legislative rules. Far too frequently, Congress
declines to establish meaningful statutory standards^o and the
agency declines to issue regulations that create standards
sufficient to permit ALJs to be confident that they know the
issues in a proceeding or the probative value that the agency
will attach to various types of evidence that arguably bear on
those issues. 5^ As a result, agency ALJs frequently have a less
complete understanding of the substantive legal principles that
should inform their evidentiary rulings than do trial judges.

The decision to take the risk of erroneous exclusion of
evidence in jury trials is based in part on considerations of
necessity that have no analogue in administrative adjudications.
In a jury trial, there is little choice but to ask trial judges
to resolve close evidentiary disputes through application of
complicated and detailed exclusionary rules, and thereby to take
the risk of a new trial or of a decision that is not based on all
reliable evidence. In Dean Calabresi's words, juries are
"aresponsible" decision-makers ,^0 in the sense that they are not
required to explain the bases for their decisions, including
particularly the evidentiary bases for their findings of fact.
Thus, if we want to preclude juries from basing findings on
evidence considered unreliable by judges, we can do so only by
precluding their exposure to that evidence in the first place.

The considerations are entirely different in agency
adjudications . 61 Agencies and ALJs are required to state the
bases for their findings of fact.62 Their findings are then
subject to judicial review under the substantial evidence
standard. 63 jf an agency finding is based on unreliable
evidence, the agency's action is reversed. Thus, there is a
mechanism available in agency adjudications independent of
rulings on the admissibility of evidence to insure that agency
findings are based only on reliable evidence.

The independent mechanism available in agency adjudications
offers enormous advantages over the instant evidentiary ruling
during a trial that provides the only effective means of insuring
that juries do not base findings on unreliable evidence. The on-
the-spot resolution of close evidentiary issues during a trial
undoubtedly results in many erroneous exclusions of reliable
evidence because trial judges have little opportunity to reflect
on the reliability of an item of proffered evidence before
ruling. The need for instant rulings also requires judges to use
the many imperfect surrogates for reliability embedded in the FRE
because it is easier to apply objective surrogates rapidly than
to evaluate reliability directly. Evidentiary rulings in jury

150 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

trials also must be made in many cases at such an early stage of
the proceeding that judges cannot assess accurately some of the
factors, such as incremental probative value, that are important
to evidentiary decisions. ^^

By contrast, if agency ALJs defer all close decisions
concerning the reliability of proffered evidence by admitting all
evidence that might be sufficiently reliable to justify
consideration, they can make reliability decisions at a time when
their decisions are more likely to be accurate. As they read the
record and begin to draft their opinion, they can reflect on the
entirety of the evidence submitted and base their reliability
determinations on each item of evidence as it relates to other
evidence and to the issues as they then understand those issues.
Equally important, the agency decision-makers can engage in the
same careful process of deciding which evidence is sufficiently
reliable to warrant consideration in resolving the issues as they
see them. Since a principal role of agencies is to make policy
decisions Congress has declined to make,^^ agencies frequently
focus on a set of issues and evidence different from the issues
and evidence the ALJ believed to be important. Once the agency
has completed this process, a reviewing court can perform the
important function of insuring that no finding is predicated on
unreliable evidence.

Advocates of application of the FRE to agency adjudications
seem to ignore completely the major functional differences
between the role of the FRE in jury versus non-jury proceedings.
While the FRE apply putatively to both types of proceedings,
judges do not apply them in the same manner in jury and non-jury
cases. Indeed, appellate courts consistently admonish trial
judges to resolve all close evidentiary disputes in favor of
admission in non-jury cases. The landmark decision on this issue
is the Eighth Circuit's oft-cited 1950 opinion in Builders Steel
Co. V. Commissioner . 66 The reasoning in that opinion applies a
fortiori to the agency adjudication context:

In the trial of a nonjury case, it is
virtually impossible for a trial judge to
commit reversible error by receiving
incompetent evidence, whether objected to or
not. An appellate court will not reverse a
judgment in a nonjury case because of the
admission of incompetent evidence, unless all
of the competent evidence is insufficient to
support the judgment or unless it affirmatively
appears that the incompetent evidence induced the
court to make an affirmative finding which would
not otherwise have been made. 67

FEDERAL RULES OF EVIDENCE 151

One who is capable of ruling accurately upon the
admissibility of evidence is equally capable of sifting
it after it has been received, and, since he will base
his findings upon the evidence he regards as competent,
material and convincing, he cannot be injured by the
presence in the record of evidence which he does not
consider competent or material.

If the record on review contains not only all
evidence which was clearly admissible, but all evidence
of doubtful admissibility, the court which is called
upon to review the case can usually make an end of it,
whereas if evidence was excluded which that court
regards as having been admissible, a new trial or
rehearing cannot be avoided. ^^

It seems anomolous for Congress or an agency to purport to
require ALJs to exclude evidence they believe to be inadmissible
under the FRE when appellate courts uniformly instruct federal
trial judges to resolve all close cases in favor of admission in
nonjury cases. Each of the factors that cause appellate courts to
give this guidance to trial judges applies with at least equal
force to agency ALJs. Indeed, there are powerful additional
reasons ALJs should resolve all close cases in favor of admission.

Agencies do not merely perform the decisional review function
assigned to appellate courts; they make decisions, frequently on
the basis of considerations quite different from those that
influenced the ALJ. Thus, it is more important that agencies have
access to all evidence that even arguably is sufficiently reliable
to warrant consideration than it is for appellate courts to have
access to such evidence. In addition, agencies, unlike courts,
can base findings on evidence inadmissible under the FRE if a
reviewing court concurs in the agency's judgement that the
evidence is sufficiently reliable. ^9 Thus, it seems foolish to
instruct ALJs to exclude evidence based on a set of rules that
bars a large class of evidence that the agency could use as a
basis for action if the evidence ever reached the agency decision-
maker. Of course, an agency decision-maker is always free to
disregard an item of evidence inadmissible under the FRE if she
believes it.tg be unreliable. Instructing ALJs to exclude all
evidence inadmissible under the FRE has the effect, however, only
of removing the agency decision-maker's discretion to consider
evidence she and a reviewing court believe to be sufficiently
reliable to justify consideration.

It is not only difficult, risky, and unnecessary to instruct
ALJs to exclude evidence made inadmissible by the FRE, it is
inappropriate to ask them to perform this task because agencies
should have the discretion to rely on such evidence if it is
reliable. The FRE themselves support this proposition.

152 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Most of the FRE, and in particular the elaborate rules
governing the admissibility of hearsay, are predicated on the
assumption that the issue is whether an item of evidence is
suitable for consideration by a lay decision-maker . ^0 The FRE
also have provisions that deal explicitly with the issue of
whether an item of evidence is suitable for consideration by an
expert. FRE 703 permits an expert to base an admissible opinion
on inadmissible evidence if that evidence is "of a type reasonably
relied upon by experts in the . . . field . . . .""^l The courts
have interpreted FRE 703 to permit an expert to base an opinion on
inadmissible but reliable hearsay. ^2 Further, they have held that
the scientific community's view of reliability governs, rather
than a court's view.^^ Thus, the trial judge's role is to
determine through factual investigation whether an item of
inadmissible evidence used as the basis for an expert opinion is
considered reliable by other experts in the field. The judge is
not to decide whether the evidence meets the judge's threshold of
reliability or whether it conforms to the surrogates for
reliability selected by the drafters of the FRE to determine
whether nonexperts can use an item of evidence as the basis for an
opinion or conclusion.

Agency decision-makers are experts, not lay jurors or lay
witnesses. As such, the findings and opinions of agency decision-
makers should be governed by the same pragmatic standard used both
by the courts and by the drafters of the FRE to determine whether
an item of evidence is sufficiently reliable to form the basis for
an expert opinion. Once that proposition is accepted--and the
Supreme Court accepted it in Richardson v. Perales^'^--it makes no
sense for Congress or an agency to attempt to restrict an AL J ' s
discretion to admit evidence solely because that evidence is not
admissible in a jury trial. In summary, the "so far as
practicable" standard should be abandoned because: (1) courts do
not know what it means or how to enforce it; (2) instructing ALJs
to exclude evidence based on the standard forces them to undertake
a difficult and hazardous task; (3) excluding evidence on the
basis that it is inadmissible in a jury trial is totally
unnecessary to insure that agencies take actions based only on
reliable evidence; and, (4) agencies, like other experts, should
be permitted to rely upon classes of evidence broader than those
that can be considered by lay jurors.

The APA Standard

The advantages of the wide-open APA standard are apparent
from the prior description of the disadvantages of the "so far as
practicable" standard. The APA standard does not cause confusion
among reviewing courts; nor does it require ALJs to undertake a
task that is difficult, risky, unnecessary, and counterproductive.
The APA standard alone also has difficulties, however, as the
survey of ALJs indicates.

FEDERAL RULES OF EVIDENCE 153

ALJs expressed less satisfaction with the APA standard than
with a standard that makes reference to the FRE.75 That relative
dissatisfaction was based primarily on frustration that the APA
standard does not provide an adequate tool to permit an ALJ to
perform her case management role. ALJs perceive that the APA
standard provides no basis for excluding evidence even if it is
patently unreliable or its probative value is so low that it does
not justify the amount of hearing time it would require. This is
a serious disadvantage. The delay and high cost of the
administrative process poses a severe threat to the quality of
justice available in our modern administrative state. ^^ Admission
and cross-examination of a large volume of low quality evidence
contributes significantly to the extraordinary length and
attendant high cost of many agency adjudications.

The APA standard alone authorizes an ALJ to exclude an item
of evidence only if it is "irrelevant, immaterial or unduly
repetitious."^^ Read literally, this standard confers discretion
to exclude very little evidence. The modern threshold for
determining relevance and materiality is extremely low.^^ The
apparently independent basis for excluding evidence as unduly
repetitious may be helpful in extreme circumstances, but it seems
to provide authority to exclude evidence that meets the low
relevancy threshold only if the evidence is virtually identical to
other evidence already in the record.

The inadequacy of the APA standard alone as a case management
tool becomes apparent when it is compared with the FRE.
Independent of the technical exclusionary rules that are designed
to insulate lay jurors from arguably unreliable evidence, the FRE
provide federal trial judges a powerful tool to permit them to
exercise their case management responsibilities in an effective
manner. FRE 403 permits exclusion of relevant and material
evidence if the probative value of that evidence is substantially
outweighed by any of several counterweights, specifically
including "considerations of undue delay. "^^

To illustrate the difference between the APA standard alone
and an evidentiary standard that incorporates FRE 403, consider a
hypothetical situation that recurs frequently in agency
adjudications.. A party (perhaps a party with a motive for delay)
proffers a voluminous exhibit tangentially related to an issue in
the case and based entirely on low quality second and third hand
hearsay information. The ALJ is confident that neither she nor
the agency will rely on the exhibit for any purpose. She also
knows, however, that typical conservative counsel for the opposing
parties will insist on cross-examining the witness responsible for
the exhibit at length and on presenting similar low quality
rebuttal exhibits if the ALJ admits the originally proffered
exhibit. Thus, admission of the exhibit will lengthen the
proceeding significantly.

154 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The ALJ would like to exclude the exhibit, thereby
substantially truncating the hearing and hastening the day when
the agency ultimately can decide the case. Yet the APA standard
alone provides no clear authority to exclude the exhibit, no
matter how low its quality or how much it is likely to prolong the
proceeding. The exhibit meets the low modern threshold for
determining relevance and materiality and, it is probably not
unduly repetitious unless the ALJ already has admitted a similar
exhibit. Under the APA standard alone, the ALJ may feel compelled
to admit the exhibit. By contrast, FRE 403 provides the ALJ the
additional tool she requires to engage in responsible case
management in this frequently recurring situation. Even though
the exhibit is relevant, she can exclude it under FRE 403 because
its probative value is substantially outweighed by considerations
of undue delay.

Since the balancing test in FRE 403 is weighted in favor of
admission, the ALJ will continue to resolve close cases by
admitting a controversial item of evidence, just as federal trial
judges now do in non-jury cases. Hence, exercise of the
discretion conferred by FRE 403 raises little risk of an agency or
court remand because an ALJ erroneously excluded an item of
evidence. Appellate courts accord substantial deterrence to trial
judge applications of FRE 403.^0 Agencies and reviewing courts
should accord analogous deference to ALJ applications of FRE 403
in recognition of the AL J ' s greater familiarity with the situation
at trial and the difficulty of the ALJ ' s task in exercising her
case management responsibilities. Because of the combination of
ALJ resolution of all close cases in favor of admission and agency
and court deference to ALJ evidentiary rulings applying FRE 403,
authorizing ALJs to apply FRE 403 does not raise the serious and
unnecessary risks inherent in instructing ALJs to apply the myriad
complicated and technical provisions of the FRE that are designed
to control jury trials. ^^

The POL Standard

The DOL standard82 seems to eliminate the disadvantages of
both the "so far as practicable" standard and the APA standard.
It creates no confusion for reviewing courts because its reference
to the FRE is permissive rather than mandatory. For the same
reason, it does not impose a difficult, risky and
counterproductive responsibility on ALJs. At the same time, the
DOL regulation provides ALJs a basis for managing the cases that
come before them. They have a clear basis to exclude evidence
whose incremental contribution to the fact-finding process does
not justify the amount of hearing time its admission would
require. The DOL regulation incorporates the most powerful tool
available to federal trial judges to expedite proceedings and to
keep unreliable evidence from cluttering the record, absorbing
valuable trial time, and delaying a decision in the case--FRE 403.
Judging from the high rate of satisfaction reported by DOL ALJs,83

FEDERAL RULES OF EVIDENCE 155

the DOL regulation allows ALJs to perform their case management
function far more effectively than does the APA standard alone.

On balance, the approach taken by Congress and DOL in the
process of adopting an evidentiary regulation to govern agency
adjudications seems far preferable to the alternatives now in
effect at other agencies. Congress should limit its role in the
process of establishing agency evidentiary rules to incorporation
of the APA standard. If Congress actually wants to attach special
limits on the type of evidence that a particular agency can use as
the basis for its findings of fact — and it is hard to identify any
good reason for this action^^ — it should do so directly by
establishing a special, more demanding definition of substantial
evidence applicable to that agency, rather than attempting to
further this goal indirectly through the awkward process of
limiting the evidence an ALJ can admit.

Agencies also should refrain from imposing on ALJs the
straight jacket of the FRE. Instead, agencies should provide as
much guidance as possible, including adoption of the weighted
balancing test of FRE 403, to enable ALJs to perform their
important case management function. Agencies also can assist ALJs
materially by announcing in advance of adjudications--preferably
through the rulemaking process — the substantive standards the
agency intends to apply in resolving various classes of
adjudications. 85 ^n evidentiary rulings must be based on a good
understanding of the substantive issues in dispute.

156 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

FOOTNOTES

* George W. Hutchison Professor of Law, Southern Methodist

University School of Law. B.S. 1965, Lehigh University; J.D.
1972, University of Virginia. The author served as
consultant to the Administrative Conference with respect to
the recommendation that is the subject of this article.
While the Conference adopted the recommendation, it did not
vote on or approve in any way this article or the report from
which the article was derived. The author wishes to
acknowledge the assistance of Michael Lloyd and Richard
Sedory, University of Pittsburgh School of Law, Class of
1986, who provided research assistance for this article.
Special thanks are due also to Richard Berg, who provided
many helpful comments on the article.

1. The goals stated are based on the author's interpretation of
the debate that preceded passage of the recommendation. The
Conference has not adopted this, or any other, set of goals
underlying adoption of the recommendation.

2. See, e.g. , 29 U.S.C. section 160(B) (purporting to mandate
use of FRE in National Labor Relations Board adjudications
"so far as practicable."

3. FRE 801-805.

4. See K. Davis, Administrative Law Treatise §16.5 (1980).

5. The consultant's report has been revised to enhance
consistency with the final version of the recommendation and
the debate preceding adoption of the recommendation.

6. A substantial majority of federal agencies merely recite or
paraphrase the evidentiary provision in the Administrative
Procedure Act, 5 U.S.C. section 556(d). That provision
neither establishes nor refers to any rules of evidence. See
text accompanying notes 18 through 23.

7. 29 C.F.R. section 18.44 (Department of Labor).

8. E.g. , 29 C.F.R. section 102.29 (National Labor Relations
Board); 43 C.F.R. section 4.122 (Department of Interior Board
of Contract Appeals) .

9. Davis, Hearsay in Administrative Hearings, 32 Geo. Wash. L.
Rev. 689 (1964); Davis, The Residuum Rule in Administrative
Law, 28 Rocky Mountain L. Rev. 1 (1955); Davis, Evidence
Reform: The Administrative Process Leads the Way, 31 Minn.
L. Rev. 581 (1950); Davis, An Approach to Problems of
Evidence in the Administrative Process, 55 Harv. L. Rev. 364
(1942) .

FEDERAL RULES OF EVIDENCE 157

10. Gellhorn, Rules of Evidence and Official Notice in Formal
Administrative Hearings, 1971 Duke L. Rev. (1971).

11. 402 U.S. 389 (1971) .

12. E.g. , Note, The Substantial Evidence Rule in Administrative
Proceedings: Restrictions on the Use of Hearsay Since
Richardson v^ Perales, 36 Ark. L. Rev. 102 (1983); Note,
Administrative Law — Evidence — Residuum Rule — Unemployment
Compensation Board of Review v. Ce ja, 20 Duq. L. Rev. 343

(1982); Note, Administrative Law — Hearsay Evidence —
Uncorroborated Hearsay Evidence Will Not Support a Factual
Finding in Unemployment Compensation Proceedings — Ceja, 87
Dick. L. Rev. 193 (1982).

13. E.g. , Note, The Good Faith Exception to the Exclusionary
Rule: Should It Apply to OSHA Enforcement Proceedings? 9 U.
Dayton L. Rev. 95 (1983); Note, The Exclusionary Rule and Its
Applicability to OSHA Enforcement Proceedings, 12 U. Bait. L.
Rev. 1 (1982) .

14. See J. Mashaw, C. Goetz, F. Goodman, W. Schwartz, P. Verkuil
& M. Carrow, SOCIAL SECURITY HEARINGS AND APPEALS (1978);
Pierce, The Choice Between Adjudicating and Rulemaking for
Formulating and Implementing Energy Policy, 31 Hastings L.J.
1 (1979).

15. Federal Rules of Evidence, Pub. L. 93-595; 88 Stat. 1926
(1975) .

16. Some ALJs "always" rely on the Federal Rules, while other
ALJs "never" or "rarely" rely on the Federal Rules. See
tables on in text.

17. E.g. , NLRB v. Process and Pollution Control Co., 588 F.2d 786
(10th Cir. 1978); Helena Laboratories Corp. v. NLRB, 557 F.2d
1183 (5th Cir. 1977); NLRB v. Addison Shoe Corp., 450 F.2d
115 (8th Cir. 1971) . See also text at notes 33-35.

18. 5 U.S.C. section 556(d).

19. See Sen. Doc. No. 248, 79th Cong., 2d Sess. 30, 208, 270
(1946); Report of the Attorney General's Committee on

Administrative Procedure 70-71 (1941) . See also K. Davis,
supra note 4, at section 16.4 (1980).

20. E.g. , 42 U.S.C. section 7171(G) (Federal Energy Regulatory
Commission must comply with APA section 556) .

21. 29 U.S.C. section 160(B).

22. Compare 39 C.F.R. section 916, with 39 C.F.R. section 952

158 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

(differing rules of Postal Service) .

23. 29 U.S.C. section 160(B).

24. 29 C.F.R. section 2200.72.

25. 43 C.F.R. section 4.122.

26. 49 C.F.R. section 1100.75.

27. 47 C.F.R. section 1.351.

28. 29 C.F.R. section 18.44.

29. SCM V. Xerox Corp., 77 F.R.D. 10 (D. Conn. 1977) (limiting
number of days in which parties could present evidence under
FRE 403) .

30. E.g. , FTC v. Cement Institute, 333 U.S. 683, 705-06 (1948);
Opp Cotton Mills V. Administrator, 312 U.S. 126, 155 (1941);
Evosevich v. Consolidated Coal Co., 789 F.2d 1021 (3d Cir.
1986) .

31. E.g. , NLRB v. Maywood Do-nut Co., 659 F.2d 108 (9th Cir.
1981); Catholic Medical Center v. NLRB, 589 F.2d 1166 (2d
Cir. 1978); NLRB v. Jacob E. Decker & Sons, 569 F.2d 357 (5th
Cir. 1978) .

32. See Catholic Medical Center v. NLRB, 589 F.2d 1166, 1170.

33. 588 F.2d 786.

34. 557 F.2d 1183.

35. 450 F.2d 115.

36. E.g. , NLRB v. Jacob E. Decker & Sons, 569 F.2d 357 (prior
felony convictions are admissible if their probative value
exceeds their potential for unfair prejudice) .

37. E.g. , CAB v. Air Transport Ass'n, 201 F. Supp. 318 (D.D.C.
1961). See also K. Davis, supra note 4, at section 16.10.

38. R. Lempert & S. Saltzburg, A MODERN APPROACH TO EVIDENCE 645-
651 (2d ed. 1982) .

39. ICC V. Baird, 194 U.S. 5 (1904).

40. 218 N.Y. 435, 113 N.E. 507 (1916).

41. 218 N.Y. 435, 440, 113 N.E. 507, 509.

FEDERAL RULES OF EVIDENCE 159

42. 5 U.S.C. section 706 (2) (E). See also Universal Camera Corp.
V. NLRB, 340 U.S. 474 (1951).

43. K. Davis, supra note 4, at section 16.6; C. McCormick,
EVIDENCE 126 (1954); J. Wigmore , EVIDENCE section 4(b)
(1940); Gellhorn, supra note 10.

44. 402 U.S. 389.

45. E.g. , K. Davis, supra note 4, at section 16.7.

46. The selection of a sample of ALJs to receive the
questionnaire was not scientific. The Administrative
Conference had access to a mailing list that included the
addresses of only 603 of the 1121 ALJs. The distribution of
responses seems representative, however. The respondents
from agencies that incorporate or paraphrase the APA
evidentiary standard serve at the following agencies: SSA

(113) , mine safety (5) , EPA (4) , SEC (4) , FLRA (4) , DOA (4) ,
ITC (2), FERC (2), FTC (1), FDA (1), DEA (1), NTSB (1), HUD
(1), and NRC (1). The respondents from agencies whose
evidentiary standard includes a reference to the FRE serve at
the following agencies: NLRB (23), DOL (21), FCC (8), ICC
(3) , DOI (3) , OSHRC (3) , Coast Guard (3) , USPS (2) , export
administration (1) , FMC (1) , and SEA (1) .

47. Most SSA adjudications are not adversarial; neither the
claimant nor the government is represented at the hearing.
It is difficult to envision how any set of evidentiary rules
could be applied in this type of proceeding. Most claimants,
with no knowledge of the rules of evidence, could be expected
to experience confusion and frustration when told by an ALJ
that some of their evidence had been rejected on the basis of
some "technicality" beyond their ken. The few claimants
represented by counsel would enjoy a significant advantage,
since their evidentiary arguments would be unopposed.

48. In recognition of the difficulty of applying evidentiary

rules to nonadversarial hearings involving pro se litigants,
many of the SSA ALJs who expressed a preference to adopt an
evidentiary standard that included a reference to the FRE
commented that such a change could occur only if SSA also
adopted an adversarial system in which both the claimant and
the government are represented by counsel. Such a change
would increase the cost of administering the Social Security
Disability system dramatically with little, if any,
improvement in the quality of justice provided by that
system. See Mathews v. Eldridge, 424 U.S. 319 (1976)
(refusing to require counsel at government expense in
disability proceedings on the basis that the cost of the
added procedural safeguard would exceed its benefits.) See
also J. Mashaw, BUREAUCRATIC JUSTICE: MANAGING SOCIAL

160 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

SECURITY DISABILITY CLAIMS (1983) (emphasizing the limited
extent to which expensive judicially imposed safeguards can
improve the quality of a mass justice system in contrast to
the substantial improvements potentially available through
implementation of less expensive internal quality control
mechanisms.) See generally R. Pierce, S. Shapiro, and P.
Verkuil, ADMINISTRATIVE LAW AND PROCESS 255-277 (1985).

Because of the unique features of SSA adjudications, the
Conference specifically exempted such "non adversarial"
proceedings from the scope of Recommendation 86-2.

49. Twenty-one ALJs at DOL and thirty-one ALJs at APA agencies
other than SSA responded to the questionnaire.

50. See Pierce, supra note 14; Mashaw, supra note 14.

51. Some respondents also complain that reviewing courts
sometimes require explicit discussion even of clearly
unreliable evidence. Under the "adequate consideration"
doctrine, an ALJ and an agency risk potential remand if they
fail to consider explicitly all arguably relevant evidence.
See R. Pierce, S. Shapiro & P. Verkuil, supra note 48, at
380-413. Thus, lack of discretion to exclude unreliable
evidence also can force an ALJ to devote scarce opinion-
writing time to explaining why she chose not to rely on
unreliable evidence she felt compelled to admit.

52. See text accompanying notes 28-30. Agencies also experience
difficulty attempting to interpret and apply the "so far as
practicable" standard. OSHRC has proposed to abandon its use
of the standard because it has been unable to define and
apply the standard in an acceptable manner. 51 Fed. Reg.
23184, 23190 (June 25, 1986). Unfortunately, OSHRC has
proposed to become the first federal agency to adopt the even
less appropriate standard of strict application of the FRE.
See text accompanying notes 53-70.

53. See M. Graham, Federal Rules of Evidence 82-83 (1981); G.
Lilly, An Introduction to the Law of Evidence 3-4 (1978).

54. R. Lempert and S. Saltzburg, supra note 38, at 498-505.
54a. M. Graham, supra note 53, at 82-83.

55. See text accompanying notes 75-83.

56. Evidence of prior crimes, for instance, can be considered
only for some purposes (FRE 404 and 609) and only when its
probative value for those purposes exceeds its potential for
unfair prejudice or undue expenditure of time. See U.S. v.
Beechum, 582 F.2d 898 (5th Cir. 1978). More generally, it is

FEDERAL RULES OF EVIDENCE 161

impossible to determine whether an item of proffered evidence
is hearsay without first determining the purposes for which
it may be used by the decision-maker. See Tribe,
Triangulating Hearsay, 87 Harv. L. Rev. 957 (1974).

57. See K. Davis, supra note 4, at section 17.14.

58. See Pierce, The Role of Constitutional and Political Theory
in Administrative Law, 64 Texas L. Rev. 469, 472-481 (1986).

59. See Estreicher, Policy Oscillation at the Labor Board: A
Plea for Rulemaking, 37 Ad. L. Rev. 163 (1985). For a
discussion of the practical problems posed by an agency's
failure to specify the issues in advance of an adjudication,
see Pierce, supra note 14, at 34-35. See also Robinson, The
Making of Administrative Policy: Another Look at Rulemaking
and Adjudication and Administrative Procedure Reform, 118 U.
Pa. L. Rev. 485, 524-45 (1970).

60. G. Calabresi and P. Bobbitt, TRAGIC CHOICES 57 (1978).

61. Gellhorn, supra note 10, at 17-18.

62. R. Pierce, S. Shapiro, & P. Verkuil, supra note 48, at
section 6.4.3d.

63. Id. , at section 7.3.

64. In recognition of this serious problem, appellate courts
frequently encourage trial judges to defer ruling on
difficult evidentiary issues until late in a trial. E.g.,
U.S. V. Beechum, 582 F.2d 898.

65. Pierce, supra note 58, at 505-508.

66. 179 F.2d 377 (8th Cir. 1950). Accord Fields Eng. & Equip.,
Inc. V. Cargill, Inc., 651 F.2d 589, 594 (8th Cir. 1981);
Multi-Medical Convalescent and Nursing Center v. NLRB, 550
F.2d 974, 977 (4th Cir. 1977); Northwestern Nat. Casualty Co.
V. Global Moving and Storage Inc., 533 F.2d 320, 324 (6th
Cir. 1976.) .

67. 179 F.2d at 379.

68. Id^

69. Richardson v. Perales, 402 U.S. 389 (1971).

70. K. Davis, supra note 4, at section 16.3; Gellhorn, supra note
10, at 17-22.

71. FRE 703.

162 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

72. Au Rust Proofing Center, Inc. v. Gulf Oil Corp., 755 F.2d
1231 (7th Cir. 1985); Greenwood Util. Comin. v. Mississippi
Power Co., 751 F.2d 1484 (5th Cir. 1985); In re Japanese
Electronic Producer's Antitrust Litigation, 723 F.2d 238 (3d
Cir. 1983), rev' d on other issues sub nom. Matsushita Elec.
Indus. Corp. v. Zenith Radio Corp., 106 S. Ct. 1348 (1986);

73. E.g. , Indian Coffee Corp. v. Procter & Gamble Co., 752 F.2d
891 (3d Cir. 1985) .

74. 402 U.S. 389.

75. See tables in text.

76. See Senate Comm. on Governmental Affairs, Study on Federal
Regulation Vol. IV, Delay in the Regulatory Process, S. Doc.
No. 95-72, 95th Cong., 1st Sess. (1977). See also Pierce,
supra note 14.

77. 5 U.S.C. section 556(d).

78. See FRE 401 and Advisory Committee's Note, 56 F.R.D. 183,
215.

79. See FRE 403 and Advisory Committee's Note, 56 F.R.D. 183,
218. See also Pierce, Admissibility of Expert Testimony in
Hearsay Form, 5 Am. J. Trial Adv. 277, 279-283 (1981);
Slough, Relevancy Unraveled, 5 Kan. L. Rev. 1 (1956).

80. See, e.g. , Stengel v. Belcher, 522 F.2d 438 (6th Cir. 1975).

81. See text accompanying notes 52-74.

82. 29 C.F.R. section 18.44.

83. See table in text.

84. See text accompanying notes 69-74.

85. Agencies vary widely with respect to the extent to which they
apprise the ALJ and the parties in advance of the issues they
consider important in an adjudicatory proceeding and the
types of evidence they consider probative of those issues.

At one extreme, NLRB rarely issues rules and frequently
changes its policies in adjudicatory disputes with no advance
notice. See Estreicher, supra note 59. See also Bernstein,
The NLRB ' s Adjudication Rulemaking Dilemma Under the
Administrative Procedure Act, 79 Yale L.J. 571 (1970) . By
contrast, SSA has materially assisted ALJs by resolving some
recurring factual issues by rulemalcing, identifying with
specificity other factual issues through rulemaking, and

FEDERAL RULES OF EVIDENCE 163

publishing guidelines concerning the relative reliability of
various types of evidence when considered in resolving
recurring issues. See^ e.g. ^ Heckler v. Campbell, 461 U.S.
458 (1983) (affirming SSA rule establishing grid system for
determining availability of various types of jobs) . See also
20 C.F.R. sections 404.708-780 (guidelines describing
"preferred evidence" and "other evidence" relevant to a
variety of recurring issues) .

BACKGROUND REPORT FOR RECOMMENDATION 86-3

POINTS ON A CONTINUUM:
DISPUTE RESOLUTION PROCEDURES AND THE ADMINISTRATIVE PROCESS

Philip J. Harter

Report to the Administrative Conference of the United States
June 5, 1986*

(To be published in American University Journal of Administrative Law, volume 1

number 1, 1987)

166

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES
TABLE OF CONTENTS
I

INTRODUCTION

Administrative Experimentation,
Interest in Dispute Resolution.
Contested Issues.

OVERVIEW OP THE ALTERNATIVES

Arbitration.

Med-Arb.

Factfinding.

Minitrial.

Mediation.

FacUitating.

Convening.

Conciliation

Negotiation.

ADMINISTRATIVE ARBITRATION

Voluntary versus Mandatory.

Nature of Arbitration.

Private Neutral.

Parties Choose Arbitrator.

Parties Can Select the Norm.

Flexible Procedure.

Award.

Finality.
Quality Control.

Benefits/Uses.
Drawbacks.

Administrative Arbitration

Varieties of Administrative Arbitration

TABULAR SUMMARY OF VARIETIES OF ADMINISTRATIVE ARBITRATION

DISPUTE RESOLUTION PROCEDURES 167

IV
THE LEGAL ISSUES OF ADMINISTRATIVE ARBITRATION.

Statutory Limitations when the Government is a Party.

Article III

Article II: Requirement for Executive Decisions

Delegation to Private Parties

Due Process

Unconstitutional Taking

Standardless Delegation

Conclusion: Properly Executed Arbitration Programs are Constitutional

V
HYBRID PROCESS

The Arbitrators.

Norms and Precedents.

Record and Explanation.

Privacy.

Review by the Agency.

Judicial Review

No Review; Waiver

Limited .

Arbitrary or Capricious ,

VI
CONCLUSION WITH RESPECT TO ADMINISTRATIVE ARBITRATION

VII
AGENCY OVERSIGHT OF PRIVATE DISPUTE RESOLUTION MECHANISM

VIII
MINITRIALS .

Minitrial Procedure.

Use by Government Agencies.

When and for Which Cases Should the Government Consider Using Minitrials?

NASA Minitrial. .

Nature of the Dispute.

Scope of Litigation.

Motivations to use the Minitrial.

168 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The Procedure

Army Corps of Engineers Use of the Minitrial

Industrial Contractors
Tenn-Tom

IX
SETTLEMENT TECHNIQUES

Need for Structure to Facilitate Settlements

Overview of Techniques

CONCLUSION: WHERE DO WE GO FROM HEREt

APPENDIX I

SURVEY OF DISPUTE RESOLUTION METHODS

USED IN THE

ADMINISTRATIVE PROCESS

Department of Commerce.

Office of Export Enforcement.

Office of Anti-Boycott Compliance

National Oceanic and Atmospheric Administration.

Personnel Law Division

Federal Emergency Management Agency

Commodity Futures Trading Commission.

Consumer Product Safety Commission.

Department of Agriculture.

Packers and Stockyard Division.
Natural Resources Division.

Department of Defense.

Army Corps of Engineers.

Armed Services Board of Contract Appeals.

Office of Dependent Schools.

Department of Education.

Division of Research & Improvement, Vocational Education and Rehabilita-
tion~ ~" "

Department of Energy.

Economic Regulatory Administration
Federal Energy Regulatory Commission.
Nuclear Waste.

Department of Health and Human Services.

Department of Housing and Urban Development.

DISPUTE RESOLUTION PROCEDURES 169

Department of Transportation.

Urban Mass Transportation Administration.

Office of Civil Rights.

National Highway Traffic Safety Administration.

Environmental Protection Agency.

Equal Employment Opportunity Commission

Federal Communications Commission.

Federal Election Commission.

Federal Labor Relations Authority.

Hederal Maritime Commission.

Federal Mediation and Conciliation Service.

Federal Reserve System.

Federal Trade Commission.

General Accounting Office.

Interstate Commerce Commission.

Merit Systems Protection Board.

National Mediation Board.

Nuclear Regulatory Commission.

Office of the Federal Inspector, Alaska Natural Gas Transportation System.

Pension Benefits Guaranty Corporation.

Postal Rate Commission.

Railroad Retirement Board.

Securities and Exchange Commission.

APPENDIX II
CASE STUDIES OF ADMINISTRATIVE ARBITRATION

Federal Insecticide, Fungicide and Rodenticide Act.

Pension Benefit Guaranty Corporation. .

Commodity Futures Trading Commission Reparations Procedures

Superfund Arbitration.

170 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Merit Systems Protection Board.

Background.

Appeals Arbitration Procedure.
Voluntary Expedited Appeals Procedure.
Evaluation of Appeals Arbitration.

Implementation of the AAP.

Timeliness and Cost- Effectiveness

Equity and Fairness

APPENDIX III
AGENCY OVERSIGHT OP PRIVATE DISPUTE RESOLUTION MECHANISMJS .

Securities and Exchange Commission Oversight of Self Regulatory Organisations

Federal Trade Commission

Informal Dispute Settlement Under the Magnuson- Moss Warranty Act.
Informal Dispute Settlement Under Section 5 of the FTC Act.

DISPUTE RESOLUTION PROCEDURES 171

I
INTRODUCTION

Administrative Experimentation.

The Administrative Procedure Act is by and large divided into two relatively
distinct parts: notice and comment rulemaking and trial type hearings presided
over by an administrative law judge. The provisions governing the former are, at
least in their pristine statutory form,l remarkably brief considering the leverage
provided agencies for controlling private action through their exercise. The latter
are positively Byzantine in their complexity. As opposed to defining even the
skeleton of the full range of procedures that are actually used, the two are the
endpoints of a continuum of procedures2 ranging from the flexibility of notice and
comment rulemaking to the formal rigidity of a trial type hearing under the
APA.

Perhaps unfortunately, the APA itself does not address the great bulk of
administrative procedure that lies between its extremes, 3 other than by providing
guidance through analogy and adaptation of the specified structures. On the
other hand, the lack of codification encourages experimentation with new proce-
dures to meet new needs. Moreover, because the APA itself does not address the
requirements of the modern administrative state, Congress has taken to including

*I would like to thank Karen Ault, Kirk Manhardt, and Jane Shinn for their
substantial contributions to this report.

1. The legislative history of the rulemaking provisions of the APA reveal a
Congressional intent that far more elaborate procedures would be used for
developing any rule with substantial impact. See, Harter, Negotiating
Regulations; A Cure for Malaise, 71 Geo. L. J. 1, 9-10 (1982). While more
was expected, the Act did not impose the additional procedures on agencies.
Rather, they were simply expected to follow suit. Vermont Yankee Nuclear
Power Corp. v. NRDC, 435 U.S. 519 (1978). Through creative statutory
interpretation and the "management" of the administrative process, courts
have nonetheless developed the "hybrid" rulemaking procedures to address
the need for resolving complex factual questions well beyond customary
agency expertise. DeLong, Informal Rulemaking and the Integration of Law
and Policy, 65 Va. L. R. 257 (1979).

2. Notice and. comment rulemaking is not really the lower bound of administra-
tive procedure, of course, since it has some structure and many decisions
are made without any specified process. Applications are reviewed and
stamps sold with very little formality short of resolving a dispute over a
decision made initially by a government official.

3. In contrast with the APA, the Model State Administrative Procedure Act
identifies three types of adjudicatory procedures to be used in appropriate
cases: formal (§§ 4-201 to 4-221); conference (§§ 4-401 to 4-403); and
summary (§§ 4-501 to 4-506).

Moreover, Federal agencies actually use a broad variety of adjudicatory
procedures for resolving contested issues. Verkuil, A Study of Informal
Adjudication Procedures, 43 U. Chi. L. Rev. 739 (1976). Thus, while the
APA-mandated procedures are complex, the Federal adjudicatory apparatus
can be responsive to a host of needs.

172 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

sometimes elaborate procedures in substantive statutes instead of relying on the
APA to develop a coherent general administrative process.^ As a result, new
forms of administrative procedure crop up -- through ad hoc use by agencies,
through ad hoc statutory prescription, and through the journals.

While the experimentation and evolution are clearly beneficial, they do have
their costs: the new forms sometimes clash with established precepts. ^ That can,
of course, mean either the old should adapt to the new^ or that the new is not
living up to expectations and should be changed before further use.^ Also,
because of their ad hoc nature, they sometimes take a considerable time to
become accepted and hence widely used even when proven.

We appear to be in the midst of such a process with respect to the use of
"alternative means of dispute resolution" in the administrative process -- proce-
dures that are not recognized by the APA but which appear to be useful supple-
ments to the traditional administrative processes.

Interest in Dispute Resolution.

For at least the past decade^ and particularly the last five years, there has
been an extraordinary interest in "alternative" ways of settling disputes --
alternative, that is, to the courts and formal litigation. That interest has spanned
the gamut of disputes,^ from neighborhood justice centers^^ that work to resolve

4. Elliott, The Pis-Integration of Administrative Law, 92 Yale L.J. 1523 (1985).

5. Witness, for example, the consternation of the courts in the early seventies
when directed by several statutes to review notice and comment rulemaking
on the basis of the "substantial evidence" test normally reserved for trial
type hearings. Industrial Union Department, AFL-CIO v. Hodgson, 499 F.2d
467 (D.C. Cir. 1974).

6. Courts seem fully comfortable with the notion of reviewing the factual basis
of rulemaking more intensely -- akin to that of the substantial evidence test
-- under the "hard look" doctrine that grew up contemporaneously if not as
a result of the misfit statutory directions. Ass'n of Data Processing v.
Board of Governors, 745 F.2d 677 (D.C. Cir. 1984). Both were responding to
a perceived need to force agencies into developing the factual bases of rules
built on highly technical or demographic data.

7. For example, the "offeror" provision of the original Consumer Product Safety
Act is one such failed notion that was discarded, although it may have had
as much to do with its administration as its concept. See Harter, supra note
1, at 60-63.

8. The influential Pound Conference was held in 1976. It built on the growing
interest in dispute resolution and planted it firmly in the legal agenda.
Professor Frank E. A. Sander's paper that was delivered at the Conference
served as an influential introduction and benchmark to the area. Sander,
The Variety of Dispute Resolution, 70 F.R.D. Ill (1976).

9. For a general tour of the use so far, see Goldberg, Green and Sander,
Dispute Resolution (1985).

DISPUTE RESOLUTION PROCEDURES 173

pesky controversies from barking dogs and trash in alleys, to more serious social
infractions, to major corporate matters. ^ The Chief Justice of the United States
has been an outspoken proponent of the use of extra judicial means of resolving
matters that would otherwise end up in the courts. 12 The Federal Rules of Civil
Procedure were recently amended to encourage the use of a range of means short
of actual trial for settling controversies once in the courts. ^^

The literature, 14 legal and otherwise, has also included a vast discussion of
alternative means of dispute resolution, such as arbitration, factfinding, and
mediation. While very few of these techniques are actually new, their use has
been proliferating into areas in which they were previously unknown. We are,
therefore, gaining insights into the use of these forms of making decisions in new
settings.

It is not surprising, therefore, that they have been used somewhat in the
administrative process: Given their promise and use in the judicial setting, it is
only logical that they may also address real needs of the administrative process.
And, indeed, that has been the case. Some of these dispute resolution techniques
have demonstrated their utility to administrative agencies. 1^ But, because of the
peculiar requirements of the administrative process, in other instances the fit is
not entirely comfortable. And, in some instances their use is likely inappropriate.

No particular theory has developed as to what their structure should be,!^

10. McGillis and Mullen, Neighborhood Justice Centers (U.S. Dept. Justice 1977);
Cook, Roehl, & Sheppard Neighborhood Justice Centers Field Test (U.S. Dept.
Justice 1980).

11. Green, Marks, and Olson, Settling Large Case Litigation; An Alternative
Approach, 11 Loy. L.A. L. Rev. 493 (1978); the Center for Public Resources
has been a major proponent of the use of means other than litigation,
particularly the mini-trial, for resolving corporate disputes.

12. Address by Chief Justice Burger, American Bar Association Midyear Meeting
(Jan. 24, 1982) reprinted in Burger, Isn't There a Better Way?, 68 A. B.A.J.
274 (1982).

13. F.R.Civ.P 16(c).

14. Breger, The Justice Conundrum, 28 Vill. L. Rev. 923 (1983); Sander, Mediation;
A Select Bibliography (ABA Special Committee on Dispute Resolution 1984);
Bingham, Vaughn, & Gleason, Environmental Conflict Resolution (Conservation
Foundation 1980); U.S. Dept. of Justice, Nat'l Criminal Justice Research
Service, Dispute Resolution; Techniques and Applications (1985), Alternative
Dispute Resolution Program Evaluation; Levin & DeSantis, Mediation; An
Annotated Bibliography (1978).

15. See, ACUS Recommendations 82-4 and 85-5.

16. As will become clear. Judge Friendly's observation in the early days of
hybrid rulemaking that "One would almost think there had been a conscious

(continued...)

174 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

how they should be used, how they relate to the traditional processes, what sort
of judicial review is appropriate, and what their advantages and disadvantages are.
The full range of ADR techniques can potentially make a significant contribution
to administrative procedure by providing additional means of addressing needs
within the endpoints of the procedures specified in the APA itself. Indeed, the
adaptation and more widespread use of the ADR processes that are proving
successful on the civil side may well offer a solution to some of the more
pressing problems of the administrative process. That acceptance will be facilita-
ted by familiarity with the use of the ADR processes outside of the administrative
process; a familiarity with their use so far in it; and, some understanding of how
they fit within the continuum and relate to other needs of the administrative
process. 17

This report is an initial step in that direction.

Contested Issues.

The focus of the report is on the use of non-APA procedures that may be
used to resolve disputed issues, as opposed to making administrative decisions in
the first instance. These procedures may be employed directly by the agency
itself, or they may be used by a private organization under the supervision or
some other close relationship to an agency, generally under circumstances in
which the agency itself would hear and resolve the issue were it not for the
private body. The "issues" that are the subject of this report need not be
sufficiently specific or narrow that they must be resolved in an adjudicatory
proceeding, although certainly most will. It does mean that some potential
disagreement has arisen that needs to be resolved. The need to resolve the
matter is what is important from the perspective of this report, not the context
in which the need arises. It could be as part of any form of administrative
process -- rulemaking, adjudication, permitting, inspections, procurement, or in
programs with an intimate connection to an agency but outside of the agency's

16. (...continued)

effort never to use the same phraseology twice," Associated Industries of
New York, Inc. v. Department of Labor, 487 F.2d 342, 345 n.2 (2d Cir. 1973),
applies with full vigor at this stage of the use of arbitration in the ad-
ministrative process.

17. Edelman, Institutionalizing Dispute Resolution Alternatives, 9 Jus. Sys. J. 134
(1984); Harter, Dispute Resolution and Administrative Law; The History,
Needs, and Future of a Complex Relationship, 29 Vill. L. Rev. 1393, 1417-
14ia (1984).

18. This report is a survey of the variety of techniques other than those
mentioned in the APA itself that are used to make administrative decisions.
It is a survey and not a comprehensive analysis. It is designed to review
the structure of the new processes and to highlight the legal issues involved
in their use as well as provide the basis for further use and analysis. The
report is largely based on legal materials. In particular, very little empirical
research has been conducted to determine how well the programs have
functioned in practice. Before they are institutionalized on any broad basis,
that research should clearly be done.

DISPUTE RESOLUTION PROCEDURES 175

direct purview. 19 The process to be employed may be more a function of the
nature of the issue to be resolved than of the proceeding to which it is related. 20

II
OVERVIEW OF THE ALTERNATIVES

The "alternative" of alternative means of dispute resolution does not
necessarily mean "instead of something else". 21 Rather, they are different types
of procedures that are used for making decisions, usually for resolving some sort
of contested issue. Traditional processes, such as litigation itself, are themselves
among the alternatives. Thus, the term alternative means of dispute resolution
refers to the entire spectrum of techniques for resolving issues. Like other forms
of decision making, each has its benefits and its weaknesses, and is more
appropriately used in some situations than in others. Moreover, they are often
used in conjunction with one another. And, like rulemaking and adjudication
under the APA, they are more distinct conceptually than practically: they fade
one into another.

Although there are a number of variations on the themes, 22 the major types
of ADR techniques are arbitration, med-arb, factfinding, mini-trial, mediation,
facilitation, convening, conciliation, and negotiation. The list is arranged in order
of the decreasing involvement of a third party (no matter how many parties there
may be to the controversy), generally referred to as the "neutral. "23

Arbitration.

Arbitration is closely akin to adjudication in that the neutral decides the
matter after reviewing evidence and hearing argument from the parties. It has
been widely used for decades in labor relations and in resolving commercial
disputes. It ranges in formality from very nearly that of a court to virtually
without structure; the arbitrator may be called upon to apply existing law or to
reach "justice under the circumstances."

19. For example, the stock exchanges have procedures to resolve disputes
concerning their members. These procedures, if not the decisions in
individual cases, operate under the oversight of the Securities and Exchange
Commission'. See Appendix III.

20. See, Robinson, The Making of Administrative Policy; Another Look at
Rulemaking and Adjudication and Administrative Procedure Reform, 11 U. Pa,
L. Rev. 485 (1970).

21. The reference in the text above at notes 8-9 that the interest in "alterna-
tives" to litigation is fairly common, however. The reference, therefore, is
somewhat ambiguous, sometimes meaning instead of litigation, and sometimes
meaning the full range of dispute resolution techniques including litigation.

22. See generally, Goldberg, Green, and Sander, supra note 9.

23. While, of course, the third party is not always neutral and may sometimes
have a very real interest in the outcome, in general the third party is
rigorously neutral with respect to the parties and subject matter.

176 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The arbitration may be binding in that the arbitrator's decision ends the
controversy, either by agreement of the parties or by some rule of law. 24 n may
be advisory or "nonbinding" in that the parties are not bound by the decision;
they are expected to consider it seriously, however. Many jurisdictions have
established "court-annexed arbitration" in which certain categories of cases,
frequently those involving less than a specified level of damages, are either
directly referred to arbitration or the litigants are encouraged to proceed to
arbitration before trying the case in court. Generally, a dissatisfied party is
entitled to a trial de novo although a penalty is sometimes imposed, such as
paying the other party's costs, if the requesting party does not better its position
in the trial. Interest arbitration is where the neutral decides on the "ordering"
among the parties; that is, it determines the relationship of the parties and their
interests inter se.25 Grievance arbitration, on the other hand, is to resolve
"rights" under existing agreements or other forms of social ordering. Last offer
arbitration, made familiar by the baseball rules, is where the arbitrator's decision
is limited to choosing from the last offers made by the parties.

Med-Arb.

"Med-arb" is, as the name itself implies, a hybrid between mediation and
arbitration. In it, the neutral first serves as a mediator in attempting to bring
about a settlement among the parties and then decides the issues remaining
unresolved after the mediated negotiations. 26 Thus, following the mediation, the
neutral becomes an arbitrator. Sometimes the arbitration is binding and resolves
the issues, but in others the neutral prepares a report analyzing the positions and
needs of the parties and recommends a resolution.

Med-arb is to a degree an institutionalization of the common practice of
judges' and arbitrators' pushing on parties for a settlement before the hearing or

24. For a "lexicon" of ADR terms, see U.S. Department of Justice, Office of
Legal Policy's Federal Justice Research Program, Paths to Justice: Major
Public Policy Issues of Dispute Resolution (Report of the Ad Hoc Panel on
Dispute Resolution and Public Policy prepared by the National Institute for
Dispute Resolution) (1984) at 36.

25. Perritt, "And the Whole Earth was of One Language" -- A Broad View of
Dispute Resolution, 29 Vill. L. Rev. 1221, 1229 (1983-4).

Perhaps an "interest" dispute is best characterized by an example. Professor
Perritt cites one provided by Dean Hazard:

It is the type of dispute one gets into say, with one's friend,
when you ask: Shall we go to the game or shall we stay at
home and watch television? This kind of dispute requires a
settlement procedure of some kind, but it is not the kind of
dispute that is [suited for the courts].

26. For an example of a med-arb involving a dispute over how much various
local jurisdictions should pay for a regional sewage disposal plant, see
Susskind, Court Appointed Masters as Mediators, 1 Negotiation J. 295 (1985).

DISPUTE RESOLUTION PROCEDURES 177

after the hearing but before the decision. 27 jn that case, however, the mediation
is an adjunct of the main task of judging, and it clearly carries the stick of
coercion, whereas in med-arb as usually referred to the emphasis is on the
mediation with the arbitration being used as the secondary process.

Unless the parties themselves ask the neutral to render a decision after an
impasse is reached, the process is controversial among mediators. The two
processes rely on different cultures and different relationships between the
neutral and the parties. Mediation requires an exploration of what the parties
actually need and are willing to settle for whereas arbitration remains adversarial
so that a party may be reluctant to reveal what is acceptable for fear that it
would be cut down further in the decision. 28 Oftentimes, especially in labor
cases, however, the parties will desire the resolution of the controversy and ask
the mediator to arbitrate the remaining issues. In fact, in instances in which
some resolution is important so the parties agree before negotiations begin to
some sort of med-arb process, the fact that the issues will be arbitrated if no
agreement is reached serves as a deadline and powerful incentive for the parties
themselves to reach a decision so that the "arb" part of the process often remains
unused. 29

Factfinding.

Many controversies, particularly those that must be resolved by regulatory
agencies, turn on enormously complex factual issues. They may be of the
highest-tech -- "on the frontiers of scientific knowledge" as the courts have
said'^0 -- or require predictions of difficult economic developments, or the
compilation of demographic issues, or the facts cf an industrial dispute. In these
cases, the policy or ultimate judgment on the matter cannot be decided until the
facts are developed in a relatively authoritative way. Once they are, the parties
may then negotiate a settlement, further proceedings may be held, more research
may be needed, or the facts may sufficiently drive the outcome so that very little
will remain to be done since, for practical purposes, the issue has been resolved.

27. Fuller, Collective Bargaining and the Arbitrator, excerpted in Goldberg,
Green, and Sander, supra note 9, at 247.

The Merit Systems Protection Board has established this procedure. See,
text at note 595.

28. "The consensus among mediators appears to confirm that the trust and
candor required in mediation are unlikely to exist if the participants know
the mediator may be formulating an opinion or recommendation that will be
communicated to a judge or tribunal." Folberg and Taylor, Mediation at 277.

29. Med-arb as a dispute settling technique works, and works well. We have
been involved in med-arb in such diverse fields as nursing, newspapers,
longshore, public utilities, saloons, teamsters, and teachers, as well as in
commercial disputes. Of the literally hundreds of issues involved in such
cases, less than a dozen had to be finally arbitrated by the med-arbitrator.
The parties, with his aid, successfully negotiated all the rest. Kagel,
Comment, excerpted in Goldberg, Green, and Sander, supra note 9, at 264, 265-6.

30. Industrial Union Dept., AFL-CIO v. Hodgson, 499 F.2d 467, 474 (D.C. Cir. 1974).

178 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

A "factfinding" proceeding may be appropriate for these issues. Such a
proceeding generally entails the appointment of a person or group of people with
technical expertise in the subject matter to assay the situation and prepare a
report establishing the "facts" of the question entrusted. The factfinder is not
asked to resolve the entire issue, only to establish the underlying facts. The
matter itself will be determined in another forum -- either by the parties or in
some other proceeding. The procedures used for making the determination range
from the highly informal to close to a trial. ^^

The factfinder in labor disputes may be someone with familiarity of the
industry but certainly someone familiar with labor relations generally; it may also
be someone who is widely respected by both sides, so the report will be given
credence beyond the purely factual -- objectively determinable — issues. Factfind-
ing proceedings are, of course, commonly used by administrative agencies,
although they frequently are in the form of advisory committees. 32

Minitrial.

A "minitrial" generally follows the exchange of the parties' key documents
and other factual materials. 33 jn the minitrial itself, the lawyers for each party
are given a relatively short period -- ranging from several hours to several days
-- to make their best case. They will sometimes call witnesses but generally they
argue what the evidence that has been developed shows and the legal conclusions
that would flow from the issues presented. These presentations are made to
representatives of the parties who have the authority to settle the controversy
and a neutral third party. 34 When the arguments are concluded the representa-
tives then meet to negotiate an agreement.

The process is designed so the executives can view their own case in
perspective -- its strengths and weaknesses against those of the other party. The
neutral may be called upon to render his or her opinion as to how a court or
jury would decide if the matter were submitted for a court's decision; the parties
may also ask the neutral for more limited advice. The neutral is, therefore, more
an "agent of reality" than an arbitrator. As such, his or her report would
potentially change the bargaining position of the parties, and hence they may

31. For an example of a relatively formal proceeding, see Shapiro, Scientific
Issues and the Function of Hearing Procedures; An Evaluation of FDA's
Public Board of Inquiry, Report to the Administrative Conference of the
United States (1985).

32. See, e.g. Chronic Hazards Advisory Panel, 15 U.S.C. § 2078; Air Quality
Advisory Board and Advisory Committees, Sec. 117, Clean Air Act; Federal
Insecticide, Fungicide and Rodenticide Act, 7 USC § 136d(a); the Food and
Drug Administration has used panels of the National Academy of Scien-
ces/National Research Council to review the efficacy of drugs, see Stewart,
Regulation, Innovation, and Administrative Law; A Conceptual Framework,
69 Cal. L. Rev. 1256, 1354-1359 (1981).

33. For a discussion of mini-trials in general, see Green, Marks, and Olson,
supra, note 11,

34. A neutral third party is not always used, however. The NASA minitrial did
not, for example. See text at note 345.

DISPUTE RESOLUTION PROCEDURES 179

have an incentive to settle before the report is issued. Or, the report may also
convince a party that its case is not as strong as originally thought and hence
that a settlement may be the advisable route. The function of the minitrial is to
convert what could be a complex, protracted legal battle into a business decision
to be made by the executives of the parties.

Mediation.

A mediator is a neutral third party who assists the parties in negotiating an
agreement. Mediation is simply a negotiation involving a mediator. The mediator
has no independent authority and does not render a decision. Any decision that
is made is made by the parties themselves. As one mediator with diverse
experience has said, "People pay attention to the mediator for the same reason
they do to a civilian directing traffic around an accident -- it helps the process."

The mediator may be quite active in that endeavor, however. He or she will
usually help the parties frame the issues, analyze what their actual needs are, and
what the other side needs; an important part of that process is also deflating
more ambitious assertions and desires when there is little chance of their being
achieved. He or she will likely offer suggestions for possible ways of settling the
issues and draft materials for the consideration of the negotiations. Some of the
suggestions for those ideas may, of course, come from the parties themselves but
they will be communicated in a way that will not lock a party into an idea that
does not fly; in Washington-speak, the mediator provides the parties with the
basis for a "plausible denial". The mediator may also need to communicate to the
parties what is likely to happen if an agreement is not reached. ^^ In the
current vernacular, the mediator will help the parties define their "BATNA's".^^

The mediator may meet privately with the parties and shuttle back and
forth. This is frequently helpful in bounding the issues sufficiently that the
parties can address them directly in a meeting. Without that prior definition, the
parties may find the risk of direct discussion too great from a political standpoint
within their constituencies. Moreover, the shuttling can save valuable time by
reducing the need for more direct, face-to-face meetings which are always
difficult to schedule among senior representatives. The mediator can deflect
attention from the negotiators by being the spokesperson to those not engaged in
the discussions. Importantly, the mediator also serves as the proponent of the
process itself and can help keep discussions on track and moving.

FaciUtating.

A facilitator also works "to help a group of individuals or parties with

35. A relatively common example in public disputes is that one side may
ultimately win the issue, but the other will be successful in delaying it.
That state of affairs may not be satisfactory to either side so both may wish
to resolve their differences through agreement.

As a result, it is sometimes said that one of a mediator's functions is to
carry threats back and forth among the parties,

36. BATNA stands for best alternative to a negotiated agreement. The term is
from Fisher and Ury, Getting to Yes.

180 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

divergent views reach a goal or complete a task to the mutual satisfaction of the
participants."'^'^ The terms "facilitator" and "mediator" are often used interchan-
geably. Although the two are close in meaning, they are distinct. A facilitator
generally runs meetings and coordinates the negotiations during a meeting but
does not become as involved in the substantive issues as does a mediator when
working with the parties. ^^ Thus, a mediator is also a facilitator but not the
other way around.

Convening.

A "convenor" is a neutral who helps identify those who are interested in and
affected by a particular issue and indeed what the issues in controversy are. 39
Thus, the convenor's first task is to conduct a "feasibility analysis" or "conflict
assessment" as to whether direct negotiations among the parties would be a
recommended way to resolve the issues. If they would, the convenor brings the
parties together to negotiate or otherwise reach some sort of decision. The
convenor's task ends when the parties are assembled, although of course the same
person will frequently then serve as the mediator or facilitator. "^0

Conciliation.

A conciliator works to lower tensions, improve communications, and defuse a
tense situation. "Conciliation is frequently used in volatile conflicts and in
disputes where the parties are unable, unwilling, or unprepared to come to the
table to negotiate their differences."^!

Negotiation.

Negotiation is simply -- nothing more nor less -- communication between
people in an effort to reach an agreement. Negotiations clearly happen all the
time. As the introduction to the section on negotiation of a leading book says,
"We negotiate with our friends about where to eat dinner, with our spouses about
who will do the household chores, with our children about what time they will go

37. Paths to Justice, supra note 24, at 37.

38. Since it is often confused, it bears repeating that a mediator is not an
arbitrator and does not decide substantive issues. Rather, the mediator's
substantive involvement is through exploring the issues with the parties in
an effort to illuminate potential avenues for agreement.

39. See, ACUS Recommendation 82-4, Paragraphs 3-5; Harter, Negotiating
Regulations, supra note 1, at 67-82.

40. The convenor will have developed an understanding of the issues and a trust
among the parties, and hence it is usually far easier to use the same person
as the convenor and mediator or facilitator. Harter, supra note 1 at 77-79.

41. Paths to Justice, supra note 24, at 36-37.

DISPUTE RESOLUTION PROCEDURES 181

to bed. "42 y^Q also negotiate settlements to controversies large and small.
Indeed, we negotiate agreements of all sorts.

Sometimes the term "negotiation" carries a perverse connotation, one of
"selling out" or compromising one's integrity. It certainly does not necessarily
mean horse trading, log rolling, nor other unpleasant images that conjure up
parties' exercising raw power or making inappropriate compromises. The nego-
tiations may be totally principled and based on the substantive evidence. The
scientific process of peer review is a form of negotiation in which the various
"parties" analyze the situation, raise issues, and attempt to reach a decision on a
matter.

Negotiation is such a pervasive means of "dispute resolution" that it is
sometimes overlooked as such. Since the vast majority of cases'*^ and issues are
settled, it is the lifeblood of the administrative process. Many of the procedures
developed by agencies to "resolve disputes" are actually ways to further and
stimulate negotiated settlements.

Ill
ADMINISTRATIVE ARBITRATION

Arbitration is a powerful, widely used dispute resolution technique. For
example, the American Arbitration Association has over 60,000 arbitrators on its
rosters'*'* and more than 45,000 matters are referred to it annually for resolu-
tion.^^ Its use has been endorsed and supported by the U.S. Arbitration Act^^
which directs courts to enforce arbitration agreements and their resulting awards.
The Uniform Arbitration Act, which forms the basis for legislation in more than
half the states, establishes a similar provision for state law. Court annexed
arbitration is growing in popularity and currently at least 16 states employ some
sort of arbitration program as an adjunct to the courts.'*^

Because arbitration results in a decision that is imposed on the parties, its
use is particularly appropriate for resolving "distributional" disputes in which a
better bargain for one party means less for the other. ^^ Reaching an agreement
through direct negotiation is particularly difficult in those situations. Arbitration
frequently serves as a stimulus to settle, however, since parties are forced to
prepare their cases for presentation to the arbitrator, and they will also have to
discount the potential of an adverse decision. Hence, like preparing for trial, the

42. Goldberg, Green, and Sander, supra note 9, at 19.

43. Galanter, Reading the Landscape of Disputes; What We Know and Don't
Know (and Think We Know) About our Allegedly Contentious and Litigious
Society,^31 UCLA L. Rev. 4 (1983).

44. Telephone interview with Irene Conway, American Arbitration Association.

45. Telephone interview with Earl Baderschneider, American Arbitration Association.

46. 9 U.S.C. § 1 et seq.

47. Dispute Resolution Forum (Aug. 1985) at 2.

48. Schelling, The Strategy of Conflict, (1960) at 21.

182 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

potential of an arbitral award will Itself change the parties' BATNA. Similarly,
the parties can agree to submit their dispute to arbitration but not be bound by
the arbitrator's decision. In that case, the award will serve as the basis for
further negotiation.

Voluntary versus Mandatory.

There are essentially three types of arbitration and, since the relationship
between the parties and the process itself may vary one from another, it is
important to keep the distinctions in mind.

The first two types are voluntary, in which the parties agree to submit the
dispute to arbitration. In the first, the agreement is made before any dispute
arises. The agreement will typically be made in a contract which provides that
any dispute arising under it will be submitted to arbitration. The provisions of
the arbitration may then be set out. The second form is where the parties agree
to submit a dispute that has arisen to arbitration instead of using some other
process, such as litigation, for resolving it.^^ Although the two are different for
some purposes, for the most part they are similar in their effect on the nature of
the arbitration process. One major difference, however, is that a party that
entered into a pre-dispute agreement to arbitration may change its mind once the
dispute arises and seek to use some other process once confronted with the actual
prospect of an arbitration. ^0 Under such a situation, the parties may not be fully
cooperative with each other in designing a system, and the coercion of the courts
in enforcing an agreement to arbitrate may be needed.

The third type is where the process is imposed on the parties: it is the
only forum available for resolving the matter, at least in the first instance.
Mandatory court annexed arbitration is such an example. In these cases, the
parties are generally not as free, if indeed at all, to define the process that will
be used.

Nature of Arbitration.

Arbitration has no set, definite process, and indeed that is one of its main
attractions. It is an inherently flexible procedure. Common threads run through
most arbitration programs in the private sector, however:

Private Neutral. A private individual serves as the arbitrator. That is, the
arbitrator generally does not serve in any official, governmental role, although

49. There is a perception among some who are familiar with corporate dispute
resolution that the vast majority of arbitrations are pursuant to pre-dispute
agreements. Parties appear to be much more reluctant to submit an existing
dispute to arbitration, but rather tend to favor litigation instead. Testimony
of Michael F. Hollering, General Counsel of American Arbitration, at ACUS
Hearings on Agency Use of Alternative Dispute Resolution by Administrative
Agencies, May 2, 1986. Conversation with Jonathan Marks, President, EnDls-
pute, Inc.

50. See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler- Plymouth, 105 S.Ct. 3346
(1985); Hergel and Salpeter, Alternative Dispute Resolution May Have Limits,
Legal Times (Dec. 23/30 1985) at 9.

DISPUTE RESOLUTION PROCEDURES 183

there is nothing to prevent the arbitrator from being a government official absent
any conflict of interest.

Parties Choose Arbitrator. The parties are usually able to select the
arbitrator. This enables them to choose someone in whom they have confidence.
In some instances it is important that they can select someone who has technical
expertise in the subject matter of the dispute. That enables the parties to get
right to the merits of the dispute, as opposed to having to educate a generalist
judge with sufficient background so the matter can be put in perspective. It also
enables the arbitrator to exercise a professional judgment based on experience and
technical insight instead of solely on a "record" generated by the parties.

The parties themselves may identify an appropriate person or may select
from a list tendered to them by an organization such as the American Arbitration
Association. That choice may result from the parties' ranking those on the list
and the person with the highest rank being selected, or each party may be
permitted to strike a name, so that anyone not stricken could serve. If the
parties are not permitted to choose, as is customary in the court annexed
arbitration programs, a panel of three arbitrators often serves and a decision is
made by majority vote. The arbitration in such programs is customarily nonbind-
ing.

Parties Can Select the Norm. The parties can decide what standard the
arbitrator will apply. It may be the law of a particular jurisdiction, the rules of
some organization, or the ethos of the milieu in which the dispute arose. The
norm may also be, and frequently is, the arbitrator's "own brand of justice. "^1 If
the arbitration program is imposed on the parties, the arbitrator will customarily
apply the prevailing law or other established norm of the organization imposing
the requirement.

Flexible Procedure. Since arbitration is a private dispute resolution process,
the parties themselves can design its procedures. They can range from a virtually
total emulation of a court process to the most informal and ad hoc. In some
instances, full discovery is permitted and enforced on pain of default. In other
cases major documents or other evidence on which a party will rely, are ex-
changed prior to hearing and in others nothing happens before the hearing.
Organizations such as the AAA and the National Academy of Conciliators publish
rules that are designed to govern the arbitration proceedings in particular sub-
stantive areas;52 they can serve as the "default" rules that will apply unless
modified by agreement of the parties. Because it is not a public process, the
proceedings and the result can be kept private and confidential.

The common denominator in the process is that, unless they settle, ^^ t^g

51. Jones, His Own Brand of Industrial Justice; The Stalking Horse of Judicial
Review~of Labor Arbitration, 30 UCLA L. Rev. 881 (1983).

52. See, PBGC, FIFRA in App. II.

53. It appears from preliminary research that many fewer cases that are
submitted to arbitration settle as compared to those that go to trial.
Whereas many do settle on the eve of the hearing, perhaps only half as
many do so as are settled prior to a trial. This is perhaps surprising, and
certainly something that needs to be borne in mind when considering
institutionalizing arbitration on a broad scale.

184 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

parties submit evidence and argument to the arbitrator who makes the decision.
As a result of the flexible procedure and the fact that the parties can select the
arbitrator, the process can be conducted quite expeditiously should they wish, in
terms of the time from when the dispute arises to the hearing, the length of the
hearing itself, and the time from the close of the hearing to the decision. The
parties can determine the trade off between the formality they desire and the
need for expedition.

While certainly one of the hallmarks and putative benefits of arbitration is
Its reduced transactions cost in terms of time and resources, that is not always
the case. In some instances the arbitration will look for all the world precisely
like a trial with a full complement of discovery, sworn witnesses, briefs, and so
on. 5"* Even then, the process may still be more expeditious than a court since
presumably the hearing can be scheduled more rapidly than a judicial calendar
would usually permit. But, before embracing arbitration as a means for resolving
a dispute the nature of the arbitration process that is contemplated must also be
considered to ensure that the desired benefits will actually materialize.

Award. Typically, the decision in an arbitration is only an award: a final
result, without elaboration on the facts found or the resolution of the individual
issues presented. 5^ Sometimes, of course, the decision is supported by a brief
recitation of the facts and conclusions.

Finality. One of the primary benefits attributed to traditional arbitration is
its finality. Once an award is made it may be subjected to only limited additional
review, in court or otherwise. ^^ As one leading commentator has said:

54. Letter of April 25, 1986 from Chief Administrative Law Judge Naham Litt to
Charles Pou; testimony of Stanley Johnson at ACUS hearings, supra note 49.

55. Goldberg, A Lawyer's Guide to Commercial Arbitration (1979) at 62, 66.

56. The provision of the U.S. Arbitration Act pertaining to judicial review is
extremely limited:

In either of the following cases the United States court in and for the
district wherein the award was made may make an order vacating the award
upon the application of any party to the arbitration --

(a) Where the award was procured by corruption, fraud, or
undue means.

(b) Where there was evident partiality or corruption in the
arbitrators, or either of them.

(c) Where the arbitrators were guilty of misconduct in refusing to
postpone the hearing, upon sufficient cause shown, or in refusing
to hear evidence pertinent and material to the controversy; or of
any other misbehavior by which the rights of any party have been
prejudiced.

(d) Where the arbitrators exceeded their powers, or so imperfectly
executed them that a mutual, final, and definite award upon the
subject matter submitted was not made.

(continued...)

DISPUTE RESOLUTION PROCEDURES 185

The essence of the law of arbitration is that the scope of judicial
review of arbitration awards is very limited. When the arbitrators are
properly selected, conduct an orderly hearing at which all parties have
a fair chance to present their proofs and render an intelligible award
within the scope of their authority, the courts will confirm and enforce
the award. ^"^

Or, as another explained:

The courts will not review the merits of the award and confirmation
will not be denied, nor will vacatur be granted, upon a showing of
error of law or fact on the part of the arbitrators. The court's inquiry
is confined to determining whether the award falls within the authority
of the arbitrators, whether in form it reflects the honest decision of
the arbitrators and whether the hearing generally comported with
accepted standards of due process. ^^

The relationship between courts and arbitration is itself a bit complex and
evolving, ^9 but its essence is that it is very limited.

Quality Control. The quality control in arbitration -- the reason people use
it and have confidence in it -- is the ability to choose the arbitrator and the
minimal rules under which the process operates. They obtain in return, an
expeditious decision^^ that is within the bounds of acceptability.

But, it is likely that the arbitration proceeding will be more abbreviated
than a trial and that some of the judicial procedures designed to ensure ac-

56. (...continued)

(e) Where an award is vacated and the time within which the
agreement required the award to be made has not expired the
court may, in its discretion, direct a rehearing by the arbitrators.

9 U.S.C. §10.

57. Goldberg, A Lawyers Guide to Arbitration (2d Ed. ALI 1983) p. 61.

58. Kreindler, Arbitration Practice Under Federal Law, 18 Forum 348, 357 (1983).
And see, 9 UiS.C. § 10, 11.

59. Mitsubishi Motors Corp. v. Soler Chrysler- Plymouth Inc. 105 S. Ct. 3346
(1985); AT&T Technologies, Inc. v. Communication Workers of America, 106
S. Ct. 1415 (1986); Dean Witter Reynolds Inc. v. Byrd, 105 S. Ct. 1238 (1985).

60. The often cited major advantages of arbitration is its expedition and its
finality -- it is a means of quickly resolving the dispute within the bounds
of acceptability. Statement of Kay McMurray, Director, Federal Mediation
and Conciliation Service, and Michael F. Hollering, General Counsel of
American Arbitration Association at ACUS Hearings, supra note 49. Thus, if
the procedures of an arbitration are unduly complex or if subjected to
searching review, its primary value is lost and, absent other needs the
matter would likely be better resolved in a full trial.

186 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

curacyfil will not be used. It is, therefore, perhaps inappropriate to expect that
arbitration and trials would reach the same result in every case. In some
instances arbitration may be viewed as the more accurate because of its flexible
nature and its ability to draw on technical expertise. In other instances, the
quality control procedures of the courts would be expected to reach a more
"accurate" resolution. The question then becomes how much of a spread between
the two is acceptable and at what cost.^2

Benefits/Uses. To summarize and extend, arbitration is a particularly
attractive means of dispute resolution when one or more of the following factors
are present:

.63

• Time or transactions costs are more important than the "accuracy" of
any one decision. ^^^

• No decision is of critical importance to any party. ^^

• Technical expertise is important for the decision maker.

• The parties want to choose the basis of the decision, especially if it is
to be different from the law that would be applied in a judicial
proceeding.

• The parties desire privacy.

Drawbacks. Arbitration is generally not particularly suited where:

61. E.g. enforced discovery; findings of fact and conclusions of law; subpoena of
witnesses; appeals.

62. Many people clearly have a knee jerk reaction to arbitration as simply a
sophisticated way to "split the difference" between the parties. That is,
these people seem to feel impulsively that the arbitrator will not make an
honest effort to apply the designated norms to the facts. Similar allegations
can, and frequently are, much of virtually any decisional process. It seems a
particularly unfortunate bias with respect to arbitration, however. In the
abstract, if the parties are careful in selecting the arbitrator, the problem
should not arise. More empirically, however, parties familiar with arbitration
generally find it a satisfying way of resolving disputes with integrity.

63. Paths to Justice, supra note 24, at 34; Goldberg, Green, and Sanders, supra
note 9, at 8-9.

64. For example, in a commercial or construction dispute, it may be more
important to reach some decision than ensuring that it is "accurate" in the
sense of emulating the decision a court would reach. That is necessary so
the parties can get on with business based on the decision.

65. Arbitration is frequently used where many claims need to be resolved
expeditiously, no one of which is of fundamental importance to the parties.
The parties may in fact integrate a large number of individual claims. For
example, a labor union and a company will be parties to an arbitration
agreement to resolve a variety of separate disputes. Whatever the variation
of the award, "on the average" they would not only be acceptable but
preferable to a more intensive form of resolution.

DISPUTE RESOLUTION PROCEDURES 187

• Uniform results are desired -- reaching similar results in similar cases.

• The development of a "common law" or significant policy that will
govern future decisions is important.

• Maintaining established norms or policies is important;66 in these cases
it is decided that the public policy expressed in established law
outweighs the ability of the parties to alter it by selecting the norms
or even the forum where the law will be applied."'

• Public scrutiny of the process and the result is desired.

• Strict "quality control" is important and cannot be supplied by providing
for the technical expertise of the arbiter.

• The matter affects some who are not parties so that they will lack the
ability to protect their interests in the outcome.

Administrative Arbitration

The putative benefits of arbitration are attractive indeed. Interestingly, some
of the major reasons for the establishment of administrative programs and
administrative, as opposed to judicial, adjudication was to tap many of these same
virtues. For example, one early case, which exhibited a residual concern and
discomfort with agencies, characterized their benefits:

[T]he obvious purpose of the legislation [is] to furnish a
prompt, continuous, expert and inexpensive method for
dealing with a class of questions of fact which are peculiarly
suited to examination and determination by an administrative
agency specially assigned to that task. The object is to
secure ... an immediate investigation and a sound practical
judgment, and the efficacy of the plan depends upon the
finality of the determinations of fact with respect to the
circumstances, nature, extent, and consequences of the
[issues presented]. ^^

The benefits of administrative decisions have been described more recently

66. Wilco V. Sw'ann, 346 U.S. 427 (1953); Alexander v. Gardener- Denver Co., 415
U.S. 36 (1974) (Title VII claims should be heard de novo in Federal Court
even after they have been heard in a grievance arbitration). Katsoris, The
Arbitration of a Public Securities Dispute, 53 Fordham L. Rev. 279 (1984);
Edwards, Alternative Dispute Resolution; Panacea or Anathema?, 99 Harv. L.
Rev. 668 (1986); Fiss, Against Settlement, 93 Yale L. J. 1073 (1984); Schoen-
brod. Limits and Dangers of Environmental Mediation; A Review Essay, 58
N.Y.U.L.Rev. 1453 (1983).

67. Paths to Justice, supra note 24, at 34.

68. Crowell v. Benson, 285 U.S. 22 (1932).

188 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

as avoiding judicial delays, application of expertise, and their efficiency. ^9 Thus,
the reasons giving rise to the current interest In arbitration and other forms of
dispute resolution are a resounding echo of the very basis for the establishment
of administrative agencies. But now agencies themselves face crushing case-
loads^O and are themselves accused of exhibiting problems similar to those of the
courts for which they were to be the cure.'l It is surely not surprising,
therefore, that agencies, ^2 Congress, ^3 g^d private organizations^'* are anxious to
find new ways to address the difficulties. Since the non-judicial forms of dispute
resolution frequently fulfill the promise, their use in or adaptation to the
administrative process is to be encouraged.

Dispute resolution techniques can provide an entirely new range of tools for
making administrative decisions or even alleviating the need for governmental
decisions. ^^ Thus, for example, they could take the burden off an overworked
adjudicatory process and provide better "justice" at the same time. They can also
provide a means of participation far better than that supplied by the APA itself,
even under judicial gloss adding requirements.

Some problems that are addressed through command and control regulation
can also be better addressed by establishing a dispute resolution mechanism to
resolve individual disagreements in a far more personal, factual based means than

69. Administrative agencies are both efficient and speedy; and ... [a]gencles
provide modern government with the informality of action and decision
making usually found in large private business enterprises. Mezlnes, Stein,
and Gruff, Administrative Law (1983) at 1-13.

70. For example, 20,000 cases were referred to the 27 Federal agencies that
employed at least one full-time administrative law judge In 1978. An
additional 196,428 cases were referred to the Social Security Administration
during the same year. Administrative Conference of the United States
Statistical Report for 1976-1978 of Federal Administrative Law Judge
Hearings, (1980) at 33.

71. For example, the average time from complaint to disposition of a black lung
case was nearly 1-1/2 years In the period 1976-78; it was more than 2 years
for Service Contracts Act cases; more than 4 years for a Maritime Ad-
ministration case; 2 years for Investment Company Act cases. ACUS, Federal
Administrative Law Judge Hearings (1980). To be sure, arbitration would not
be appropriate for some of these cases, but the point Is that delay, com-
plexity, and mounds of paper have surrounded administrative trials.

72. CFTC, MSPB

73. Super^ind, PBGC, FIFRA, MSPB.

74. The arbitration provisions of FIFRA were enacted at the behest of private
organizations apparently seeking an expeditious resolution of a disagreement
over payment for the use of data used to register a pesticide. See text
accompanying note 409.

75. Just as one need not find fault with a hammer to advocate Including a
screwdriver and pliers In a tool kit, one need not dwell on the failures of
trials to advocate the adoption of ADR techniques. Rather, the techniques
are alternative means of making decisions that are better suited in some circumstances.

DISPUTE RESOLUTION PROCEDURES 189

could result from a generally applicable requirement that may as a practical
matter leave the individual in the same situation as before a rule was promul-
gated.^^ The agency may be in a favorable position to supervise the minimal
requirements of the dispute resolution mechanism instead of issuing and then
policing a regulation. That process may work to the benefit of all concerned.

Varieties of Administrative Arbitration

The discussion that follows is based predominately on the case studies of
administrative arbitration that are contained in Appendix II. The arbitration
programs that were studied are those of the Federal Insecticide, Fungicide and
Rodenticide Act (FIFRA);^"^ the Multiemployer Pension Plan Amendments Act of
1980^^ that is administered by the Pension Benefit Guaranty Corporation (PBGC):
the reparations procedures of the Commodity Futures Trading Commission'''^
(CFTC); the Comprehensive Environmental Response, Compensation and Liability
Act^^ (Superfund); and the two programs of the Merit Systems Protection
Board. ^1 While certain patterns through several of the programs, no two are just
alike. Together, they span virtually the full range of possible characteristics of
arbitration programs. Their attributes are summarized in the accompanying table,
and the details are available in Appendix II.

76. For an elaboration on this theme of the relationship between dispute
resolution mechanisms (DRM) and regulation, see Harter, Dispute Resolution
and Administrative Law; The History, Needs and Future of a Complex
Relationship, 29 Vill. L. Rev. 1393, 1395-1400 (1984).

77. 7 U.S.C. § 136 et seq.

78. 29 U.S.C. § 1381 et seq.

79. 7 U.S.C. § 18(b).

80. 42 U.S.C. § 9601 et seq.

81. 5 U.S.C. §§ 1101-8911.

190 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

TABULAR SIBMART OF VARIETIES OF ABMI N I STRATI VE ARBITRATION

CHARACTERISTIC

PIPIA

PBGC

CFTC

SUPERF

MSPB/
AAF

MSPB/
VEAP

Created by rule

Stat :

Rule

Stat :

Rule/ :

or statute

stat

stat :

Use: voluntary or

Man

Vol

Vol for :

Vol.

Vol. :

mandatory

pri.; :

man for :

]

gov • t :

: :

Arbitrator: agency

Priv

Agency

Priv fr.

Agency

Agency :

or private

agency
list

Arbitrator: app' ted

Choose

App't

Choose

App't

! App't :

or parties choose

None

Ex i s t i ng

Same as

Rule

Same

rSame :

agency rule; stat;

law

formal

:as :

none specified

formal

: formal :

Proceeding:

: For

For

Inf

: For

:Inf

:Inf :

formal ; informal

Record: full w/ tr.

: Vol

: Docs

: Full

:Vol

:Vol :

limited; or full if

requested (vol).

;

: :

Decision: findings

: FF/CL

• Fact/

Award;

: Full

:Sinniary

:SiJiTnary :

of fact; conclus-

: legal

brief

:of

:of :

ions of law; award

: basis

dis. ,

: FF/CL

: FF/CL :

only; full opinion

: no find.

Agency Review: full

: None

: Limited

: None

:Limlted

:Full :

limited; none

Court Review: lim-

: Limited,

Unclear :

None :

: Arb &

:Arb &

:Arb & :

ited or arbitrary &

: but

: arb &

"waived"

: cap

reap

:cap :

capricious standard

: Tucker
: Act act.

: cap or
limited

DISPUTE RESOLUTION PROCEDURES 191

IV
THE LEGAL ISSUES OF ADMINISTRATIVE ARBITRATION

Some limitations on the administrative use of arbitration need to be borne in
mind when considering its use. Some of the problems are conceptual, 82 some are
statutory,83 and some are constitutional. 84 Some are practicah^S arbitration may
be an inappropriate tool to address the issues presented. Its benefits and
drawbacks need to be considered when developing a program, and it should not be
too quickly embraced without analyzing its utility in dealing with the specific
matters to be resolved. With only a few exceptions, most of the obstacles can be
overcome. Properly used, arbitration offers the administrative process the same
promise it has provided for resolving private sector questions.

Statutory Limitations when the Government is a Party.

The Comptroller General has on several occasions, interpreted an obscure
statutory provision with seemingly no relevance whatever^B to prohibit agency use
of arbitration in the absence of specific authorization. This section, enacted in
1909,8*^ bars the use of public money for "the pay or expenses of a commission,
council, board, or similar group, or a member of that group" unless that commis-
sion or board is "authorized by law." The Comptroller General has consistently
found this prohibition applicable to arbitration panels established to determine the
rights of the United States. The Comptroller General has also viewed Congress's
express authorization of agency use of arbitration to indicate that agencies lack
authority to submit disputes to arbitration in the absence of such authorization.

The Attorney General reviewed the legislative history of this prohibition on
the use of funds to pay unauthorized commissions soon after its enactment. The
Attorney General described the breadth of this prohibition when considering the
Secretary of War's appointment of a committee of architects to assist in over-
seeing the development of the landscape surrounding Niagara Falls. The statute
ascribing this duty to the Secretary did not expressly authorize such a commit-
tee. Nevertheless, the Attorney General approved appointment of this committee,
arguing that "public officers have not only the power expressly conferred upon
them by law, but also possess, by necessary implication, such powers as are requi-
site to enable them to discharge the duties devolved upon them. "88 The
Attorney General determined that the prohibition on paying for unauthorized
commissions was not intended to affect this implied authority. The legislative
history shows that the bill as originally introduced would have prohibited all
payments to all. commissions or boards not "in specific terms authorized by

82. See text at note 140.

83. See text at note 86 et seq.

84. See text at note 106 et seq.

85. See text at note 66.

86. 31 U.S.C. §1346.

87. Mar. 4, 1909, Ch. 299 § 9, 35 Stat. §1027.

88. 27 Op. Atty. Gen 432, 436 (June 26, 1909).

192 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Congress." This language was later modified. The statute as enacted prohibits
payment to boards not authorized by law. The Attorney General interpreted this
legislative history to mean that commissions need not be authorized by specific
statute but only have to be authorized generally. The opinion states "it would be
sufficient if [commissions] authorized in a general way by law. "89 Thus, the
Attorney General found that the Secretary of War was authorized by implication
to appoint a committee of landscape architects to assist him in performing his
duties of administration over Niagara Falls.

The Comptroller General adopted the Attorney General's analysis when he
approved the payments made to the committee of landscape architects involved in
the administration of Niagara Falls. 90 The Comptroller General reaffirmed this
conclusion when it authorized the payments to a board of experts appointed by
the Secretary of Interior to assist in administration of Indian schools. The
Comptroller General stated, "If a board of experts is necessary to accomplish the
purposes indicated, the employment of the members thereof would be authorized
under the provisions of this appropriation. Such a board would be authorized by
law within the meaning of the act of March 4, 1909."^^

Despite these initial opinions, the Comptroller General soon began to read
this prohibition more restrictively. In 1914, he refused to authorize the use of
public funds to pay for the services of a commission which devoted itself to a
matter it was not authorized by law to consider. The Mexican Border Commission
had been authorized to negotiate boundary disputes. The comptroller determined
that this Commission could not be paid for its work in negotiating the United
States' and Mexico's rights to the use of water from the Rio Grande. 92 jhe

Comptroller General also read the prohibition to bar payments to boards which
were not clearly authorized by law. In 1925, the Comptroller General barred pay-
ment for a board of consulting engineers employed to assist in construction of the
Coolidge Dam. The statute authorized payment for individual consultants but did
not explicitly authorize the appointment of a board of consultants. 93 jn another
case, the Comptroller General determined that the Navy could not pay its share of
the cost for arbitration of a contract dispute with a manufacturer because such a
board was not authorized by law. 94

In 1928, the Comptroller General applied the prohibition to an agency's
submission to an arbitration panel. In reviewing a proposed lease between the
government and a private company, the Comptroller General determined that the
government could not accept a clause agreeing to arbitrate all disputes concerning
the condition of the leased property at the end of the lease term. The Com-
ptroller General rejected the arbitration clause for two reasons. First, he argued

89. 27 Op. Atty. Gen at 437.

90. 16 Comp. Dec. 282 (Nov. 2, 1909).

91. 16 Comp. Dec. 422, 424 (Jan. 10, 1910).

92. 20 Comp Dec. 643, March 18, 1914.

93. 5 Comp. Gen. 231 (August 21, 1925).

94. 5 Comp. Gen. 417 (Dec. 9, 1925).

DISPUTE RESOLUTION PROCEDURES 193

that the act of March 4, 1909^^ prohibited the payment of boards not authorized
by law, stating simply that the arbitration board called for under the lease was
unauthorized. Second, the Comptroller General argued that the government's
provision for contract dispute resolution precluded resort to an alternate forum.
The Comptroller General argued that the existence of established procedures for
resolving disputes with the government precluded the use of arbitration. The
Comptroller General states, "provision having been made by law for the adjust-
ment of claims that may arise under government contracts, there is no power or
authority in any administrative or contracting officer of the Government, by
means of a provision in a contract, to establish or provide for a different
procedure for the adjustment of such claims. "96 These two views were

subsequently relied upon to invalidate arbitration clauses in two additional
contracts. 97

The Comptroller General subsequently returned to the broad view of the
term authorized by law reflected in earlier opinions. In 194298 he quoted
extensively from the Attorney General's 1909 opinion. 99 Criticizing subsequent
opinions, the opinion held "Subsequent decisions applying a more strict rule on
the basis that the creation of commissions, boards, and similar bodies must be
specifically authorized by statute may not have taken cognizance of the earlier
history of the matter. "100 Concluding that the question of authorization did not
bar government agreement to the inclusion of an arbitration clause in a lease of
government property, the Comptroller General turned to the more general question
of whether the existence of a prescribed method for resolving disputes against the
government precluded agencies from adopting alternative means for resolving
disputes.

The Comptroller General determined that there is no bar to the use of a board
or panel to determine the factual question of reasonable value. Under the terms
of the lease at issue, the government could only gain from the arbitration award
as the lease provided that the value of the property could not be fixed at any
rate less favorable than the original terms of the lease. The Comptroller General
approved the inclusion of the arbitration clause under these conditions since the
government could not lose under the process and the arbitrators were not
deciding any questions concerning the legal liability of the government. These
arbitrators were merely making a factual determination of the value of certain
rental space.

The Comptroller General has refused to extend its acceptance of the use of
arbitration beyond the function of fact finding or appraising value. In 1953, he
decided the Navy lacked authority to submit to arbitration as prescribed in a
contract it had signed with a Swedish company. After reviewing several nine-
teenth century court of claims decisions, the Comptroller General decided, "The

95. 35 Stat. 1027.

96. 7 Comp. Gen 541, 542 (March 3, 1928).

97. 8 Comp. Gen. 96 (Aug. 28, 1928) and 19 Comp. Gen 700 (Feb. 3, 1940).

98. 22 Comp. Gen 140 (July 10, 1942).

99. Supra, note 90.

100. 22 Comp. Gen. 140, 143.

194 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

conclusion seems warranted that In the absence of statutory authorization, either
express or Implied, officers of the Government have no authority to submit or to
agree to submit to arbitration, claims which they themselves would have no au-
thority to settle and pay. "1^1 He also concluded that Congress's express
authorization of arbitration in some statutes, indicates that agencies generally
lack the authority to submit to arbitration. The Comptroller General states, "The
action of the Congress,... in authorizing the heads of executive departments to
arbitrate certain specific and well defined matters might well, indicate ... that the
executive branch has no general or inherent power to submit claims against the
United States to Arbitration. "1^2 -p^e Comptroller General's opinion of agency
use of arbitration remains unchanged. The opinion is not based upon any statute,
but is an inference drawn by the Comptroller General from Congress's explicit
authorization of arbitration in several statutes.

The Comptroller General's most recent opinion concerning agency use of
arbitration dates from 1978. ^^"^ The Federal Trade Commission requested an
opinion concerning the agency's decision to resolve a factual dispute with a
contractor through binding arbitration. The Comptroller General held that such
substitution for prescribed dispute resolution procedures would be improper,
although an arbitrator who is in fact an appraiser is a desirable adjunct to the
normal dispute resolution procedures. The Comptroller General also reiterated his
position that he was approving only arbitration's use to determine the fact of
reasonable value in situations in which the arbitrator did not impose any
obligation on the government or leave questions of legal liability for the ar-
bitrator's determination. The Comptroller General approved of the FTC's use of
arbitration "to render a determination as to the reasonable value of work per-
formed by the defaulted contractor ... so long as the prescribed disputes proce-
dure and provisions for judicial review incorporated therein are not displaced. "^^^

Thus, as a result of this line of holdings, the government cannot be bound
by an agency's arbitration program unless it is specifically authorized by statute
or is limited to factfinding. Absent these, an agency's arbitration must be
nonbinding and hence the functional equivalent of a minitrial.

Given the erratic interpretation of the statute read to ban the appointment
of arbitrators unless specifically authorized and the relatively this justification of
a ban based on Congress's inclusion of specific provisions for arbitration, it seems
appropriate for Congress to clarify this matter. In particular, an executive
branch official should be allowed to use arbitration for making decisions within
his or her authority if they believe that would be a beneficial means of doing so.
Such authority would not, of course, pre-empt the existing authority of the
Comptroller General and the General Accounting Office for "determin[ing] whether
payments of public funds are warranted by applicable law and available appropria-

101. 32 Comp. Gen 333, 336 (Jan. 27, 1953).

102. M.

103. B-191484, May 11, 1978.

104. Id. at 3.

DISPUTE RESOLUTION PROCEDURES 195

tions."!^^ Thus, an arbitral award would still be subject to a determination by
GAO that its terms can be lawfully met.

Article III

The courts were clearly jealous of their prerogatives during the development
of administrative law, and announced the need for judicial, not administrative,
resolution of important matters, especially facts. 1^6 -phe need was raised to the
Constitutional level. With the growth of the administrative state, the acceptance
of decisions made by agencies and a limited form of judicial review -- to ensure
that the determinations are based on substantial evidence -- also grew. The early
doctrines gradually died.l^"^ Indeed, agency decisions became sufficiently accepted
that few thought much about the old tension or that only Article III courts could
hear and resolve some types of issues. Interestingly, the limitation on the use of
entities other than courts to resolve matters has been rekindled recently. While
it does not affect most administrative arbitration, the issue has arisen and it does
define the outer boundaries of what can be done in it. The new requirements
must clearly be taken into account when considering whether to develop a new
administrative program.

Northern Pipeline Co. v. Marathon Pipe Line Co^Q^ held that the Bankruptcy
Act of 1978 wrongfully delegated federal judicial power to individuals who are not
Federal judges. Judges appointed under the Bankruptcy Act are not guaranteed
the safeguards of life tenure and irreducibility of salary deemed essential to
judges appointed under Article III. The arbitration program of the Federal
Insecticide, Fungicide and Rodenticide Act (FIFRA) was challenged on the similar
grounds that the use of an arbitrator denied the parties their right to have the
issue resolved by an Article III court. ^^^ The Court upheld the constitutionality
of private arbitrators determining the amount of compensation a second or
"me-too" pesticide registrant must pay to a prior registrant when EPA uses data
submitted by the first registrant in support of the second pesticide registration on
the grounds that it is a "public dispute."

The Court acknowledged Congress's discretion over the adjudication of
public rights over one hundred years ago:

There are matters, involving public rights, which may be
preserved in such form that the judicial power is capable of
acting on them, and which are susceptible of judicial
determination, but which Congress may or may not bring
within the cognizance of the courts of the United States, as

105. Steadman, Schwartz, and Jacoby, Litigation with the Federal Government
>. (2nd Ed. 1983) at 205.

106. Ohio Valley Water Co. v. Ben Avon Borough, 253 U.S. 287 (1920); Crowell v.
Benson, 285 U.S. 22 (1932).

107. Davis, Administrative Law and Government at 69; Estep v. United States, 327
U.S. 114, 142 (1946).

108. 458 U.S. 50 (1982).

109. Thomas v. Union Carbide Agricultural Products, 105 S. Ct. 3325 (1985).

196 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

it may deem proper. HO

FIFRA illustrates that the public rights doctrine extends to disputes between
private parties. FIFRA empowers arbitrators, who are not Article III judges, to
adjudicate disputes between pesticide registrants over amounts of compensation
due as a result of EPA's use of previously submitted data. The Court notes that
this right to compensation is statutorily based and that pesticide registrants lose
any claim to compensation based upon state property law when they submit the
data to EPA with knowledge of FIFRA's data use provision, m

Although this right to compensation concerns private parties, the Court
determined that this right carries many attributes of a public right since Congress
created the right as part of a comprehensive regulatory scheme governing
pesticide registration intended to safeguard the public health. The Court justified
Congress's delegation to arbitrators by noting it could have granted EPA the
power to decide the value or compensation due but instead chose to vest ar-
bitrators with this authority. The use of this alternative does not raise this dele-
gation of Congress's Article I legislative authority to the level of encroaching
upon judicial power so as to violate Article III.

FIFRA does provide a role for the judiciary in its regulatory framework,
however. It authorizes judicial review of an arbitrator's decision in cases of
fraud, misconduct and misrepresentation. In Thomas, the Court found that this
scope of judicial review satisfies the need to ensure an "appropriate exercise of
the judicial function" because it provides judicial protection against "arbitrators
who abuse or exceed their powers or willfully misconstrue their mandate under
governing law. "112

The Court summarized the scope of Article III limitation upon the delegation
of decisionmaking power:

Congress, acting for a valid legislative purpose pursuant to
its constitutional powers under Article I, may create a
seemingly "private" right that is so closely integrated into a
public regulatory scheme as to be a matter appropriate for
agency resolution with limited involvement by the Article III
judiciary. To hold otherwise would be to erect a rigid and
formalistic restraint on the ability of Congress to adopt
innovative measures such as negotiation and arbitration with
respect to rights created by a regulatory scheme. H^

Thus, the public rights doctrine is a broad, flexible doctrine which author-
izes the delegation of quasi-judicial, decisionmaking authority to non- Article III
judges when Congress adopts innovative approaches to the resolution of disputes
as part of a regulatory scheme.

The latest explication of the nature of issues that agencies, and hence

110. Murray's Lessee v. Hoboken Land, 18 How. 272, 284 (1856).

111. 105 S. Ct. at 3335, citing Ruckelshaus v. Monsanto, 104 S. Ct. 2862 (1984).

112. 105 S. Ct. at 3339.

113. 105 S. Ct. at 3340.

DISPUTE RESOLUTION PROCEDURES 197

administrative arbitration, can hear came as recently as the end of last term.
The D. C. Circuit held the Commodity Futures Trading Commission could not
resolve a counterclaim involving state law in a proceeding arising out of the same
transaction that was clearly within its jurisdiction because doing so would
transcend Article III limitations. 1^"* The Supreme Court reversed, pointing out
that Article III has two purposes: one is to protect an independent judiciary
from encroachment by other fora, and the second is to afford parties the right to
have their controversies heard by Article III judges.

As to the first, the Court found the important factors to be considered are

the extent to which the "essential attributes of judicial
power" are reserved to Article III courts, and, conversely,
the extent to which the non-Article III forum exercises the
range of jurisdiction and powers normally vested only in
Article III courts, the origins and importance of the right to
be adjudicated, and the concerns that drove Congress to
depart from the requirements of Article III.ll^

The Court sustained the agency's resolution of the state law claim on the
ground that the courts would still be called upon to enforce the order; the legal
rulings would be subject to de novo review; the range of issues presented is
narrow; and, the scheme did not oust the courts of jurisdiction since the parties
could still proceed there instead of before the agency. The Court found, there-
fore, that the program was not a threat to separation of powers.

With respect to whether the parties could "waive" their rights to an Article
III court, the Court held in reviewing the CFTC program that

as a personal right, Article Ill's guarantee of an impartial
and independent federal adjudication is subject to waiver,
just as are other personal constitutional rights that dictate

the procedures by which civil and criminal matters must be
tried. 116

Thus, Article III does not appear to raise any limitations on the use of
arbitration to resolve public disputes. Nor is it a limit for resolving private
disputes so long as consent is freely given by the parties and the courts maintain
at least some role in reviewing and enforcing the order.

Article III could conceivably pose some restriction on the extent to which
Congress could require mandatory arbitration as a way of resolving private
disputes since the very limited judicial review could be regarded as an impermis-
sible intrusion into the prerogatives of the judiciary. That courts are called upon
to enforce the otherwise private award may not be sufficient basis of judicial
involvement to protect this aspect of the separation of powers requirement. The
Court's reasoning in Thomas, however, that the limited review of arbitral awards

114. Schor V. Commodity Futures Trading Commission, 740 F.2d 1262 (D.C. Cir.
1984), vacated, 105 S. Ct. 3325, reinstated, 770 F.2d 211 (D.C. Cir. 1985),
rev'd, 106 S. Ct. 3245 (1986).

115. Id. at 3258.

116. Id. at 3256.

198 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

is sufficient to provide the requisite level of judicial protection necessary to meet
the standards of Article III would seem to apply with equal vigor to private
actions. Thus, even the mandatory arbitration of private disputes appears to meet
the standard develop in Schor.

Congress has authorized the use of arbitration as a means for adjudicating
disputes involving public rights in a number of statutes. For example, the
Randolph- Shepard Vending Stand Act^l^ grants a preference to blind vending
stand operators seeking sites on Federal property. Disputes concerning this
program may be submitted to an arbitration panel convened by the Secretary of
Education upon request of the individual, the state agency administering the
program or by the Secretary. The arbitration panel's award is reviewable in the
Federal District Court as if it were final agency action under the Administrative
Procedure Act.

Other instances of Congressional authorization of arbitration include CERCLA
or SuperfundjH^ the Flood Insurance program, ^^ Department of Defense design
bid competitions, 120 patent interference cases^^l a^d ^^e largest federal sector
use of arbitration, the Civil Service Reform Act's requirement of arbitration of
employee grievances. ^22

Administrative arbitration programs have been assailed on several additional
constitutional grounds. That lower courts have sustained some of the challenges
indicates their potential seriousness. Properly designed and used, however,
administrative arbitration fits comfortably within the constitutional framework--
at least as much as agencies themselves.

Article II: Requirement for Executive Decisions

Some issues may be so intertwined with government policy that they cannot
be decided by a private arbitrator. Buckley v. Valeo^^*^ held that the "perfor-
mance of a significant governmental duty exercised pursuant to a public law"124
can only be discharged by an Officer of the United States appointed in accor-
dance with the Appointments Clause of the Constitution. 125 Tj^e argument has
been raised as to whether a private arbitrator could be authorized to make a

117. 20 U.S.C. Sec. 107. See discussion infra at note 132.

118. 42 U.S.C. Sec. 9612(b)(4)(G).

119. 42 U.S.C. 4083.

120. 10 U.S.C. 277(e).

121. 35 U.S.C. §135(d). An advance notice of proposed rulemaking to establish
procedures for the arbitrations was published at 50 Fed. Reg. 2294 (1985).

122. See 5 U.S.C. 4303 and 7512.

123. 424 U.S. 1 (1976).

124. Id. at 140-141.

125. Article II, Section 2, Clause 2.

DISPUTE RESOLUTION PROCEDURES 199

Dinding decision in a matter in which an agency must make a final, binding deci-
sion, such as in rulemaking or revoking a permit. 1^6 Even in the case of
revoking a permit, however, it would not seem inappropriate if the parties -- the
agency, the permittee, and the interested interveners -- agreed to resolve a
contested issue by submitting it to arbitration. 127 Doing so would seem analogous
to stipulating a factual premise of the action. The ability of the arbitral decision
to withstand challenge from a non-participating third party would likewise appear
to be similar to the ability of a disgruntled third party to challenge a stipulation.
In both instances, the decision is made by the government official, albeit in the
one he has agreed to be bound by the arbitrator's decision. The officer or
government employee presumably will have made that decision on the ground that
it is in the government's overall interest to arbitrate the claim as opposed to
consume resources to chase the issue through a more elaborate process.

The real question would seem to concern the extent to which the non-
executive branch official is called upon to make policy determinations. As the
quote from Buckley indicates, it is the significant decisions that must be made by
government employees, not all decisions. Thus, the restriction would appear to
bar the arbitrator's deciding major policy questions, not the factual basis of such
a decision or a mixed question of law and fact in which the norms are already
relatively well developed. Not only are these areas constitutionally doubtful, they
are the very areas where the utility of arbitration is limited in the first instance.
The Article II limits, therefore, do not appear to be a practical concern.

Delegation to Private Parties

A closely related issue is whether there may be limitations on the ability of
the government to delegate powers to a private individual or institution. As the
discussion above makes clear, the use of private arbitrators to make decisions
closely affiliated with the government has been upheld on several occasions. 128
Although the law on this issue is far from clear, 129 there are undoubtedly some
limits. Thus, the more central the decision is to an issue that only the

126. Memorandum of April 24, 1986 for Stephen J. Markman, Assistant Attorney
General, Office of Legal Policy, from Samuel A. Alito, Jr., Dep. Ass't
Attorney Gen., Office of Legal Counsel, Administrative Conference Recom-
mendations on Federal Agencies' Use of Alternative Dispute Resolution
Techniques.

127. Indeed, EPA is considering doing just that with respect to the permitting of
hazardous waste facilities. Robinson, U.S. Environmental Protection Agency
Institutes Alternative Dispute Resolution in its Enforcement Program, 18 Dis.
Res. News 6 (ABA Cmte. on Dis. Res. 1986). Memorandum of December 2,
1986 to Ass't Administrators, Regional Administrators, Enforcement Policy
Work Group, Draft Guidance on the Use of Alternative Dispute Resolution
Techniques in Enforcement Cases. The draft recognizes the statutory
limitations, however, and limits the use of binding arbitration to factual
situations. Id. at 4.

128. Thomas v. Union Carbide Agr. Products Co., 105 U.S. 3325 (1985); Schweiker
V. McClure, 456 U.S. 188 (1982).

129. OLC Memorandum, supra note 126, citing Davis, Administrative Law Treatise
3.12 (2d Ed. 1978).

200 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

government can make, the more likely it is that an agency must be in a position
to review the matter before it can be final.

As in the discussion of the need for executive branch decisions, the extent
to which this is a problem would seem to be directly correlated with the extent
to which the arbitrator Is called upon to make policy decisions, and that is
precisely the area in which the utility of arbitration Is questionable. For
virtually all areas in which arbitration may be attractive, therefore, it does not
raise constitutional difficulties.

Due Process

The manner in which reimbursements under Medicare are determined has
been criticized as denying participants due process. Part A of the program
provides insurance coverage for the cost of institutional health services, while
Part B is a voluntary supplementary insurance program covering a percentage of
costs for other medical procedures. Both parts are administered by private
insurance carriers. Under the programs, claims for payment or reimbursement are
submitted to the carrier. If the request is denied, the beneficiary may request a
reconsideration. HHS' Health Care Financing Administration decides the matter
for Part A and a different employee of the carrier makes the decision as to Part
B. Under Part A, only controversies involving more than $100 may be appealed to
the Secretary and judicial review is available only if the amount in dispute is
$1,000 or more. Under Part B, the decision is final and non-reviewable. Thus,
under Part B, a private "arbitrator" is assigned to decide the matter, and the
decision is not subject to judicial review.

The use of a private individual to make decisions that are, to some degree
or another, administrative decisions is certainly anomalous. The question would
logically arise whether the types of decisions that are referred to the private
arbitrators are such that they should be decided by government officials. The use
of the private carriers to make the decisions in Medicare Part B was challenged
as a denial of due process. The District Court agreed "insofar as the final,
unappealable decision regarding claims disputes is made by carrier appointees
/'130 jn applying the test of Mathews v. Eldridge,^^^ the court concluded that
administrative law judges must hear the appeals. The Supreme Court
reversed. 132 n held that the deciding employees did not have a conflict of
interest since their salaries and any resulting claims are paid by the Government,
not their employers. Moreover, the nature of the decision is determined by
statute and regulation. Thus, the court found there is no reason to believe those
making the decisions are not qualified to perform their tasks and hence that their

130. Schweiker v. McCIure, 503 F. Supp 409, 418 (N.D. Cal. 1980).

131. 424 U.S. 319 (1976). In determining the nature of a hearing that is minimal-
ly required by due process, the court is to balance the private interest
affected by the official action; the risk of erroneous deprivation of such an
interest through the procedures used; and the probable value of additional
procedural safeguards; against the government's interest, including the
function and expense of additional or substitute procedural safeguards.

132. Schweiker v. McCIure, 456 U.S. 188 (1982).

DISPUTE RESOLUTION PROCEDURES 201

margin of error is any greater than that for administrative law judges. 1^3 Thus,
the court has approved private schemes at least to the extent they operate under
procedures specified by the agency.

The need for minimum procedural safeguards was stressed in a subsequent
casel34 involving the question as to whether an oral hearing must be held for
claims for less than $100 or whether a paper hearing would be sufficient. The
court laid down guidelines that must be followed if the oral argument was to be
avoided, especially the adequacy of notice, access to the evidence on which the
decision was made, and the ability to speak with someone who knows and
understands the basis for the decision.

A second answer to the seeming conflict between using private arbitrators
for public decisions is that the decisions are not entirely public: While the
decisions may implement an administrative program and bear an intimate connec-
tion to it, the decisions are not those of the agency and are basically for the
resolution of a controversy between private individuals and organizations. l^o

Unconstitutional Taking

FIFRA was also challenged that the arbitration program constituted an
unconstitutional taking of private property in violation of the Fifth Amendment.
The Court rejected the challenge in Ruckelshaus v. Monsanto. ^^^ Monsanto
alleged that EPA's use of its data for the benefit of another applicant's pesticide
registration effected a taking of Monsanto's property without just compensa-
tion.137 The district court sustained the challenge. ^^^ The Supreme Court
reversed, finding that while Monsanto and other data submitters may have a
property interest in data submitted to EPA, these companies cannot allege that a
taking occurs when EPA uses this data in a manner which was authorized at the
time the data was submitted. 139 The Court noted, however, that under the
statutory scheme in effect between 1972 and 1978 data submitters could have a
legitimate claim that documents submitted under the designation "trade secrets"
between 1972 and 1978 were improperly taken when used for the benefit of other
pesticide registration applicants. I'^O Such an allegation would depend upon the
actual amount of compensation received in arbitration. The Court found that

133. 456 U.S. at 200.

134. Gray Panthers v. Schweiker, 716 F.2d 23 (D.C. Cir. 1983).

135. This is not the case in some of the Superfund cases in which a claimant
disputes the Administrator's denial of liability or the amount claimed from
the fund.

136. 104 S.Ct. 2862 (1984).

137. 104 S. Ct. at 2871.

138. Monsanto Co. v. Acting Administrator, United States Environmental Protec-
tion Agency^ 564 F. Supp. 552 (ED Mo. 1983).

139. 104 S. Ct. at 2872-2877.

140. 104 S. Ct. at 2877-2879.

202 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Monsanto had not yet had any issue of compensation submitted to arbitration and
thus no issue of taking had yet arisen. ^^^

The Court held, however, that any data submitter seeking to contest an
arbitrator's compensation award retains the right to challenge the amount of
compensation in the United States Court of Claims. ^"^^ jhe Court ruled that the
Tucker Act offers a potential remedy to any data submitter whose data is used or
taken by EPA for the benefit of another applicant. Thus, any data submitter who
is dissatisfied with an arbitration decision may sue the United States in the Court
of Claims under the taking clause on the ground that it did not receive just
compensation for the use of its data.

Standardless Delegation

FIFRA has also been assailed as an unconstitutional delegation of legislative
power because the statute is alleged to offer so little guidance as to the stan-
dards an arbitrator should apply in administering the data compensation program.

The Supreme Court did not address this issue in JVlonsanto ^ '* 3 because
Monsanto's claim concerning the constitutionality of the arbitration scheme was
not ripe for review since it had not been subject to any arbitration. In contrast,
the district court^'*'* had found the arbitration provision arbitrary and vague.
Similarly, the district judge in Union Carbide Agricultural Products v. Ruckel-

141. 104 S. Ct. at 2878.

142. 104 S. Ct at 2880-2882. The Tucker Act, 28 U.S.C. § 1491 provides that
any individual who believes that the United States has taken his property
may bring this claim for compensation before the United States Claims
Court. The Tucker Act states:

The United States Claims Court shall have jurisdiction to
render judgment upon any claim against the United States
founded either upon the Constitution, or any Act of Con-
gress, or any regulation of an executive department, or upon
any express or implied contract with the United States or for
liquidated or unliquidated damages in cases not sounding in
tort.

The Court held that in the absence of specific legislation addressing their
interaction, the Tucker Act remedy and FIFRA's data compensation scheme
must coexist. Thus, the Court interpreted FIFRA as "implementing an
exhaustion requirement as a precondition to a Tucker Act claim. That is,
FIF^A does not withdraw the possibility of a Tucker Act remedy, but merely
requires that a claimant first seek satisfaction through the statutory
procedure." 104 S. Ct. at 2881.

143. 104 S. Ct. 2862 (1984).

144. Monsanto v. Acting Administrator, United States Environmental Protection
Agency, 564 F. Supp. 552 (ED Mo. 1983).

DISPUTE RESOLUTION PROCEDURES 203

shaus^^^ remarked that FIFRA represents a standardless delegation of power to
arbitrators.

The court in Sathon, Inc. v. American Arbitration Associationl'*^ refused to
issue a declaratory judgment as to the standard an arbitrator must apply in
determining the amount of compensation due. Sathon sought a declaratory
judgment to determine whether it must pay to an original data submitter a share
of the cost of producing the data used or whether it must pay a share of the
value of its use. The court sustained the vague criteria of "compensation,"
saying:

It is up to Congress to say what standards are to be applied
or to delegate this authority. There is nothing in the
statute (or the regulations promulgated thereunder) relating
to the standard to be applied in such proceedings or provid-
ing for judicial intervention in such matters. 1^7

Another court concurred that arbitrators under this scheme are not required
to apply an particular allocation formula, and that the absence of a specific
standard was not unconstitutionally impermissive as a denial of due process or
excessively broad delegation of authority. ^^^

Conclusion: Properly Executed Arbitration Programs are Constitutional

The courts which have interpreted the Multiemployer Pension Plan Amend-
ments Act of 1980'sl49 (MPPAA) arbitration provisions thus far have been called
upon to. determine the Act's constitutionality and have not actually reviewed an
arbitration decision under the Act. MPPAA has oeen upheld against assertions
that its provisions violate standards of due process;!^^ deny employers access to
an impartial tribunal;!^! commit a taking of property without just compensa-

145. 571 F. Supp. 117 (SD NY 1983), rev'd sub nom., Thomas v. Union Carbide
Agricultural Products, 105 S. Ct. 3325 (1985).

146. No. 83 Civ. 6019 (U.S. District Court N.D. 111., March 30, 1984) 20 ERC 2241.

147. 20 ERC 2245.

148. PPG Industries, Inc. v. Stauffer Chemical Co., 637 F. Supp. 8 (D.D.C. 1986).

149. P.L. No. 96-364, 94 Stat. 1217, codified at 29 U. S.C. Sec. 1381 et seq.

150. See, Pension Benefit Guaranty Corp v. R.A. Gray, 104 S.Ct. 2709(1984)
(Court held constitutional MPPAA's retroactive imposition of withdrawal
liability.)

151. See discussion in text. Board of Trustees of the Western Conference of
Teamsters Pension Trust Fund v. Thompson Building Materials, Inc, 749 F. 2d
1396 (9th Cir. 1984); Washington Star Company v. International Typographical
Union Negotiated Pension Plan, 729 F. 2d 1502 (D.C. Cir. 1984); Peick v.
Pension Benefit Guaranty Corp. 724 F. 2d 1247 (7th Cir. 1983).

204 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

tion;152 violate the Seventh Amendment's provision for trial by jury;!^*^ and
constitute a violation of Article III of the Constitution by vesting federal Judicial
power in arbitrators who are not federal Article III judges. ^^^

Administrative arbitration programs have been attacked on a broad range of
constitutional grounds. Thus far all the challenges have been rebuffed. It would
therefore appear that such a program will pass constitutional muster and can de-
cide any Issue an agency can so long as they adhere to at least minimal proce-
dures, avoid major policy matters, and are subjected to at least some judicial
review -- even the narrow standard of the Arbitration Act.

HYBRID PROCESS

As should be clear by now, several of the administrative arbitration programs
are actually hybrids between administrative and private sector processes. ^^^ Ttiey
typically are used to resolve issues that arise because of an administrative
program and are administered at least in part by an agency, but they are not part
of the agency itself. That is, the decision reached is not an agency order. The
agency, however, is charged with defining the process to be followed. Sometimes,
as in Superfund, the agency is a party, but in others, such as PBGC and FIFRA,
it is not. It seems likely that prior to the interest in alternative means of
dispute resolution the issues submitted to arbitration would have been resolved by
the agency itself in some sort of trial type hearing. For example, prior to
FIFRA's amendment, EPA made the determination as to how much compensation is
due; now the arbitrator does.^^^ Since the programs are so intimately connected
to the agency and Implement part of an agency program, they have some of the
attributes^^^ of agency action. Moreover, in some of the programs, the arbitra-
tion is the only forum available for resolving the matter. It is therefore unlike
voluntary arbitration and more like an administrative or judicial hearing in which
the process is imposed on the parties. Thus, administrative arbitration might
sometimes be thought of in conceptual terms as similar to an administrative
hearing.

152. Board of Trustees of the Western Conference of Teamsters Pension Trust
Fund V. Thompson Building Materials, Inc., 749 F. 2d 1396, 1406 (9th Cir.
1984) (taking clause does not prohibit Congress from readjusting contractual
relationships of private parties); accord, Peick v. Pension Benefit Guaranty
Corp., 724 F. 2d 1247, 1274-1276 (7th Cir. 1983).

153. Washington Star Company v. International Typographical Union Negotiated
Pension Plan, 729 F. 2d 1502, 1511 (D.C. Cir. 1984); Peick v. Pension Benefit
Guaranty Corp., 724 F. 2d 1247, 1277 (7th Cir. 1983).

154. Board of Trustees of the Western Conference of Teamsters Pension Trust
Fund V. Thompson Building Materials, 749 F. 2d 1396, 1404-1406 (9th Cir.
1984).

155. FIFRA, PBGC, Superfund.

156. See discussion infra at note 404.

157. E.g. judicial review for some, but not all of them.

DISPUTE RESOLUTION PROCEDURES 205

But, these programs also have some of the attributes of private sector
arbitration, such as a reduced record, a private arbitrator, the parties' having a
role in choosing the person who will decide, and decisions required by rule to be
reached far more quickly than is customary for administrative litigation.

The administrative arbitration programs are, therefore, to a very real extent
a hybrid, having both public and private characteristics. Sometimes the two
collide. The difficulty is made more confusing by no two being alike.

The Arbitrators.

Arbitrators are basically selected in one of three ways in administrative
arbitration programs, although a fourth way is clearly possible. The first is the
private analog in which the parties participate in selecting the arbitrator. They
may agree directly on an individual to serve as the arbitrator. Barring that, and
the procedure contemplated in several of the programs, the parties are tendered
a list of potential arbitrators. Each party may then either strike a designated
number of individuals from the list or rank those on the list according to
preference. The arbitrator is then chosen from those remaining on the list or
from those with the highest overall ranking. 1^^

The PBGC is a fairly typical example as to how arbitrators are selected.
Under the PBGC final rules, the parties shall select an arbitrator within 45 days
of initiation of arbitration or at a mutually agreed time. Several comments to the
proposed rule on this issue suggested allowing the parties to select the arbitrator
before initiation of arbitration. PBGC rejected the suggestion because it believes
that post-initiation selection will reduce the risk of jeopardizing the arbitrator's
neutrality. 1^^

In its proposed rules, the PBGC invited comments on the usefulness of a
PBGC-maintained roster of qualified arbitrators. The PBGC agreed with the
majority of comments that such a roster would duplicate those already maintained
by private organizations. PBGC will not, therefore, implement the proposal. 160
The American Arbitration Association (AAA) maintains a roster of qualified arbi-
trators from which it makes selections after parties in dispute have had an
opportunity to rank the acceptability of the candidates. 1^1 The PBGC noted in
the preamble of the final rules, however, that plan sponsors may still maintain
their own rosters without violating preselection restrictions. lo2

The PBGC .rules do not state specific qualifications for the arbitrator
because, after considering comments on the issue, the PBGC determined that the
arbitrator would assuredly be qualified because the parties are required to select

158. Superfund; see discussion at note 567. FIFRA; see discussion at note 416.

159. 50 Fed. Reg. 34686.

160. 50 Fed. Reg. 34679.

161. AAA rules - Section 12.

162. 50 Fed. Reg. 34680.

206 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

him by mutual agreement. "^

Upon accepting an appointment, each arbitrator must disclose to the parties
any "circumstances likely to affect his impartiality. "^^^ If any party determines
that the arbitrator should be disqualified on the ground that he is not impartial,
he must request, within 10 days, that arbitrator withdraw. If the arbitrator
agrees that he is no longer impartial, he must withdraw from the proceeding and
notify the parties of his reasons. ^^^ One comment to the PBGC proposed rule
on this issue argued that disqualification would be too easy under the rule, while
another argued that the rule should provide the parties with a mechanism to
compel the arbitrator to withdraw. The PBGC concluded that its final rule has
struck a reasonable balance. ^^^

If a selected arbitrator declines appointment or, after accepting, withdraws,
dies, resigns, or is for some reason unable to perform his duties, the parties shall
select another arbitrator within 20 days of receiving notice of the vacancy. ^^"^
PBGC initially proposed allowing 45 days for selecting a new arbitrator but
reduced the limit because the parties will have had already identified suitable
candidates during the original selection. 1^^ The parties may seek designation
and appointment of an arbitrator in a U.S. District Court if they are unable to do
so within the time limit of the rules. 1^^

The second way is for the arbitrator to be a private individual who is
imposed on the parties without their participating in the selection. This process
is used in any of the case studies, and it is followed in the administration of the
Medicare program administered by the Department of Health and Human Services.

The third means of obtaining an arbitrator is for the agency to appoint an
agency official to serve that function. The CFTC and the MSPB follow this
model. This is unlike the typical binding commercial arbitration, but quite similar
to the non- mandatory court annexed programs. The dispute in both instances is
submitted to the arbitrator only with the parties' concurrence. Thus, the parties
can decide whether the nature of the dispute and their respective needs are such
that this procedure is in their interest to pursue. Hence, although some of the
protections normally afforded in arbitration is lacking, the parties are in a
position to make the choice of whether or not to invoke the process. Indeed, the
Medicare decision would indicate that the process should be fully acceptable even
if imposed on the parties, so long as minimally acceptable procedures are followed
in reaching the decision.

163. 50 Fed. Reg. 34679.

164. § 2641.3(b).

165. ^ 2641.3(c).

166. 50 Fed. Reg. 34681.

167. § 2641.3(d).

168. 50 Fed. Reg. 34681.

169. § 2641.3(e).

DISPUTE RESOLUTION PROCEDURES 207

The fourth means of appointing an arbitrator would be for the parties to
choose from among a list of agency personnel. The Chicago office of the Merit
System Protection Board are selected in this way,1^0 and arbitrators for Super-
fund are selected from an agency approved list of private individuals.

Norms and Precedents.

Some administrative arbitration programs are directed to apply existing law
and precedent. 171 In such cases, they are alternative procedures to the same end
as a more formal process. 1^2

Several of the programs are explicitly non-precedential, in that an arbitral
decision in a matter cannot serve as resolving any issue for any purpose other
than that before the arbitrator. 1^3 jhe CFTC believes the lack of precedential
or res judicata effect is a positive incentive to use the arbitration process since a
decision will not have a potentially damaging collateral effect. 1^'* Several
comments on the PBGC's proposed rule indicated, however, that they thought
compiling the awards would provide valuable guidance for future decisions.

170. Adams and Figueroa, Expediting Settlement of Employee Grievances in the
Federal Sector, (Report to ACUS Evaluating MSPB's Appeals Arbitration
Procedure) (1985) at 31.

171. PBGC, CFTC, MSPB. Whereas the arbitrator in the PBGC is to apply
existing law, the agency has noted that the regulation establishing the
program does not tell the arbitrator just where or how to find it. 50 Fed.
Reg. 34,681.

172. For example, in reviewing the difference between arbitration under a
collective bargaining agreement and review by the Merit Systems Protection
Board, the court said:

While undoubtedly hoping to encourage employee selection of
the grievance-arbitration process, Congress did not wish that
choice to be made on the basis of a predictable difference in
substantive outcome. To the contrary, it envisioned a system
that would, as between arbitration and MSPB procedures,
'promote consistency ... and ... avoid forum shopping.'" TTius,
"the arbitrator's authority can be no less than the MSPB's
but also ... it can be no greater." Devine v. Pastore, 732
F.2d 213, 216 (D.C. Cir. 1984).

And see, Cornelius v. Nutt, 105 S.Ct. 2882 (1985).

173. CFTC. For example, in Superfund, 40 C.F.R. 305.51(c) provides;

No award or decision shall be admissable as evidence of any
issue of fact or law in any proceeding brought under any
other provision of CERCLA or under any other provision of
law. Nor shall any prearbitral settlement be admissable as
evidence in any such proceeding.

174. Nelson, CFTC's New Rules; Some Innovative Approaches to Adjudication; 9
Ad. L. News 1 (1984).

208 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Unlike the others, the FIFRA program does not provide any guidance to the
arbitrator as to the norm to apply. Because of its lack of standards, It has been
attacked as an impermissive grant of legislative power to the arbitrator, and at
least two courts have agreed. ^^^ Others, however, have not.^'^^ The matter is
likely to be raised again until a definitive resolution is made.^^^ Whether
permissible or not, such standardless arbitration appears inadvisable. Arbitration
is generally not appropriate for developing a "common law" or other definitive
norm that is to provide guidance for future conduct. ^^^ Without existing
standards and without such a common law, decisions would run the risk of being
arbitrarily ad hoc when criteria should be developed. The major issue -- whether
compensation should be based on cost of developing the data or its value once
developed -- is not likely to be resolved by the expertise of the administrator,
nor supplied by reference to an external standard. At minimum, such a program
should authorize the affiliated agency to issue rules to establish the major
guidelines that will be applied.

Record and Explanation.

The Administrative Procedure Act and many of the cases Imposing the
requirement for "some sort of hearing"!^^ rely largely on paper for minimal
quality control: They require a decision to be based on a record and be explained
as to what facts the decision maker believes flow from that record, as well as the
conclusions of law. This process permits a reviewing court or other body to look
over the shoulder of the decision maker to ensure an acceptable level of ac-
curacy. A major advantage of arbitration is its speed and finality, with the
quality control provided by other means. In it, paper is a means to the decision
but largely ancillary for purposes of oversight. The nature and purpose of the
"record" is therefore different in arbitration as opposed to a judicial or ad-
ministrative hearing.

175. Monsanto v. Acting Administrator, 564 F. Supp. 552 (E.D. Mo. 1983), rev'd on
other grounds sub nom. Ruckelshaus v. Monsanto Co., 104 U.S. 2862 (1984);
Union Carbide Agricultural Products v. Ruckleshaus, 571 F. Supp 117
(S.D.N.Y. 1983), rev'd sub nom, Thomas v. Union Carbide Agricultural Pro-
ducts, 105 S. Ct. 3325 (1985).

176. Sathon, Inc. v. American Arbitration Association, 20 ERC 2241 (N.D.IU. 1984).

177. The Issue was pressed In the Supreme Court in Thomas v. Union Carbide
Agricultural Products Co., 1055 S. Ct. 3325 (1985) but the Court decided it

was neither adequately briefed nor argued to this Court and was
not fully litigated before the District Court. Without expressing
any opinion on the merits, we leave the Issue open for determina-
tion on remand.

105 S. Ct. at 3340.

178. Although addressing problems with settlements and not arbitration, the need
for establishing and adhering to norms is raised by Edwards, Fiss, (1984),
and Schoenbrod, all supra, note 66.

179. Friendly, Some Kind of Hearing, 123 U. Pa. L. Rev. 1267, 1316 (1975).

DISPUTE RESOLUTION PROCEDURES 209

Thus, for example, in most of the administrative arbitration programs that
were surveyed, a full record could be generated at the request of a party but are
not as a matter of course. To be sure, the arbitral decisions turn on written
materials that are disgorged through some sort of discovery and introduced at a
hearing but, absent a request, transcripts of the hearing are typically not kept
nor are the decisions explained with the rigor of an administrative decision.l^O
The decision is usually a review of the factual and legal basis of the decision, but
the rules typically indicate it is to be more abbreviated,

I£ administrative decisions are to be fully reviewed in another forum, 1^1
they may need a fuller explanation and a more fully developed record than is
customary in private sector arbitration. That, of course, comes at the expense of
time and cost; and, indeed, subsequent review also comes at the cost of finality.

Privacy.

One of the reasons parties sometimes choose private sector arbitration is
that the record and the decision itself can be kept private and confidential. To
the extent the arbitration is viewed as part of an administrative program, the
expectation would be that they should be accessible to the public, or conducted
"in the sunshine," In those programs in which the program is a part of the
agency itself and results in an agency decision, 1^2 h^q Freedom of Information
Act would apply and hence the record would be subject to full public access.
The others, however, do not result in an agency decision. Thus, if the agency is
not a party, 1^3 POIA would not apply, ^^^ In that case, the proceeding likely

180. This point was emphasized by the D,C, Circuit in a case reviewing the
nature of judicial review of an arbitrator's decision concerning disciplinary
proceedings against a government employee:

If arbitration becomes simply another level of decision
making, subject to judicial review on the merits, arbitrators
may begin to decide cases and write opinions in such a way
as to insulate their awards against judicial reversal —
producing opinions that parrot the appropriate statutory
standards in conclusory terms, but suffer from a lack of
reasoned analysis. Such a shift from the arbitral model, in
which decision makers are free to focus solely on the case
before them rather than on the case as it might appear to an
appellate court, to the administrative model, in which
decision makers are often concerned primarily with building a
record for review, would substantially undercut the ability of
arbitrators successfully to resolve disputes arising out the
employment relationship, Devine v. White, 697 F,2d 421, 436
(D.C, Cir, 1983).

181. See infra concerning agency and judicial review.

182. MSPB, CFTC

183. PBGC, FIFRA

(continued...)

210 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

could remain confidential absent overriding rules or statute. If, of course, the
agency Is a party, as in Superfund, then FOIA would apply to its records and
hence likely that of the entire proceeding.

Review by the Agency.

To the extent the arbitration results in an agency order, the traditional
relationship between the decision made by the hearing officer and the agency
would provide for either appeal to the agency or discretionary review by the
agency on its motion. One of the attributes of voluntary arbitration, however, is
its finality. Thus, again, the two concepts collide in concept.

The Merit Systems Protection Board, for example, initially provided for
agency review only to address harmful procedural irregularity or a clear error of
law. While more review than under commercial arbitration, it was more limited
than usual. In response to views of the parties that typically appear before it,
the Board changed its Appeals Arbitration Procedure into the Voluntary Expedited
Appeals Procedure in part to provide full appeal to the agency.

The CFTC's arbitration program provides that the agency may review a
decision on its own motion to determine that it is not the result of any fraud,
partiality, or other misconduct. In this case, the agency is providing the same
narrow review typically accorded voluntary arbitration.

To the extent the arbitral award becomes an agency order, it would seem
appropriate for the agency to have some power to review to ensure it meets
minimal levels of acceptability. To ensure the benefits of expedition and finality,
however, that review should be quite narrow, probably akin to the standard of
judicial review under the arbitration act. Thus, an agency should review only for
gross deviation from policy or procedure, which is the administrative analog of
the award's being outside the scope of the arbitrator's authority.

The hybrid programs, 185 however, have no review by the agency. That is
likely stems from a view that the very reason for the arbitration is that the
matter is largely a private sector dispute that does not require agency action. 186

184. Even if a private arbitrator is retained by an agency, it would not appear
that the arbitrator's records that are developed in a hearing are agency
records for purposes of FOIA. They would seem analogous to records
developed by a government contractor to which the government has access,
in which case the Supreme Court held that they are not agency records.
Forsham v. Harris, 445 U.S. 169 (1980). Moreover, if the record remain in
the possession of the arbitrator, the agency is not obligated to retrieve
them. Kissinger v. Reporters Committee for Freedom of the Press, 445 U.S.
136 (1980T^

185. PBGC, FIFRA, Superfund.

186. Superfund does not fit this model. Its arbitration program applies standards
developed by the agency and determines the agency's liability. Thus, it is
clearly not a "private" dispute. The fact that the decision is not made by

(continued...)

DISPUTE RESOLUTION PROCEDURES 211

Hence there is no reason for the agency to be involved in reviewing let alone
deciding.

Judicial Review

There are essentially three forms of judicial review of administrative
arbitration decisions: none; limited, akin to traditional arbitration; and some
variant of the APA's arbitrary and capricious standard.

No Review; Waiver. If parties decide to use an arbitration program to
resolve an existing dispute, one component of that election could be a waiver of
any right to seek the judicial review normally accorded administrative action.
That is, by opting into arbitration, the parties would opt into its full ramifica-
tions, including its finality. The CFTC programs follow this approach. The
Supreme Court recently sustained such waivers of judicial review on the ground
that the right to have the dispute heard by an Article III court is a personal one,
and hence it may be waived. ^^^

The extent to which such waivers are enforceable when the election is made
before the dispute arises is open to question, at least in some instances. The
Supreme Court has held that a predispute agreement to arbitrate any claim that
would arise between a securities broker and its customer is not enforceable since
it could derogate rights provided by the Federal securities laws.^^^ Although the
case has been questioned and limited, ^^^ it continues to stand for some limitation
on the ability of a person to sign away his or her rights to an administrative or
judicial proceeding. Moreover, the Court has followed this line of reasoning in
other cases. It recently held that even though some aspects of a matter may be
arbitrated, an arbitral award could not preclude a judicial role in protecting the
federal statutory and constitutional rights that Section 1983 is designed to

18 6. (...continued)

an agency official may indicate a distrust for the ability of separation of
functions doctrines to result in impartiality while still wanting to maintain
enough control over the process that it will result in expeditious, acceptably
decisions; the alternative would be to rely on the courts, and the agency
could not set the agenda there.

187. Schor v. Commodity Futures Trading Commission, 106 S. Ct. 3245 (1986).

188. Wilko V. Swann, 346 U.S. 427 (1953).

189. See, Dean Witter Reynolds Inc. v. Byrd, 105 S. Ct. 1238 (1985). The lower
courts split as to Byrd's effect, with some holding that preenforcement
agreements to arbitrate securities disputes were enforceable, Halliburton A
Assoc, Inc. V. Henderson, Few & Co., 774 F.2d 441 (11th Cir. 1985), while
others disagreed and continued to apply Wilko's traditional limitation,
Conover v. Dean Witter Reynolds, Inc., 794 F.2d 520 (9th Cir. 1986).

The Supreme Court has granted certiorari to resolve the matter. McMahon
v. Shearson/American Express, 788 F.2d 94 (2d Cir.) cert, granted, 107 S. Ct.
60 (1986). The resolution of this case should have a significant effect on the
extent to which predispute agreements to arbitrate matters involving of
public policy are enforceable.

212 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

safeguard. 130 Thus, neither full faith and credit nor a common law rule of
preclusion of review would permit a court to accord res judicata effect to an
unappealed arbitration award.

The combined teaching of these cases is that if a dispute involves important
public rights, the court may invalidate an agreement to subject them to binding
arbitration and hence a party could still have the matter heard in a traditional
manner. 191 In other instances, however, the agreement is enforced, and the
matter is referred to arbitration, with its limited review. 1^2 while technically not
"waiver" cases in that such an agreement would preclude judicial review altogether
and arbitration has some judicial review, the cases do mark an outer boundary of
the ability of parties to sign away their rights before a dispute arises.

Limited. Judicial review of traditional arbitration awards is very narrow.
The United States Arbitration Act^^*^ directs courts to enforce the awards except
(a) where it was procured by corruption, fraud, or undue means; (b) where there
was evident partiality or corruption in the arbitrators; (c) where the arbitrators
were guilty of misconduct in the conduct of the hearing to the extent the rights
of any party were prejudiced; or (d) where the arbitrators exceeded their powers
assigned under the agreement. l^'*

The standard applied in FIFRA tracks this approach. It provides for judicial
review only in the case of "fraud, misrepresentation, or other misconduct by one
of the parties to the arbitration or the arbitrator. ..."l^^ The Court has ack-
nowledged that limited judicial review is permlssible^^^ ^^d has upheld it against

190. MacDonald v. City of West Branch, 104 S. Ct. 799 (1984). See also, Alexan-
der V. Gardner-Denver, 415 U.S. 36 (1974).

191. Other aspects of an arbitration agreement may be enforced, however. Thus,
when a securities agreement provided that "Any controversy between you and
the undersigned arising out of or relating to this contract or breach thereof
shall be settled by arbitration" the portion arising under the Federal law was
heard by a court since the dealer assumed it would not be referred to
arbitration, but that arising under state law was ordered arbitrated. Dean
Witter Reynolds Inc. v. Byrd, 105 S. Ct. 1238 (1985).

192. Mitsubishi Motors Corp. v. Soler Chrysler- Plymouth, 105 S.Ct. 3346 (1985).

193. 9 U.S.C. § 10.

194. As "a matter of federal law, any doubts concerning the scope of arbitrable
issues should be resolved in favor of arbitration." Moses M. Cone Memorial
Hospital V. Mercury Construction Corp., 460 U.S. 1 (1983).

195. 7 U.S.C. Sec. 136a(c)(l)(D)(ii).

196. Many matters that involve the application of legal standards to facts and
affect private interests are routinely decided by agency action with limited
or no review by Article III courts. See, e.g., 5 U.S.C. §§ 701(a)(1), 701(a)(2);
Heckler v. Chaney, 105 S. Ct. 1649 (1985); United States v. Erika, Inc., 456
U.S. 201, 206, (1982) (no review of Medicare reimbursements); Monaghan,
Marbury and the Administrative State, 83 Colum. L. Rev. 1, 18 (1983)
(administrative agencies can conclusively adjudicate claims created by the

(continued...)

DISPUTE RESOLUTION PROCEDURES 213

a challenge that it constitutes a wrongful delegation of judicial power to the
arbitrator. 197 jhe Supreme Court left open the possibility, however, that a
dissatisfied data provider could sue in the Court of Claims for a "taking" under
the Tucker Act.^^^ Thus, the Court seems to indicate that it does not regard the
arbitral award as a judicial finding, since presumably there would be no "taking"
if the amount were judicially determined. ^^^ This may result in the anomalous
result that a dissatisfied data submitter could obtain judicial review of the arbi-
tral award by suing in the Court of Claims, whereas the data user may have
difficulty securing a similar review.

Arbitrary or Capricious. The MSPB and Superfund programs both provide for
"arbitrary and capricious" scope of judicial review. 200 For example, the Super-
fund rules provide:

19 6. (...continued)

administrative state, by and against private persons); Redish, Legislative
Courts, Administrative Agencies, and the Northern Pipeline Decision, 1983
Duke L. J. 197 (same).

Thomas v. Union Carbide Agricultural Products, Inc., 105 S. Ct. 3325, 3334
(1985).

197. Thomas v. Union Carbide Agricultural Products, Inc., 105 S. Ct. 3325 (1985).

198. Ruckelshaus v. Monsanto, 104 S. Ct. 2826 (1984).

199. The Court has made quite clear that arbitration is not a judicial proceeding
subject to full faith and credit. Dean Witter Reynolds Inc. v. Byrd, 105 S.
Ct. 1238 (1985).

200. Under the Randolph- Sheppard Vending Stand Act, 20 U.S.C. Sec. 107, blind
persons who are licensed as vendors by state agencies may receive prefer-
ence in obtaining vending stands on federal property. An individual who is
dissatisfied with the state agency's actions may obtain a hearing on the
state level. If he or she remains dissatisfied, he or she may request the
Secretary of Education to establish an arbitration panel to hear the dispute.
A state agency may also request arbitration whenever it believes a federal
agency or department is not complying with the Act.

The arbitration is the exclusive remedy for an alleged grievance, not-
withstanding Congress's saying it "may" be used. Hence someone who
believes he or she has been denied such a preference must submit the
complaint to arbitration before pursuing the matter in court. That is, it has
been held that the arbitration is an administrative remedy that must be
exhausted before a court will entertain the complaint. Randolph- Sheppard
Vendors of America v. Weinberger, 795 F.2d 90 (D.C. Cir. 1986).

While the awards are "final and binding on the parties," 20 U.S.C. Sec,
107d-l, they are "subject to appeal and review as a final agency action"
under the APA, 20 U.S.C. Sec. 107d-2. Thus, the arbitrary or capricious
standard applies to these arbitrations. The court in Georgia Department of
Human Resources v. Bell, 528 F. Supp 17 (N.D. Ga. 1981) reviewed an award
under 5 U.S.C. Sec. 706 as final agency action, as if it had been made by
the agency itself.

214 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The award or decision of [an arbitrator] shall be binding and
conclusive, and shall not be overturned except for arbitrary
or capricious abuse of the [arbitrator's] discretion. 201

The scope of review under PBGC is more complicated. One part of the
statute indicates that the arbitrator's findings of fact are to be presumed correct
subject to rebuttal only by a clear preponderance of the evidence. 202 This would
appear to provide for de novo judicial determination of issues of law and a review
of facts under a "clear preponderance of the evidence" standard. The matter is
confused, however, by another section of the Act which directs that, to the
extent consistent with the Multiemployer Pension Plan Amendments Act of 1980,
the awards are to be enforced under the limited provisions of the United States
Arbitration Act. At least one court has held that only the limited scope of
review provided commercial arbitration Is available. 203 Most courts, however,
have Interpreted the Act as providing for the broader review.

One case draws an Important analogy between the arbitration and admini-
strative agencies. 204 n argues that "judicial deference to the arbitration process
[under the Act] Is mandated by the same policies that underlie the principles of
judicial deference to administrative agencies. "205 Thus, the decisions are
reviewable, like those of an agency, to determine whether the applicable law was
correctly applied and whether the findings comport with the evidence. Like an
agency, the arbitrator will be someone skilled In pension and labor matters and
thus likely to fashion a resolution superior to a court In matters within that
expertise.

An MSPB case wrestled with the relationship between an arbitration award
and the court In words reminiscent of the origins of the "hard look" doctrlne:206

For judicial deference to arbitral decisions to have meaning-
ful application, the reviewing court must be confident that
the arbitrator has undertaken a thorough review of each
aspect of the ... action. 207

Thus, the standard that has evolved In several of the administrative arbitra-
tion programs Is for a court to review an award as if it were a decision of an
agency. This standard may be appropriate In those cases where the arbitration Is

201. 40 C.F.R. Sec. 305.51; 42 U.S.C. Sec. 9612(b)(4)(G).

202. 29 U.S.C. Sec. 1401(b)(2), (c).

203. Washington Star Company, v. International Typographical Union Negotiated
Pension Plan, 729 F.2d 1502 (D.C. Clr. 1984).

204. lAM National Pension Fund Benefit Plan C v. Stockton TRI Industries, 727
F.2d 1204 (D.C. Clr. 1984).

205. M. at 1207.

206. Greater Boston Television Corp. v. FCC, 444 F.2d 841 (D.C. Clr. 1970), cert
den. 403 U.S. 923 (1971).

207. Local 2578 AFGE v. GSA, 711 F.2d 261, 267 (D.C. Clr. 1983).

DISPUTE RESOLUTION PROCEDURES 215

mandatory,208 in that it is the only means available for resolving the dispute. In
that case, the fuller judicial review may be an important protection. Even in this
case, however, the courts should recognize the benefits that were supposed to be
derived from the arbitration scheme, as opposed to reliance on administrative
adjudication under the APA, and hence accord deference to the arbitral award or
some other form of limited review so long as there is an indication of the proper
standards' being applied. 209 Perhaps, the proper standard of judicial review
should be no different than that of agency action before it became more intru-
sive: a rational basis test.

VI
CONCLUSION WITH RESPECT TO ADMINISTRATIVE ARBITRATION

Some of the administrative arbitration programs track their private sector
analogs quite closely. The Commodity Futures Trading Commission's program, for
example, applies to cases where time and transaction costs probably outweigh the
need for procedural rigor, and the decisions are final. 210 other programs,
however, do not fi:^ so well. The FIFRA program, for example, has the finality
normally accorded arbitration, but it would appear that at least in some instances
a large amount of money would be at stake and there are no guidelines for how
the decision will be made. Moreover, that lack will probably not be rectified by
the expertise of the arbitrator. Some norm — whether through statutory
prescription, agency rule, or developed common law -- would be in order. Were
it established, the matter would then be better suited for arbitration since it
would be more a matter of accounting or otherwise applying existing criteria. In
either event, the margin for error would be substantially reduced. As it stands,
any need for expedition probably does not outweigh \he need for a standard.

Most of the administrative arbitration programs have two significant
differences between them and traditional arbitration: First, this use is not
voluntary, either before or after a dispute has arisen, but rather it is the only
available means of making the decision. 211 Second, the greatest difference
between most of the administrative arbitrations and private sector commercial
arbitration is that the arbitral award is subjected to a scope of jucm^ial review
very similar to that of an administrative action, even when the award itself is not

208. Mandatory arbitration seems inappropriate except in those cases when the
benefits of a trial type hearing are clearly and substantially outweighed by
the need to (1) save time or other transaction costs or (2) have a technical
expert resolve the issues. Otherwise, the "arbitration" is really stripped
clean adjudication and the hallmark of arbitration — its voluntariness — is lost,

209. Devine v. White, 697 F.2d 421 (D.C. Cir 1983).

210. Compare this with the criteria at notes 63-67.

211. Moreover, this relationship between the courts and the arbitration is
different from that of typical court annexed arbitration where there is a
trial de novo before the court, sometimes with disincentives against frivolous
appeals.

216

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

an agency order. 212

Even though each program differs from the others, what seems to be
evolving Is a form of "administrative arbitration" In which the agency Is at best
passive. The adjudication -- In the form of the arbitration -- Is outside the
agency, but the relationship between It and the court is similar to that of the
court and an agency with respect to Informal adjudication. Once that Is re-
cognized, It provides a new tool for addressing a range of Issues that do not need
the full rigor of APA trial type hearings but more judicial oversight than
customarily applied in arbitration. Most seem to contemplate that the decision
Itself will be relatively narrow and able to apply existing, well defined stan-
dards.213

Some of the other programs are only variants of the modified procedure that
have been used previously. 214 jn these, there is very little that is new. In the
others, however, an interesting hybrid has been born that may have potential for
substantial growth.

Unfortunately, "arbitration" is a sufficiently pliable term that it can be used
to describe virtually any process in which a third party makes a decision. It
would be helpful if there could be concurrence on some minimal criteria a
program must have before legitimately being called "arbitration" even in the
administrative sense. A first cut at that might be:

abbreviated discovery;

parties' participation in the selection of the arbitrator;

application of a pre-existing norm that is defined by either statute or a
rule issued by the implementing agency;

once norms are applied, discretion Is relatively narrow;

strict time limits for decision;

abbreviated decision, with a discussion of its factual and legal basis but
no findings;

limited review. Arbitration Act or designated as "arbitrary and capri-
cious" but with a recognition of the nature of the process as defined In

212. Some courts have said with respect to the PBGC program that the arbitra-
tion is a form of "exhaustion" of remedies that is a precursor to a judicial
determination. See, e.g. Peick v. Pension Benefit Guaranty Corp., 742 F.2d
1247 (7th Cir. 1983). Even with this perspective, however, the arbitration is
the assigned first step In the decision process.

213. Superfund. Trustees of the Western Conference of Teamsters Pension Trust
Fund V. Thompson Building Materials, Inc., 749 F. 2d 1396 (9th Cir. 1984).

214. Edles, The Hearing Requirement in the 1980s, 31 Fed. Bar N and J 435 (1984).

DISPUTE RESOLUTION PROCEDURES 217

the criteria. 215

Since these procedures are more limited than those provided by the APA, the
process should be used only where the general criteria of arbitration are met. 216

VII
AGENCY OVERSIGHT OF PRIVATE DISPUTE RESOLUTION MECHANISM

Two basic, structural forms of administrative arbitration emerge from the
preceding analysis: (1) Programs that are explicitly within the agency itself and
are used to resolve issues that would otherwise be decided under the customary
agency processes. 217 (2) Programs that decide issues that arise because of agency
action, or closely affiliated with it, but which are not actually a part of the
agency;218 while distinct, they can be viewed in some ways as "associated" with
the agency. A third model of administrative arbitration -- or, more accurately,
administrative dispute resolution -- is where the agency supervises a dispute
resolution mechanism ("DRM") that operates as a part of a private organization.

A number of programs require, or permit, private organizations to establish a
forum — a DRM -- for reviewing complaints or other issues that arise with
respect to some particular activity. The circumstances are such that if such a
program were not established, the agency itself might be required to hold a hear-
ing to resolve the matters presented. Under these programs, the agency may
specify minimal procedures that must be followed by the private organization219
and it will review how well the process is working, but it does not typically sit
in review of any individual decision.

The Magnuson-Moss Warranty Act220 for example is administered by the
Federal Trade Commission and encourages warrantors to establish procedures to
resolve disputes concerning warranties fairly and expeditiously. 221 The Act
requires the FTC to issue rules prescribing the minimum requirements for a DRM
to qualify for special treatment. If such a program is established, a complaining
consumer must first turn to it before proceeding to court or other remedy. 222 ^
DRM is required to be independent of warrantor; have procedures that minimize

215. Thus, the court should assure itself that the arbitrator applied the right
norms and performed in accordance with the requirements, but it would not
attempt to force the arbitrator to replicate either a judicial or APA trial
type hearing.- In either case, the benefits would be lost.

216. See supra, at notes 63-67.

217. MSPB, CFTC.

218. FIFRA, Superfund, PBGC.

219. For example, see discussion of Medicare procedures in text associated with
notes 130-134, supra.

220. 15 U.S.C. §§ 2301-2310.

221. 15 U.S.C. §

222. 15 C.F.R, § 703.

218 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

burdens on the consumer; be financed by the warrantor; and be designed to
achieve the basic goals of speed and fairness. 223 These programs can obviously
be massively large. The Better Business Bureau, for example, operates the

program for some of the auto companies and processes in excess of a quarter of a
million disputes over automobile warranties per year. 224

Programs such as these are caught in a dilemma. On the one hand the
procedures used by the DRM must be sufficiently rigorous to provide confidence
on the part of the users that they will receive a fair hearing. On the other
hand, if the procedures are too stringent, there will be no incentive to establish
them -- either because they would be too expensive to operate or because they
would not offer an attractive alternative to other available m^ans of resolving the
disputes. The tension between the two needs is clear and has been the subject of
controversy over the years. 225 Several states have become dissatisfied with the
process and have passed "Lemon Laws" going beyond the FTC's minimal proce-
dures.226 The Fxc has recently begun a negotiated rulemaking to review and
revise Its rules. 227

What Is needed for such a program Is to strike the delicate balance of
providing an Incentive to establish a fair and effective program228 and an
Incentive to use the process as opposed to others that may be available -- or to
ensure that it Is Indeed fair and effective If those affected are forced to use It
at least In the first Instance.

The FTC also entered Into a consent decree with General Motors In settle-
ment of Its allegation that GM had failed to notify customers of high failure rates
of certain automobile components and that constituted a violation of Section 5 of
the Federal Trade Commission Act. 229 instead of fighting the matter through a
trial type hearing before the agency Itself and on through the courts, the
Commission entered Into an agreement with GM whereby It would establish a DRM
— the Better Business Bureau -- to determine whether a particular car is afflicted
with the problems and what should be done to rectify the matter. Under the
process, the BBB attempts to mediate ari agreement between the dealer and the
customer and, falling satisfaction at that point, the Issue Is arbitrated.

The process was criticized both on the grounds that a refund should be

223. Appendix III.

224. Testimony of Dean Determan at ACUS Hearings, supra, note 49.

225. See, Rossi, Incentives for Warrantor Formation of Informal Dispute Settle-
ment Mechanisms, 52 U.S.C. L. Rev. 235 (1978); Greenburg and Stanton,
"Business Groups, Consumer Problems: The Contradiction of Trade Associa-
tion Complaint Handling," in L. Nader, No Access to Law (1980) at 193.

226. E.g. Connecticut.

227. 51 Fed. Reg. 5205 (Feb. 12, 1986).

228. One person who is familiar with the effect of the Magnuson-Moss Act's
"exhaustion" requirement argued that It was often not an Incentive at all
because It raised other forms of legal uncertainty and potential liability.

229. In the Matter of General Motors Corporation, Dkt. No. 9145; see Appendix III.

DISPUTE RESOLUTION PROCEDURES 219

provided generally to all owners of the affected cars — whether or not they
displayed any of the symptoms — and that the mediation entailed a burdensome
extra step that would likely not prove effective since the customers had already
tried and failed to reach agreement with the company. BBB has reported that
nearly 90% of the cases in one test sample were settled by mediation, however. 230

Another major example of an agency's oversight of private dispute resolution
mechanisms is the Securities and Exchange Commission relationship with the
DRM's of the self-regulatory organizations such as the exchanges and the
National Association of Securities Dealers. 231 The Commission must approve
particular rules that are adopted by the SRO's, some of which deal with their
mechanisms for resolving issues that arise through their actions. The Commission
deferred developing rules establishing a nationwide system for resolving disputes
between broker-dealers and their customers when the industry organized the
Securities Industry Conference on Arbitration which in turn drafted a Uniform
Code of Arbitration. The code has been adopted by all ten of the SROs and the
Commission. As of 1984, the SRO's had resolved almost 5,000 cases. 232

Other examples of the private DRMs that are overseen by agencies are the
Medicare procedures discussed above233 and medical ethics panels in hospitals. 234

Supervised DRMs can provide particular, specific decisions that can serve in
lieu of a general regulation. 235 \q a defense against what it fears may be more
intrusive regulation, industry frequently argues that it will provide needed
safeguards, and hence that additional regulation is not needed. Even if the
industry developed a satisfactory rule, it will not be effective unless those
affected by it have some opportunity to enforce it and that will likely require a
means for resolving disputes that arising under the program. These would entail
determining whether, in a particular instances, the rule was broken; whether it
applies at all; whether it takes into account appropriate considerations; what
damages someone sustained; and so on, raising all the issues that arise in an
administrative program. One means of dealing with this situation is to encourage
the self regulation, but require the establishment of a DRM to resolve the issues
that will inevitably arise. Otherwise, either an agency or court will have to
resolve the issues or the program will provide a privilege and not right, which of

230. Testimony of Dean Determan at ACUS Hearings, supra note 49. The process
has been controversial however. See, FTC, Consumer Group Clash over GM
Program, Washington Post, p. E3 (October 25, 1985) which quotes the Center
for Auto Safety as arguing "that the program is 'a disaster for consumers'."
The Center alleged that the reviews of the program have not taken suffi-
cient account of consumers who did not know about the program or who
gave up before reaching a final resolution,

231. See Appendix III for a fuller discussion.

232. Katsoris, The Arbitration of a Public Securities Dispute, 53 Fordham L. Rev.
279, 284 (1984).

233. See text accompanying note 130-134 supra.

234. See, e,g,, 50 Fed, Reg, 14,878 (1985) for regulations that implement the Child
Abuse Amendments of 1984, P, L, 98-457.

235. Harter, Dispute Resolution and Administrative Law, supra, note 76,

220 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

course Is very different from the regulation sought to be forestalled.

Several issues need to be considered and balanced when establishing a DRM
that is overseen by an agency: What the incentives are to establish the program
in the first place -- why would the private organization want to do it; what are
the alternatives to doing so. Secondly, why would those affected, such as
consumers, want to use it instead of some other process available. Or, if its use
Is mandatory, then the agency will need to assure the public that minimally
acceptable procedures will be followed. ^36 Finally, the agency needs to develop
an enforcement mechanism by which it will oversee the execution of the proces-
ses. That generally means the agency not an individual appeal, but that it will
review how well the system is working overall to determine whether the minimal
procedures are being met and whether the procedures should be modified.

vni

MINITRIALS

Its creators called it an "information exchange", but a New York Times
headline writer in August 1978 found "mini-trial" to be more descriptive and the
name stuck. The writer was reporting the quick settlement procedure designed
by lawyers to untangle years of litigation in a patent case involving TRW, Inc.
and Telecredit, Inc. 237

The minitrial is a flexible, voluntary alternative means for the resolution of
complex disputes successfully used by businesses, governments, and various
interest groups. The minitrial was developed with the guiding hand of the Center
for Public Resources, a non-profit organization formed in 1979 by a group of gen-
eral counsel of well known Fortune 500 corporations. The new procedure has
made advances in commercial and consumer dispute contexts where reduction in
litigation expense is a major goal, and the idea has begun to spread to a wider
segment of the bar including the government contract field. NASA, the govern-
ment pioneer in the program, used a minitrial procedure to settle a multimillion
dollar satellite contract dispute with Spacecom and TRW. 238 T^e Justice Depart-
ment has run a minitrial pilot program in certain military procurement cases, and
the Army Corps of Engineers has established a pilot minitrial program in several
of its regions.

Minitrial Procedure.

The minitrial, sometimes referred to as a mini-hearing to indicate the
relatively informal nature of the process, is a highly abbreviated litigation process
in which litigants present the heart of their case to senior officials of the other
party who have authority to settle. "The primary purpose of the minitrial is to

236. What should be minimally required must necessarily depend on the nature of
the questions to be resolved. Thus, they process will depend on the subject
matter.

237. "Alternatives to the High Cost of Litigation", CPR, N.Y., N.Y., Special Issue
1985, p. 3.

238. 44 Federal Contracts Report 589.

DISPUTE RESOLUTION PROCEDURES 221

set a stage and create a momentum for settlement. "^^^ Typically the process
involves the "exchange of briefs or position papers with supporting documents,
oral presentations of facts and law to senior officials of the opposing parties,
some opportunity for questioning, and negotiation by the senior officials to
attempt to settle the dispute. "240 ^^ advantage of the minitrial is that it focuses
the attention and energy of executives on both sides of the dispute and forces
them to participate directly in the negotiated settlement. Another desirable
feature of the minitrial is its flexibility: the parties can tailor the essential
elements of the procedure to fit the litigation at hand.

Parties are motivated to adopt the minitrial procedure by several factors--
avoidance of high litigation costs, avoidance of adverse outcomes of litigation,
the need to return employees supporting the litigation to more productive activi-
ties, and the desire to maintain a reasonably cordial relationship between litigants
who may wish to continue doing business together in the future. ^41

The parties typically negotiate the groundrules at the outset and often
suspend or curtail discovery. This would suggest to parties, who have an eye on
the possibility of suspending normal litigation and attempting the minitrial, to
make a careful schedule of depositions. 242 Because the minitrial may be elected
before the end of discovery, the parties should depose those individuals whose
testimony will have the most substantial impact. 243

The minitrial is wholly voluntary so the parties must genuinely want to see
it used as a means of settlement for it to succeed. 244 Obviously the threshold
question for the parties to consider is whether the nature of their dispute lends
itself to the mini-hearing process. 245 one of the developers of the minitrial
offered the following observation on the decision of whether to use the process:

It may not be appropriate where precedent-setting issues of law and
witness credibility are the central issues and where the client has made
a business determination to roll the dice. It can, however, be tailored
to fit most large scale disputes involving mixed questions of law and
fact, particularly where issues of science and technology are important.
For most large, entrenched cases, the minitrial offers a better alter-

239. Minitrial Successfully Resolves NASA-TRW Dispute, The Legal Times, Monday,
September 6, 1982, p. 17.

240. Parker, Douglas M. and Phillip L. Radoff, The Mini-Hearing; An Alternative
to Protracted Litigation of Factually Complex Disputes, 38 The Business
Lawyer 35, November 1982.

241. Minitrial supra 233 at 17.

242. Id.

243. "Alternatives to the High Cost of Litigation", CPR, N.Y., N.Y., Special Issue
1985, p. 3.

244. Parker and Radoff, supra note 240 at 42.

245. Olson, Dispute Resolution: An Alternative for Large Case Litigation, 6
A.B.A. Litigation Sec. J. 22 (1980). cited in Parker and Radoff, supra note
240 at 42.

222 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

native to the more common practice of one side and then the other
occasionally tossing out a settlement offer. 246

Two obviously related questions to consider are whether one side will have
gained a tactical advantage if settlement Is not reached and what point in the
litigation process will be the most appropriate to conduct the minltrial.247
Parties should consider that despite a failure in settlement following the minitrial,
the process itself aids the parties in preparing and focusing the issues of their
cases for future full-blown litigation.

If the parties decide to use the minitrial, an important consideration is
whether to use a neutral advisor to moderate the discussion. 248 Most, but not
all, minitrials employ a neutral advisor with special expertise (often a retired
Judge) to "supervise the discussion and to furnish the parties with a nonbinding
evaluation of the most likely outcome of the dispute were it to wind up In
court, "249 j^ cases of highly technical disputes, some parties have found that the
Introduction of a neutral advisor causes additional expense and possible delay
because the advisor must become sufficiently educated. 250 j^ the NASA case
explained below, for example, the parties never seriously contemplated using a
neutral advisor. ^^1

Relatively short written briefs discussing the applicable facts and law are
usually exchanged prior to the minitrial. 252 More comprehensive briefs are
sometimes helpful or necessary In narrowing the issues In advance of oral
presentations. 253 j^ the NASA case, for example, the briefs were rather lengthy
and also were followed by a simultaneous exchange of written questions to be
responded to at oral presentation. 254

The hearing Itself usually lasts no more than two days for the parties to
state their cases (excluding extraneous Issues), offer evidence for their positions,
and field questions. 255 presentations can be made by lawyers, technical experts.

246. Parker and Radoff, supra note 240 at 42.

247. Id. p. 35.

248. Id. p. 43.

249. "Alternatives to the High Cost of Litigation", CPR, N.Y., N.Y., Special Issue
1985, p. 3.

250. Parker and Radoff, supra note 240 at 43.

251. Id.

252. Id.

253. Id.

254. Minitrial supra note 239 at 13.

255. Alternatives to the High Cost of Litigation, CPR, N.Y., N.Y., Special Issue
1985, p. 3.

DISPUTE RESOLUTION PROCEDURES 223

or a combination of both. 256 ^t the conclusion of the hearing, the negotiating
officers go off on their own to settle the dispute, with legal advisors standing by
for consultation. If they reach an impasse, and have proceeded before a neutral
advisor, the parties can request an advisory opinion on the likely outcome. The
advisory opinion often acts as a catalyst towards settlement. 257 with or without
a neutral advisor, any deadline set by the parties can contribute to lending a
sense of urgency to resolving the dispute. 258

Use by Government Agencies.

The growing movement in corporate and consumer disputes to save time,
money, and judicial resources through alternative dispute resolution techniques —
such as minitrials -- has slowly reached the government setting. 259 Exploration
of the new technique should be helpful since the government has experienced the
same rising litigation costs and interminable court delays as private parties.
Several perceived statutory and practical obstacles have impeded the government
in using creative dispute resolution methods, however. The minitrial may be
particularly well suited to overcome these obstacles. 260

One obstacle which makes government contract disputes distinct from
commercial litigation is the elaborate disputes resolving statutory procedure
mandated by the Contract Disputes Act of 1978.261 The statute applies to all
contracts entered into after March 1, 1979. A key provision of the statute
mandates that all government contracts include dispute clauses which set forth
procedures by which disagreements relating to the contract must be resolved. 262
The procedure requires the government to make a final written decision concern-
ing the disagreement with the contractor including all the facts and legal
conclusions which led the government to deny the contractor's claim. 263 Upon
receipt of the government's final decision, the contractor has three options: (1)
acquiesce; (2) appeal the decision to an agency board of contract appeals; or (3)
sue in the U.S. Claims Court. 264

Whether these statutory procedures are exclusive is a question which raises

256. Parker and Radoff, supra note 240 at 43.

257. Cong. Rec. S14707 (November 1, 1985).

258. Parker and Radoff, supra note 240 at 44.

259. Crowell and Moring Discussion Paper, Alternative Resolution of Government
Contract Disputes, p. 1.

260. Minitrial supra note 239 at 21.

261. 41 U.S.C. §§ 601-613 (Supp. IV 1980).

262. Minitrial supra note 239 at 19.

263. Id.

264. Id.

224 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

an Impediment to the government's use of the minitrlal technique. 265 pQp
example, In Davis and Moore, ^66 ^^g Interior Board of Contract Appeals held that
the government cannot submit to binding arbitration because of conflict with the
statutory procedures. ^67 jy^^ government's authority to settle and to devise
means of settling, however, has never been doubted because in fact a basic
purpose of the Contract Disputes Act was to promote more efficient resolutions of
disputes. 268

A second serious obstacle facing government use of expedited settlement is
"the natural inclination of agency officials to follow the book, in resolving
disputes, thereby theoretically avoiding congressional and public criticism. "269 a
plethora of organizations outside the agency review and second-guess any
settlement. Potential reviewers and possible critics Include oversight committees
of Congress, audit teams from the General Accounting Office, and the agency
Inspectors general, 270 ^g well as the general public. The use of mlnltrlals may
actually ease this problem, however. The process requires a written record
clearly documenting the issues of settlement, potential litigation risks are clearly
described by the legal positions set forth in the briefs, and the formality of the
procedure Itself may lessen criticism. "271

A third perceived constraint unique to the federal contracts context is the
question of settlement authority. Federal agencies have a rigid chain of command
and settlements must often be approved by the legal, financial, procurement
policy, and technical divisions of an agency. 272 Tentative settlements are often
upset by subsequent internal agency review. The minitrlal procedure may also
obviate much of this problem. In preparation for the minitrlal, the government is
forced to define the authority of the negotiation and the acceptable negotiating
position. The advance approval and "written authorization from the head of the
agency, empowering the representative on behalf of the agency to reach a
settlement, reduces the opportunities for overturning the settlement. "273

Finally, a related problem for the government is the question of settlement
funding requirements. 274 ^ negotiating officer for the agency obviously cannot
ultimately make settlement without the funds to cover it. Minitrlal requirements

265. Id.

266. IBCA No. 1308, 81-2 BCA 91 15,418.

267. Minitrlal supra note 239 at 21.

268. jd. S. Rep. No. 3173. 95th Cong., 2nd Sess. 119781.

269. Crowell and Morlng, p. 1.

270. Minitrlal Successfully Resolves NASA-TRW Dispute, The Legal Times, Monday,
September 6, 1982, p. 21.

271. jd.

272. jd.

273. jd.

274. Crowell and Morlng, supra note 259 at 6.

DISPUTE RESOLUTION PROCEDURES 225

in some ways relieve these problems by involving senior officials who have the
authority to approve "re-allotments". 275 Re-allotments can be made within the
agency to cover the financial needs for a particular settlement.

Despite the putative obstacles mentioned above, the government has already
begun exploring alternative dispute resolution ("ADR") techniques, such as
minitrials, because of several factors relating to litigation, some unique to
government and some particular to all litigants.

The most obvious catalyst for exploration of alternative resolution techniques
is the rising cost of litigation and the court delays which face all private parties
and with perhaps even greater force the government. 276 Disputes between
agencies and their suppliers has been the natural result of an increase of federal
procurement spending. 277 jn fiscal year 1982, for example, 1,273 cases were filed
with the Armed Services Board ("ASBCA"), the largest administrative board of
contract appeals, while only 974 cases were filed the previous year. 278 Only 95
of the 1,594 pending cases in 1982 were being processed under optional expedited
procedures. 279 Although the administrative appeals boards were designed as a
streamlined alternative to court litigation, the costs are still substantial because
of the formal procedures adopted by the boards. 280 Minitrials have resulted in
substantial savings for the parties. In the NASA case, which was the first
minitrial used in the context of government procurement, one estimate suggested
that the savings "were probably more than $1 million in legal fees alone. "281

Another factor making the minitrial particularly attractive to the government
is related to the required procedures of the Contract Dispute Act of 1978 itself.
The required disputes clause in government contracts requires that federal
suppliers continue performance, notwithstanding a dispute with the government.
The contractor may not stop work and immediately challenge in court an agency
order or contract interpretation. 282 Another mandatory clause in all government
contracts, the "changes clause", also allows the government to insist upon changes
to the contract during performance. 283 Those allowable government changes
would of course be considered breaches of contract in a commercial setting. 284
In exchange for those two conditional clauses, the government must pay a fair

275. Minitrial supra note 239 at 21.

276. Crowell and Moring, supra note 259 at 2.

277. Id.

278. Id.

279. Id.

280. Id., at 3.

281. Eric D. Green, Boston University Law School Professor in 44 Federal
Contracts Report 591, September 23, 1985.

282. Crowell and Moring, supra note 259 at 4.

283. Id.

284. Id.

226 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

amount for additional work. 285 Problems arise, however, when the government
does not consider one of its directions as being a "change" in the contract. The
contractor must continue to perform and leave for later the question of who will
bear costs. '^^^ An efficient, expedited resolution of the dispute by minltrial
settlement will lessen the adversarial roles between the government and its sup-
plier -- "a phenomenon that serves the ongoing business relationship of the
parties to government contracts. "287

When and for Which Cases, Should the Government Consider Using Minitrials?

In Its pilot program for using minltrial techniques to resolve disputes, the
Justice Department has directed government attorneys that cases selected for
minltrial should be at an early stage of litigation. 288 jy^^ cost savings of a
minltrial held after discovery has already been completed may not be signifi-
cant.289 In addition, the case should probably involve more than $250,000 to
justify expenditure of at least a full day's time of high-level company executives
and government officials. 290

The minltrial technique lends itself well to cases Involving highly technical
concepts and disputes involving mixed questions of law and fact. 291 The NASA
case was a good candidate to test the minltrial for this reason. The government
also may wish to consider using the minltrial method in cases Involving classified
defense contracts. The informal settlement can be conducted without an eviden-
tiary hearing in open court that might be harmful to the national security. 292

The minltrial Is likely less appropriate where witness credibility Is a major
factor. The technique is also probably not justified in cases where questions of
law can quickly be resolved through summary judgment. 293 Finally, the minltrial
would not be extremely effective for the government in litigation undertaken to
Implement policy. 294

285. Id.

286. W.

287. Minltrial Successfully Resolves NASA-TRW Dispute, The Legal Times, Monday,
September 6, 1982, p. 19.

288. 44 Federal Contracts Report 591.

289. Id., at 589.

290. Id., at 590.

291. jd.

292. Crowell and Moring, supra note 259 at 8.

293. jd.

294. Oliver, Dale E., Crowell and Moring, Alternative Dispute Resolution In
Government Litigation; Remarks before the First Judicial Conference of the
United States Court of Appeals for the Federal Circuit, p. 1.

DISPUTE RESOLUTION PROCEDURES 227

The following is a brief review of two government cases successfully
resolved through use of minitrial techniques.

NASA Minitrial.

The first reported use of the minitrial technique to resolve a government
contracts dispute was in 1982 when NASA, Space Communications Co. (Spacecom
-- prime contractor), and TRW, Inc. (TRW — the subcontractor) settled a
multi- million dollar technical dispute. 295 jhe dispute involved one of NASA's
communications satellite programs.

Nature of the Dispute. In December 1976, NASA awarded a major satellite
contract to Spacecom for the production of a tracking and data relay satellite
system (TDRSS) and related services to be provided over a ten year period. 296
The satellites were to be deployed in orbit by a space shuttle and provide a
telecommunications link to an earth station. 297 jhe contract had an initial price
of $786 million. 298

TRW, Inc., the principal subcontractor, was responsible for providing system
engineering, building the communication satellites and providing the necessary
software. 299

By the fall of 1981, the commencement of the TDRSS services had been
rescheduled because of delays in production of the space shuttle; the contract
price had nearly doubled because of the delays and program changes; and several
contract disputes had arisen between Spacecom and NASA. 300 fhe disputes,
ultimately resolved by the minitrial, arose when NASA issued two letters of
direction to the contractors in early 1979. The letters sought to obtain for NASA
certain capabilities that it believed were within the scope of the contract. 301
Spacecom and TRW maintained that the instructions constituted new work which
entitled them to increased compensation. 302 Spacecom and TRW appealed the
final decision of the contracting officer to the NASA Board of Contract Appeals.
The consolidated appeal was one of the largest ever filed with the Board. 303
These appeals commenced the litigation.

Scope of Litigation. The litigation involved a series of complex issues

295. 44 FCR 590.

296. Minitrial supra note 239 at 13.

297. 44 FCR 590.

298. Parker and Radoff, supra note 240 at 37.

299. Minitrial supra note 239 at 13.

300. Parker and Radoff, supra note 240 at 37.

301. 44 FCR 596.

302. Minitrial supra note 239 at 13.

303. 44 FCR 596.

228 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

relating to the Interpretation of the TDRSS performance specification In a variety
of highly technical respects. 304 "The merits of the Issues involved Intricate
questions of computer capability, electronics, and the laws of orbital mechanics,
as well as traditional questions of contract interpretation. "305

The complaint and answers were filed in September 1979 and February 1980,
respectively. 306 Shortly after discovery began, the parties suspended the pro-
ceedings for three months to pursue traditional settlement negotiations. 307
Settlement failed. The parties renewed litigation and engaged in massive docu-
ment discovery Involving the reproduction of approximately 33,000 pages of
government files and 72,000 pages of the contractors' files. 308

Depositions commenced In the summer of 1981.309 Although the contractors
sought 11 depositions and the government sought 43, only 5 depositions actually
took place. 310 By September, the highly technical examinations of the witnesses
"consumed 3100 pages of transcript. "311 The widening scope of discovery required
the Board to push back the hearing date several times and it was estimated that
trial was still at least a year away. 312

In the fall of 1981, Spacecom approached NASA with the suggestion to
undertake settlement discussion again. The parties agreed on a minltrial after
certain preconditions were set by the parties: (1) the contractors would submit a
cost proposal with a breakdown of the six major issues of appeal; (2) each side
would give written authority to settle to an appointed negotiator; (3) deadlines
and rules of conduct would be agreed upon; and (4) discovery would be suspended
during the minltrial. 313

Motivations to use the MInitrial. First, both parties were concerned with
costs. They had already found It necessary to conduct detailed discovery and
anticipated substantial additional discovery. The parties had proposed calling for
the depositions of forty-five additional government and contractor witnesses over
the next ten months. 314

304. Parker and Radoff, supra note 240 at 37.

305. Id., p. 38.

306. W.

307. Minltrial supra note 239 at 13.

308. Parker and Radoff, supra note 240at 38.

309. Id.

310. Minltrial supra note 256 at 13.

311. Parker and Radoff, supra note 240, at 38.

312. Minltrial supra note 239 at 13.

313. M., p. 13.

314. Parker and Radoff, supra note 240 at 38.

DISPUTE RESOLUTION PROCEDURES 229

Second, the parties were motivated to tighten the schedule. A trial date
was not even in sight with delays attributable to the complexities of the case,
problems in coordination between the prime and subcontractor, the difficulty of
securing people for litigation who were also needed in the TDRSS program, and
the shortage of people allocated to the case by the government. 315

A third concern of both NASA and the contractor was the uncertainty of
result. Both parties were aware that the difficulty of making a clear, comprehen-
sive and persuasive presentation of such complex issues created an unusual
uncertainty in the outcome. 316

Another motivation for the minitrial was the parties' need for continued
cooperation. Litigation can strain business relations between parties. In this
case, the parties were required to continue working together to deploy the satell-
ite successfully, a national asset. They also wanted to release key personnel from
the litigation process to resume channelling their energies into the program. 317

Finally, the parties felt the need to address the merits and involve senior
officials. Spacecom realized that previous settlement discussions had not ad-
dressed the merits of the issues nor involved face-to-face meetings of senior
management. 318 it felt that NASA's willingness to invest such time and money
into discovery suggested that NASA was persuaded that the government's case was
meritorious. 319 The contractors felt that a settlement could only be reached if,
through a minitrial, senior management of NASA was exposed to the contractor's
best case and both parties were able to address the merits. 320

The Procedure. Before proceeding, the parties agreed that:

• Litigation would be stayed during the minitrial, 321 but would resume if
no settlement were reached.

• The contractors would submit a formal claim covering cost of perfor-
mance and proposed allocation of cost of each legal issue. 322

• The parties would simultaneously exchange briefs setting forth their
factual and legal positions. All cited documents were to be included in

315. Crowell and Moring, supra note 259 at 8.

316. Parker and Radoff, supra note 240 at 39.

317. Id.

318. Id.

319. Id.

320. Id.

321. Id., p. 40.

322. Id.

230 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

appendices. 323 no reply briefs would be filed.

• Shortly after the briefs were exchanged, each party would submit
questions to be addressed by the other during Its oral presentation. ^24

• The trial was to be one day. Each side was to have three hours to
make a presentation and could use whatever combination of lawyers and
engineers It thought appropriate In making the presentations. ^25

• Presentations were to be made to senior officials representing each
party. An associate administrator of NASA and the director of Goddard
Space Flight Center for NASA; a VP of TRW and the president of
Spacecom. for the contractors. Only senior officials would ask
questions. 326

• Settlement negotiations would then begin.

In the actual minitrial, the oral presentations were made exclusively by
lawyers. 327 Also, the parties chose not to use a neutral advisor because of the
complex technical issues in dispute. 328

Settlement negotiations began the day after the hearing "behind closed
doors" at NASA headquarters. 329 Only the four principal negotiators directly
participated in the negotiations but had advisors and legal counsel stand by to
discuss positions. 330 jy^^ parties had agreed to a groundrule of limiting the
settlement negotiations to a single day but decided that an additional day was
justified by the progress made. The parties settled after their second day of face
to face meetings and reached agreement on the claim as well as unrelated dis-
putes.331 All claims and related issues amounted to well over $100 million. 332

Army Corps of Engineers Use of the Minitrial

In the last two years, the Corps of Engineers has used the minitrial

323. 21' NASA submitted a 64 page brief with a 43 document appendix, while the
contractor's brief consisted of 81 pages and an appendix of 79 documents.

324. Minitrial supra note 239 at 13.

325. W.

326. jd.

327. Id.

328. Crowell and Moring, p. 10.

329. Parker and Radoff, p. 41.

330. Minitrial supra note 239 at 17.

331. jd.

332. Id.

DISPUTE RESOLUTION PROCEDURES 231

procedure twice to resolve construction contract claims. ^^^ Spokesmen for the
Corps have said that the type of case most suited for a minitrial is one involving
a "highly complex factual dispute in which the contractor's arguments have some
merit. "334 fhe Corps looks for cases in which there is a possibility that a board
of contract appeals will sustain the contractor's position where there is room for
the government to settle. 335

Industrial Contractors. The Corps first used the minitrial to reach

settlement on a $630,000 construction contract claim, 336 fhe claim was made by
Industrial Contractors, Inc. that the government had "improperly accelerated
performance on its construction contract. "337 jhe parties agreed to use a mini-
trial. The contractor's president and the Corps' division engineer each presented
his claim in three and one half hours. 338 Following an appraisal of their cases
by a neutral advisor, former Claims Court Judge Louis Spector, the parties settled
after 12 hours of negotiation. 339

Tenn-Tom. The second case in which the Corps successfully used the
minitrial technique to resolve a dispute involved a $61 million construction claim
by Tenn-Tom Construction. 340 The Corps awarded a contract to construct part of
the Tennessee-Tombigbee Waterway, to Tenn-Tom, a joint venture of Morrison--
Knudsen Co., Brown and Root, Inc., and Martin Eby Construction Co. 341 The
contract was for excavation of 95 million cubic yards of earth. 342 The dispute
arose when the contractor sought a $44 million equitable adjustment based on
alleged differing site conditions. The contractor had experienced performance
difficulties because of drainage problems on site. 343 After receiving written
denial of the claim by the contracting officer, the joint venture appealed to the
Corps of Engineers Board of Contract Appeals, 344 increasing the claim to $61
million due to interest.

The parties agreed to a minitrial and chose Professor Ralph Nash, a GW

333. 44 FCR 502; 43 FCR 257.

334. 44 FCR 502.

335. Id., p. 503.

336. 43 FCR 257 in W^

337. Id.

338. jd.

339. Id.

340. In Re Tenn-Tom Construction, memorandum of settlement agreement, 8/23/85.
44 FCR 502.

341. 44 FCR 500.

342. jd.

343. Id.

344. Id.

232 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

professor, as a "neutral advisor. "345 xhe trial was held In Cincinnati on June
12-14, 1985.346 jhe principal officers for the parties were J. K. Lemley, Senior
Vice President of Morrison- Knudsen, for the contractors, and Division Engineer
Brig. Gen. Peter J. Offrlnger, for the Corps. 347 xhe parties presented their
cases on consecutive days, with a third day devoted to presentation of evidence
concerning quantum and for remaining questions. 348 gy agreement, the parties
reconvened on June 27, for presentation of further evidence and more questions.
They settled the next day. 349 xhe government agreed to pay Tenn-Tom $17.25
million in exchange for a release of all prime contractor and subcontractor claims
under the contract. 350

IX
SETTLEMENT TECHNIQUES

Agencies use a variety of techniques that are less structured and less formal
than minitrials to encourage the settlement of contested issues. The unifying
principle of all the processes Is that the parties make the decision themselves
through a negotiated agreement. That is, these procedures are unlike arbitra-
tion33l where someone makes a decision and imposes it on the parties.

Need for Structure to Facilitate Settlements

Settlements happen all the time. Most, no doubt, occur by "doing what
comes naturally." While successful in resolving many cases, an ad hoc approach
does not recognize settlement as a specific process that can result in both more
and better settlements. 352 Explicit recognition of their potential by the devel-
opment of procedures to induce them in appropriate situations353 ^^d to provide

345. Id. at 503.

346. Id.

347. ]d.

348. jd.

349. jd.

350. Id.

351. To a very real extent, however, non-binding arbitration Is a settlement
techniques since the parties return the authority to make the final decision
after award.

352. Testimony of Erica Dolgin of Environmental Protection Agency at ACUS
Hearing supra note 49. Ms. Dolgin observed that settlements have a life
span -- a beginning, a middle, and an end -- and that the procedures and
skills required for each phase may differ.

353. While It should be unnecessary to point out, but given the enormous
attention paid recently to managing dockets and using ADR techniques as a
means of reducing the backlog of trials, it bears emphasizing that not all

(continued...)

DISPUTE RESOLUTION PROCEDURES 233

for the participation of those who would be affected can help agencies handle
their caseloads and make fully satisfactory decisions with fewer resources than
would a more formal process. It is, therefore, helpful to establish procedures to
enhance the settlement process. Moreover, settlement procedures can help
alleviate problems peculiar to the government in settling cases. 354

As in any bureaucracy, the distance between those on the line and those
with decisional authority can be a major inhibition to negotiating a settlement.
The employee who is handling a particular matter may lack guidance as to the
agency's policies concerning settlement, and hence may be reluctant to engage in
discussions simply because he or she is unclear whether the agency has the power
to settle^SS ©r as to what would be acceptable. 356 Qr, as a result of the same

3 5 3. (...continued)

cases can or should be settled. The thesis of this paper is that trials are
one, but only one, means of making decisions, and that other techniques may
be more appropriate in particular circumstances. ADR techniques are a
positive means of resolving important issues, not a second best alternative to
the "real thing."

Formal decisions become public goods that guide future conduct and provide
a means of ensuring that the public welfare is achieved. For example, if
someone was the victim of severe discrimination, the public may demand a
full vindication of the violation of the public's standards, even though the
individual may be willing to settle for less. There is, therefore, some public
policy against settlement, although its full reach and reason is not always
clear.

The result, however, is that agencies and parties should always consider the
matter in perspective and recognize that some issues should be resolved in a
formal, public manner because they involve issues transcending the immediate
parties. See Edwards, Fiss, and Schoenbrod, supra note 66. On the other
hand, there seems to be no particular reason for believing a federal judge is
the only one able to pronounce justice in such cases and that properly
structured and supervised settlements may often do a better job of rectifying
the problem.

354. Rosin, EPA Settlements of Administrative Litigation, 12 Ecology L. Q. 363 (1985).

355. Former Attjorney General William French Smith observed,

government lawyers sometimes are reluctant to use alternative
means of dispute resolution because it is not clear whether Con-
gress has authorized such means. Where Congress has, it still may
be unclear who in the agency has power to approve their use or
how an agency pays for the nonjudicial forum.

Smith, Alternative Means of Dispute Resolution; Practices and Possibilities in
the Federal Government, 1984 Mo. J. of Dis. Res. 9, 21.

356. Richard Robinson, Director, Legal Enforcement Policy Division, Environmental
Protection Agency, testified at the ACUS Hearings that settlement techniques
are not used frequently because there are too many layers involved in
getting permission to use a new approach and, even if granted, the official

(continued...)

234 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

phenomenon, a proposed settlement may be subjected to multiple layers of review
within the agency. ^^^ In that case, those with whom the agency Is negotiating
may be reluctant to be forthcoming since the tentative agreement may be upset as
it wends Its way through the agency. People negotiate to reach a binding
resolution of the controversy. Hence, if the agreement that was crafted after
days of pressing discussions does not have a fairly good chance of being accepted,
parties have a significantly lessened Incentive to bargain.

These problems with settlement can be addressed by providing those who
would normally negotiate with the public with guidelines as to the agency's
policies concerning settlements. ^^^ Another means of addressing similar problems
is for the agency to make lines of authority clear and provide a means for
Involving policy-level officials in the decisions as they mature, so that once the
agreement is struck there is a reasonable likelihood that It will be upheld.

Another inhibition to settlements -- one certainly not limited to government
-- is that the parties become overly convinced of the strength of their respective
cases. Since each believes he or she has a winner, and hence a high BATNA,
they also see little to be gained in settling, unless of course the other side sees
the light and capitulates. That is not conducive to settlement. Thus, another aid
in the settlement process is to provide some sort of "reality check" on all parties.
This is some means of helping a party assess the strength of its case in a rela-
tively honest, straight forward way so that they can put its settlement potential
into perspective. The minltrial, for example, is designed to use a neutral advisor
who will render an Informal, non-binding opinion should the executives fail to
negotiate an agreement. ^^^

Yet another problem facing government officials in settling cases is debili-
tating second guessing. ^^0 Direct negotiation among those affected customarily

3 56. (...continued)

is likely to feel he or she will not receive enough credit for using a new
approach. Thus, it is easier and safer to stick with traditional litigation.
Indeed the government has never used ADR in an enforcement case.

357. See discussion supra at note 272.

358. Testimony of Kay Mc Murray, Director, Federal Mediation and Conciliation
Service, at ACUS Hearings, supra note 49.

The Attorney General recently issued guidelines to executive branch agencies
concerning settlements. It cautions agencies against yielding future discre-
tion in settlements and provides examples of the types of settlements the
Department of Justice will oppose. While perhaps negative in tone, it does
provide agencies with guidance they can take into account when initiating
settlement discussions. It is far better to know of the limitations at the
early stages of negotiation than having a fully developed tentative agreement
knocked down.

359. See discussion supra at note 33.

360. Those who manage the government's litigation may also be reluctant to use
informal dispute resolution processes because of a fear that they will be

(continued...)

DISPUTE RESOLUTION PROCEDURES 235

relies on the parties' self interest for its integrity; indeed, the ability of those
affected to actually make the decision is one of the most attractive aspects of
direct negotiations. Thus, whether or not the agreement is a "good deal" for any
one party can be judged by comparing it to that party's goals and what might
have occurred if some other process for reaching a decision were followed. The
difficulty with using direct negotiations when the government is a party is that
the government's own goals may sometimes be unclear. Thus, for example, it may
not be clear in the abstract whether a settlement was wise under the circumstan-
ces because the government's case was weak, or the official wanted to achieve
some other end,361 or whether the settlement inexplicably gave too much away.
The potential for second guessing an official can have a debilitating effect on
negotiations in some controversial areas. In that case, it may be that the agency
would want to establish a panel of senior officials or a group of neutral ad-
visers,^^2 publish the settlement in the Federal Register for comment, ^^^ or some
other means to ensure the integrity of the decision and to curtail pernicious
second guessing.

Overview of Technlque8364

The Environmental Protection Agency drafted, but has not published rules to
encourage the negotiation of test rules under the Toxic Substances Control Act by
providing procedures leading to a "consent agreement" that will have the effect of
an EPA rule.^^^ The proposal provides "EPA intends to use enforceable consent
agreements to accomplish testing where a consensus exists among EPA, affected
manufacturers and/ or processors, and interested members of the public concerning

360. (...continued)

criticized. For certain issues, such as public health and safety, the percep-
tion remains with some that private, informal hearings are inadequate, and
that public officials who allow such hearings may be abusing their power.

Smith, supra note 355, at 21.

361. There is always the possibility that someone will attack a settlement as
motivated by the government official's seeking beneficial employment or
otherwise currying the favor of the one with whom he or she is settling.

362. See, Railwa,y Labor Act, § 2, Ninth; Switchmen's Union v. National Mediation
Board, 320 U.S. 297 (1943).

363. The Department of Justice and the Federal Trade Commission publish notices
concerning proposed mergers.

In addition to providing information for the agency's consideration, the
publication can also help diminish allegations of backroom deals since the
world at large will know that the decision is being made and what its
contours are.

364. See Appendix I for a survey of settlement techniques used by administrative
agencies.

365. Draft of August 7, 1985 of a notice of proposed rulemaking.

236 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

the need for and scope of testing. "366 procedures have also been recommended
for using negotiation to resolve complex Superfund matters. 367 Ep\ has Issued
guidelines for settling enforcement actions. 368

The Federal Energy Regulatory Commission uses as "settlement Judge" to help
the parties settle a case.3o9 The Chief Judge has the authority to designate an
ALJ who is not assigned to a case to meet with the parties In an effort to clarify
and narrow the issue and to see if they can settle the matter. The settlement
judge does not have the authority to Impose a decision, and because the judge is
not the one who will try the case, the parties are likely to feel freer to be more
direct and open In attempting to reconcile their differences. One judge indicated
that he was able to review the file and provide a fairly accurate appraisal of the
case for certain types of matters, and that had a salutary effect on the parties
by putting their case into perspective. To an extent, the settlement judge acts a
bit like a mediator and a bit like the neutral adviser in a mlnitrial by giving his
reaction to the case.

Agencies have also established a number of explicit mediation programs. The
Secretary of Commerce mediates disputes under the Coastal Zone Management Act
between a federal agency and the affected costal zone state. 370 The Office of
Ocean and Coastal Resources Management mediates several disputes per year
between state agencies and federally licensed activities. Complaints over age
discrimination are mediated by the Federal Mediation and Conciliation Service, 371
and the Equal Employment Opportunity Commission seeks to reconcile differences
over unlawful employment practices. 372 The Grant Appeals Board of the Depart-
ment of Health and Human Services provides a "two track approach," one of
which is mediation; this process Is the subject of a separate, comprehensive study
by the Administrative Conference.

The criteria for determining whether an Issue Is likely to be resolved
through negotiation were developed In ACUS Recommendation 82-4.373 while the
recommendation itself focused solely on the prospects for negotiating regulations,
the criteria are applicable to issues of public policy generally. Briefly stated, the
criteria for deciding when a matter would lend Itself to a negotiated solution

366. Id.

367. ACUS Rec. 84-4; Anderson, Negotiation and Informal Agency Action; The
Case of Superfund, 1985 Duke L. J. 261 (1985).

368. See, e.g., 50 Fed. Reg. 5034 (1985).

369. Appendix I.

370. Appendix I.

371. For a discussion of FMCS's non-labor activities generally, see Barrett, The
FMCS Contribution to Non-labor Dispute Resolution, Monthly Labor Review
31 (August 1985).

372. 29 CFR § 1601.24.

373. Harter, Negotiating Regulations, supra note 1, Perrltt, Negotiated Rulemaking
In Practice, 5 J. Pol. Ana. & Mgt. 482 (1986).

DISPUTE RESOLUTION PROCEDURES 237

are:

.374

• The number of interests that must participate in the discus-
sions at any one time is limited to approximately 15-25;
others can be accommodated by means of "teams" or cau-
cuses".

• Each interest is sufficiently organized that individuals can be
selected to represent it during negotiations, or several
individuals together can span the range of interests.

• The issues are mature and ripe for decision; that is, they are
sufficiently crystallized that the parties can focus on them
directly.

• There is a realistic deadline; this may be an agency commit-
ment to move forward on its own if sufficient progress has
not been made in the negotiations.

• No party will have to compromise an issue fundamental to its
very existence.

• The outcome is genuinely in doubt, in that no party can
achieve its will without incurring an unacceptable sanction
from some other party; thus, the parties have reached a
stalemate or an impasse.

• The parties will commit themselves to negotiating in good
faith (which is not to say that they have to agree to yield
whatever other tools they have at their disposal to achieve
their ends).

Many of these provisions have direct applicability to deciding whether it would be
appropriate to settle a pending matter.

CONCLUSION: WHERE DO WE GO FROM HERE?

A prestigious panel of the American Bar Association, following an extensive
study, found severe shortcomings in the administrative process:

We share the general view that many administrative procedures are too
slow, costly and cumbersome. As a result, vital economic interests
concerned with capital formation, plant modernization and business
expansion are severely handicapped, and reforms necessary for the
protection of workers and consumers are too long postponed. These
delays and excessive costs have resulted, in considerable part, from the
fact that administrative procedures, initially developed as a safeguard

374. Harter, Regulatory Negotiation; An Overview, Dispute Resolution Forum, (Jan,
1986) at 4. See also, Cormick, The "Theory" and Practice of Environmental
Mediation, 2 Envtl Prof. 24 (1980); Susskind & Weinstein, Toward a Theory
of Environmental Dispute Resolution, 9 B.C. Envtl Aff. L Rev. 311 (1980);
Raiffa, The Art and Science of Negotiation (1982).

238 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

against the threat of regulatory abuse, have come to mimic the Judicial
process, with inadequate regard for the flexibility available under
existing statutes. Improved procedures will serve all citizens, both as
consumers and producers. ^"^^

Former Attorney General William French Smith echoed these concerns in
terms of direct impact on the Federal Government:

Increased use of adversarial procedures in the courts and administrative
process has had serious consequences. Regulatory proceedings have
become more lengthy and complex as a result of conflict between the
government and private parties, and have all too often led to unneces-
sary and wasteful regulations. Moreover, lawsuits involving the
government have become more numerous. The number of lawsuits in
which the United States was a party grew by more than 155% in the
last decade: from 25,000 new lawsuits a year in 1970 to 64,000 new
lawsuits a year in 1980. The accompanying costs to the government
have increased at an even greater rate, with legal expenses of federal
agencies estimated to have more than tripled in the decade of the 70's.
In a time of fiscal constraints, the government simply cannot afford
these costs. ^^^

Even without the shortcomings of an excessive reliance on trial type
procedures, alternative means of dispute resolution may have positive benefits
beyond alleviating caseloads and resulting delay. Another prestigious, diverse
panel found in its report to the Department of Justice concerning courts but in
terms equally applicable to agencies:

Society cannot and should not rely exclusively on courts for the
resolution of disputes. Other mechanisms may be superior in a variety
of controversies. They may be less expensive, faster, less intimidating,
more sensitive to disputants' concerns, and more responsive to underly-
ing problems. They may dispense better justice, result in less aliena-
tion, produce a feeling that a dispute was actually heard, and fulfill a
need to retain control by not handing the dispute over to lawyers,
Judges, and the intricacies of the legal system. ^^^

The increased use of the full range of alternative means of dispute resolu-
tion by administrative agencies can, in appropriate circumstances, help address
these problems. As former Attorney General Smith has also observed, "Federal
officials have just begun to recognize the potential of alternative dispute resolu-
tion processes and only recently have they tried to apply these processes In
resolving controversies In which the government Is a party. "378

Several things appear necessary to Increase the beneficial use of dispute
resolution techniques by Federal agencies. First Is simply an explicit recognition

375. American Bar Association, Commission on Law and the Economy, Federal
Regulation; Roads to Reform (1979) at 92.

376. Smith, supra note 355, at 10; footnotes omitted.

377. Paths to Justice, supra note 24, at 1.

378. Smith, supra note 355, at 11.

DISPUTE RESOLUTION PROCEDURES 239

of their existence and potential. Second is the development of procedures and
processes -- sometimes relatively fully developed and other times more conceptual
and ad hoc — to tailor the general processes to the specific agencies and
programs. Third is an outreach to make members of the private sector comfort-
able with the potential of the new procedures. This was clearly demonstrated for
example when the Chicago regional office of the Merit Systems Protection Board
engaged in a conscientious outreach effort to make its constituents aware of its
program, and that office had by far the widest use. 3*^9 Fourth is the systematic
sharing and evaluation of the experience with the new forms so that they can be
adjusted to meet legitimate needs and a fuller understanding of their appropriate
use developed.

The administrative process itself was in large measure born as an alternative
means of dispute resolution — a way other than courts for making important
societal decisions. It is singularly appropriate, therefore, that it should be
responsive to various forms of dispute resolution that are gaining broad accep-
tance in the civil sector. These processes can help administrative agencies fulfill
their original potential. We are on our way in recognizing their role. That alone
is a major first step towards broader, more successful use.

379. Adams, supra note 170, at 10-11, 65-67, 85, 92.

240 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

APPENDIX I

SURVEY OF DISPUTE RESOLUTION METHODS

USED IN THE

ADMINISTRATIVE PROCESS

This survey is a rough "catalogue" of the uses agencies currently make of
alternative means of dispute resolution. It is based on three sources: (1)
Agencies' responses to a questionnaire developed in conjunction with the Office of
the Chairman of the Administrative Conference and circulated to the agency mem-
bers of the Conference. (2) A review of all references in the United States
Code to the terms "arbitration, mediation, conciliation, negotiation, or informal."
(3) Programs that have come to our attention informally.

It excludes for the most part programs dealing solely with labor relations,
which to a very real extent are the most rich in their use of ADR techniques.
They are not included because they so closely resemble their private sector
counterpart and are basically a special case.

Department of Commerce.

Office of Export Enforcement. Under the Export Administration Act of 1979
50 U.S.C. Appendix 2410 the Office of Export Enforcement (OEE) issues an initial
contact letter informing a party of its intention to issue a charging letter. The
party may discuss the proposed charges with the OEE and attempt to reach a
pre-charging letter settlement. This method is used approximately 50% of the
time and results in settlement of the dispute 95% of the time. This settlement is
governed by regulations at 15 C.F.R. 388.17(b). If the dispute is not resolved, the
charging letter is issued. The consent agreement which results from this process
is reviewed by the Deputy Assistant for Export Enforcement.

Office of Anti-Boycott Compliance. This office uses the procedures followed
by the Office of Export Enforcement in all of its disputes.

National Oceanic and Atmospheric Administration. The Office of the
Secretary conducts a mediation of coastal zone management disputes under the
Coastal Zone Management Act 16 U.S.C. 1451 et seq. Under the Act, the Secretary
of Commerce is authorized to mediate disputes between a federal agency and a
coastal state concerning a coastal management program. The Act also authorizes
the Office of Ocean and Coastal Resources Management to mediate where a state
agency intends to object to a federally licensed activity. The mediation must be
agreed to by all parties. It is used once or twice a year. The mediation is
governed by 15 C.F.R. part 930, subpart G. See also, 15 C.F.R. 930.124. If the
mediation is not agreed to or fails, all parties have recourse to the courts. If
informal mediation fails, formal appeal may be taken to the Secretary of Com-
merce.

The National Oceanic and Atmospheric Administration also administers the
Deep Seabed Hard Mineral Resources Act, 30 U.S.C. 1401 et seq. with implementing
regulations at 15 C.F.R. part 980. Under this Act, U.S. companies seeking licenses
to mine manganese must resolve all disputes involving overlapping mine sites. The
administrator of NOAA may resolve these conflicts applying principles of equity.
Under 15 C.F.R. 970.302 the administrator will encourage companies to resolve the
conflicts voluntarily. The NOAA will then review any subsequent voluntary
agreement. This method of dispute resolution has been used one time.

DISPUTE RESOLUTION PROCEDURES 241

Personnel Law Division. The Division conducts arbitration of employee
grievances under the Civil Service Reform Act, 5 U. S.C. 7121. Arbitration has
been used approximately eight times a year and is governed by regulations in 29
C.F.R. 1404 and Collective Bargaining Agreements.

Federal Emergency Management Agency

The agency uses alternative methods of dispute resolution in two instances.
(1) FEMA uses arbitration under the Urban Property Protection and Reinsurance
Act, 12 U.S.C. 1749(b). The procedures are set forth in 44 C.F.R. 56.37. No cases
have been brought under this Act to date. (2) FEMA uses standard dispute
resolution techniques in such matters as equal opportunity cases, adverse actions,
performance ratings, and Merit Systems Protection Board cases.

Commodity Futures Trading Commission.

See Appendix II. The Commodity Exchange Act encourages private sector
mechanisms for dispute resolution in requiring designated contract markets and
registered futures associations to provide a voluntary equitable procedure through
arbitration or otherwise, for the settlement of customers' claims and grievances
against any member or employee. See 7 U.S.C. 7A(ll),21(blO). There is currently
no limitation on the monetary value of claims which may be subject to arbitra-
tion. The Commission recently amended its rules under 17 C.F.R. 170.8, 180.2 to
encourage the use of arbitration as a means of dispute resolution. See 48 Fed.
Reg. 22136.

Consumer Product Safety Commission.

Under the Federal Hazardous Substances Act, 15 U.S.C. 1266, the Commission
must provide any person alleged to have violated the Act appropriate notice and
opportunity to present his views either orally or in writing prior to the Commis-
sion's referring a case to the U.S. Attorney for criminal prosecution. The
Commission is also required to use informal dispute resolution procedures under 5
C.F.R. 752.404 in the settlement of any employee disputes.

Department of Agriculture.

Packers and Stockyard Division. Private parties may file complaints under
the Packers and Stockyards Act. See 7 U.S.C. 181 et seq. This complaint is filed
in the field offices of the Packers and Stockyards Administration. The office will
investigate the complaint and the regional supervisor may then express his
opinions to the parties orally or by letter as to whether respondent may be liable
to pay the complainant. After this process, if the parties wish to litigate, the
case is referred to the Office of General Counsel for a reparation proceeding.
Records of the numbers of such mediations which have not been followed by
reparation cases have not been kept in recent years. In fiscal year 1974, the
number of mediation cases was approximately 600 which far exceeded the number
of formal reparations proceedings.

Natural Resources Division. The agency conducts agency-initiated methods
of dispute resolution under the National Forest System. The procedures for

242 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

dispute resolution include appeals of decisions of forest officers under 36 C.F.R.
211.18. This is a broad informal appeals process which is applied in approximately
300 cases annually. Other rules of procedure include 36 C.F.R. 228.14 which is an
appeals process available to mineral operators aggrieved by decisions in connection
with the regulations governing locatable minerals and 36 C.F.R. 292.15 which is an
appeals process for owners of private land within the Sawtooth National Recrea-
tion Area. A line officer of the Forest Service resolves disputes In each of these
specified procedures.

Department of Defense.

The vast majority of dispute resolution mechanisms within the Department of
Defense are not conducted pursuant to the AFA. The following are the responses
of the component agencies within the Department of Defense which use alterna-
tive forms of dispute resolution.

Army Corps of Engineers. The Corps of Engineers uses an intervening
management level review to attempt to resolve contract disputes that would
otherwise have to be resolved by resort to trial-type hearings before the En-
gineers Board of Contract Appeals. This informal review is called Division Review
of Final Contracting Officer Decisions Made at the District Level. This review
involves a document review and an informal hearing held by the division engineer
or his deputy at which both the contracting officer and the contractor appear and
present their views and arguments. The division review informal hearing process
is used at the option of the division engineer. The process is used in about 1/4
to 1/2 of all contract dispute cases. There are no formal rules of practice or
procedure for this review process. The hearing is informal and within the sole
discretion of the division engineer who presides at these informal hearings. If
the dispute is not resolved the Engineers Board of Contract Appeals holds a more
formal hearing and subsequently renders its decision.

Armed Services Board of Contract Appeals. All the appeals to the ASBCA
may potentially result in hearings, however, ASBCA Rule 11 allows the parties to
submit their case on a documentary record without a hearing. Additionally ASbcA
Rule 12 provides for a faster decisionmaking process on truncated proceedings
where the amount in controversy is $50,000 or less.

Office of Dependent Schools. The Department's regulations governing the
education of handicapped students in a DOD dependent school make mediation a
prerequisite to a due process hearing to resolve a dispute between the parents of
a handicapped student and school authorities. 32 C.F.R., Section 57, Appendix II,
para. C2. School administrators who are usually not from the handicapped
student's own school serve as mediators. If the mediation is unsuccessful, the
parents or the school may petition for a due process hearing.

Department of Education.

Division of Research A Improvement, Vocational Education and Rehabilitation.
The Randolph- Shepard Act, 20 U.S.C. 107 et seq. provides for the use of arbitra-
tion in the resolution of disputes concerning blind persons' priority in the
operation of vending facilities on federal property. Blind vendors who are still
dissatisfied with state action arising from the operation or administration of the
program after being provided a full evidentiary hearing by the state may request
the Secretary of Education to convene an arbitration panel to resolve the dispute.

DISPUTE RESOLUTION PROCEDURES 243

The three member arbitration panel issues binding decisions that are considered
final agency action. The Rehabilitation Services Administration has developed
procedures for convening panels and conducting arbitration. The procedures are
contained in a policy issuance program instruction, ISA PI 7817. They provide for
a formalized evidentiary hearing including oral argument, examination, and
cross-examination, as well as submission of written briefs. Disputes are handled
through this arbitration mechanism whenever requests to convene panels are re-
ceived. The RSA reviews panel decisions for consistency with federal law and
regulations.

Department of Energy.

The Department of Energy's adjudications are non-APA adjudications. In one
instance, however, DOE uses an alternative method of dispute resolution.

Economic Regulatory Administration. The administration generally employs
informal administrative procedures in authorizing applications to import or export
natural gas. These procedures include the use of public conferences, pre-hearing
conferences, oral and written presentations, and opportunities for reply comments.
The Economic Regulatory Administration almost always uses informal mechanisms
in its consideration of natural gas import and export authorizations. Procedures
are governed by 18 C.F.R., Chapter 1, but new rules have been proposed. The
agency decides which procedures will be applied. The ERA administrator acts as
the decisionmaker in the process. The ERA also, in certain instances, has
required opposing parties to meet privately to resolve certain problems or to
obtain additional factual information. Under this private sector mechanism, the
ERA establishes the time-table under which parties will meet. This private sector
mechanism has not been used frequently.

Federal Energy Regulatory Commission. Approximately 80% of the Commis-
sion's caseload is resolved through negotiated settlements without appointment of
an ALJ. However, a settlement judge may be appointed when informal discussions
have not been fruitful but one or more parties believes it is possible to settle the
case. Settlement judges were appointed in seven cases in fiscal year '83. The
settlement judge is appointed pursuant to 18 C.F.R. 385.603.

In addition, the Commission staff engages in a form of mediation in develop-
ing environmental conditions on licenses for hydroelectric generating plants. It
also uses a form of mediation among interested parties in developing environmen-
tal impact statements and developing nationwide plans.

Nuclear Waste. The DOE is required to resolve disputes concerning the
siting of nuclear waste repositories through a written agreement with the affected
state or Indian tribe, arrived at through negotiation or arbitration. See 42 U.S.C.
Section 10131 et seq.

Department of Health and Human Services.

Within the Department of Health and Human Services, the Public Health
Service, the Health Care Financing Administration, the Office of Human Devel-
opment Services, and the Office of Community Services provide for a variety of
non-APA adjudications. Informal dispute resolution, where it exists, has no
predetermined procedures or personnel.

244 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The Health Care Financing Administration, however, is required under 45
C.F.R., Section 201.6(c) to pursue informal efforts to resolve disputes with a state,
before instituting a formal hearing. In addition, all the agencies with which the
Health Care Financing Administration deals attempt to informally resolve disputes
with grantees prior to the commencement of formal proceedings.

HHS is also required to publish regulations to provide for appropriate
investigative, conciliation and conference procedures for the resolution of age
discrimination suits in federally assisted programs. See 42 U.S.C. Section 6101.

The Departmental Grant Appeals Board of HHS has established a mediation
program. The process was modeled on one established by EPA which created a
program in 1979. HHS's rule provides that the Board in consultation with the
parties may suggest the use of mediation techniques and will provide or assist in
selecting the mediator. The mediator may take any steps agreed upon by the
parties to resolve a dispute or clarify the issues. The results of mediation are
not binding upon the parties unless they so agree in writing. The Board will also
provide people trained in mediation skills to aid in resolving a dispute that is not
pending before the Board itself. At least seven cases have been heard under this
process.

Department of Housing and Urban Development.

Bid protests under National Housing Act Contracts, 12 U.S.C. Section 1701 et
seq, 42 U.S.C. 3535(d) and 24 C.F.R. Part 20 Subpart C, may be decided by the
HUD Board of Contract Appeals upon written submission of the protestor and
procuring agent. This procedure is followed in all cases of bid protests under a
National Housing Act Contract. The procedure is used in approximately 8 cases
per year.

The Fair Housing Act of 1968, 42 U.S.C. Section 3601 et seq directs the
secretary to attempt to resolve all complaints under the Act through informal
methods of conference, conciliation or persuasion.

Department of Transportation.

Urban Mass Transportation Administration. The Department's Disadvantaged
Business Enterprise Regulations require an UMTA recipient who is unable to meet
a 10% goal to meet with a UMTA administrator to discuss how best to meet that
goal. The UMTA currently is considering the possibility of encouraging private
parties with complaints against UMTA recipients to try to resolve those disputes
locally before involving UMTA.

Office of Civil Rights. The Office uses alternative methods of dispute
resolution in considering participation by minority business enterprises in Depart-
ment of Transportation programs. Any firm which believes that it has been
wrongly denied certification as a minority business enterprise may file an appeal
with the Department of Transportation. This appeal is governed by regulations in
49 C.F.R. 23.55. The Secretary of Transportation serves as fact finder over these
cases with delegation to the Departmental Director of Civil Rights. Approximately
ISO cases are handled per year In this program.

The DOT also encourages recipients of financial assistance to establish
procedures for hearing appeals of denials of minority business enterprise certifica-

DISPUTE RESOLUTION PROCEDURES 245

tion. These recipients are usually local or state governments. This non-federal
mechanism is not widely used. Perhaps less than 10 recipients have established
their own procedures for hearing these appeals. The recipients who have
established such a procedure address a rather high number of cases -- possibly 150
to 200 per year. The Department of Transportation does not monitor the
operation of these hearings. Businesses denied certification maintain the right to
file an appeal with the Department when they are dissatisfied with the results of
recipient's hearings.

National Highway Traffic Safety Administration. Where the agency believes
civil penalties may be appropriate for violations of the Motor Vehicle Information
and Cost Saving Act, 15 U. S.C. 1981-1991, or the Federal Motor Vehicle Safety
Standards promulgated under the National Traffic and Motor Vehicle Safety Act,
15 U.S.C. 1392, NHTSA has developed procedures for informal resolution without
resort to an agency hearing. The procedures are not incorporated by the agency
in its regulations. Generally the agency sends the manufacturer a notice letter
advising it of the agency's view that a violation exists and of the possible liabil-
ity for civil penalties. This letter informs the manufacturer that it has the
opportunity to submit data to use in arguments that would show that the violation
did not occur and/or that there is a reason to mitigate the amount of the
penalty. The agency then considers the information submitted by the manufac-
turer and arrives at what it views as an appropriate civil penalty amount.
Further negotiations may proceed before the final figure is established. From
August 1982 to August 1983 the above procedures have resulted in the collection
of $146,000 in penalties for 11 standards enforcement cases and a total of $9,000
for nine odometer cases.

Environmental Protection Agency.

In the area of hazardous wastes. Section 3013 of RCRA authorizes EPA to
issue orders requiring parties to conduct testing or monitoring of hazardous waste
sites or facilities. Section 106 of the Superfund authorizes EPA to issue orders
requiring parties to take action necessary to protect the public from the dangers
associated with the release of hazardous substances. Recipients of either type of
order may take advantage of the opportunity to informally confer with the agency
concerning the terms of the order. There are no set procedures governing the
conduct of the proceedings. In 1983 there were 15 Section 3013 orders and 26
Section 106 orders issued. The selection of presiding officers for this proceeding
has not been standardized.

Under the Superfund Act any claim against the fund rejected by the
President is to be heard by a member of a Board of Arbitrators. 42 U.S.C.
Section 9612. An arbitrator's decision may be appealed to a Federal District
Court but may only be reversed if found to be arbitrary and capricious.

Arbitration is also authorized by the Federal Insecticide, Fungicide and
Rodenticide Act (FIFRA), 7 U.S.C. Section 136 which requires the use of arbitra-
tion to establish the compensation due for one applicant's use of prior submitted
data in an application for registration of a pesticide. 7 U.S.C. Section 136(a).

Equal Employment Opportunity Commission.

Under 42 U.S.C. Section 2000-e-5(b) the EEOC is authorized to attempt to
eliminate alleged unlawful employment practices by informal methods of con-

246 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

ference, conciliation and persuasion.

Federal Communications Commiasion.

The FCC uses several agency Initiated alternatives to dispute resolution.

Paper hearings. Under 47 U.S.C. Section 309e, the FCC may conduct paper
hearings in situations where there are competing applicants for low power
television service. To date, none have been conducted. The rules of practice
governing these hearings are found at 47 C.F.R. Section 1.241a. If the Commission
cannot resolve the controversy, a regular trial-type hearing is conducted.

Expedited hearings. Under 47 U.S.C. Section 309e the Commission may
conduct expedited hearings involving basic qualifying issues for competing
applicants for cellular radio service facilities. The FCC reports that this proce-
dure basically involves strict adherence to a hearing schedule already prescribed
by the rules. The rules governing this expedited hearing are found in 47 C.F.R.
Section 22.916 and Section 22.917.

The FCC also provides for private sector mechanisms for some licensees who
are encouraged to resolve electrical interference problems without the Commis-
sion's intervention. Absent industry cooperative efforts the resolution of these
interference issues would trigger agency proceedings. The agency does not keep
detailed information about the exact measures taken by communications industries
in private sector negotiations. The agency also does not review measures
negotiated and placed into effect through private action. The agency's Field
Operations Bureau does monitor and reinforce the effectiveness of these measures.

Federal Election Commiasion.

Under 2 U.S.C. 437(g), if upon investigation of a complaint or upon its own
initiative the FEC concludes a violation of federal campaign laws has occurred,
the FEC has 30 days to make every effort to conciliate a resolution of the
violation. Any resulting conciliation agreement will conclude the EEC's interest
in the matter. If informal dispute resolution methods fail, the FEC may file a
civil action.

Federal Labor Relations Authority.

Title VII of the Civil Service Reform Act of 1978 established the Federal
Service Impasses Panel as an entity within the FLRA. This panel Is to provide
assistance In resolving negotiation Impasses between federal agencies and exclusive
representatives of federal employees. The Impasses Panel Is not required to use
any particular procedure In the resolution of negotiation Impasses. The Panel has
broad authority to fashion procedures appropriate to resolve disputes and does so
on a case-by-case basis. The following are the most often used procedures.

Factfinding. Factfinding Involves a hearing before a Panel member or a
Panel designee the purpose of which Is to establish a complete record of the
issues In dispute and the positions of the parties. This Involves a trial-type
hearing after which the Panel issues its own settlement recommendations or it
may issue a binding decision.

DISPUTE RESOLUTION PROCEDURES 247

Written submissions. This procedure does not involve a hearing. The parties
exchange written statements of position and supporting evidence and may subse-
quently exchange rebuttal statements. After consideration of the written material
the Panel may make recommendations for settlement or issue a binding decision.

Arbitration. The Civil Service Reform Act of 1978 authorizes the parties to
voluntarily submit their dispute to an independent arbitrator after the procedure
has been approved by the Panel.

Med-Arb. When med-arb is used a neutral is given the authority to both
mediate the dispute and make a binding award on those issues not resolved during
the mediation. This procedure often leads to a resolution without the neutral
having to issue a decision.

The Federal Service Impasses Panel makes the decision as to which proce-
dures will be used to resolve a dispute. To date, factfinding has been directed 14
times, written submissions have been employed 42 times, outside arbitration has
been recommended in 14 cases and the med-arb procedure has been used in 20
cases. The Impasse Panel's regulations governing factfinding hearings can be
found in 5 C.F.R. Parts 2470 through 2472. There are no published rules or
procedures applicable to the other procedures. Factfinding hearings are held by a
panel member or a panel designee. There is no designated representative when
written submissions are used. Outside arbitration is conducted by a panel
designee or a person chosen by the parties. Each of these procedures will result
in a final and binding decision unless the parties have negotiated a settlement.

Federal Maritime Commission.

The Commission uses several alternative methods for resolving disputes
without resorting to formal hearings.

The Commission uses an informal procedure for adjudication of small claims
-- those claims for less than $10,000. The proceeding is conducted under the APA
by a settlement officer and by the Secretary of the Commission. The record
consists of written evidence and arguments. The decision of the settlement
officer is not subject to appeal by the parties but may be reviewed by the
Commission on its own motion. The parties, however, may seek review in federal
court. The regulations governing this informal procedure are found at 46 C.F.R.,
Section 502.301.

The Commission uses a shortened adjudicatory procedure conducted before an
ALJ. The proceeding is limited to the submission of memoranda, facts and
arguments. The parties must consent to this procedure which is used frequently.

The Commission has also used a non-adjudicatory fact finding investigation.
These investigations are conducted by agency personnel designated by the
Commission. The regulations for this investigation procedure are found at 46
C.F.R., Section 502.281.

The Commission also has a conciliation service. The regulations are found at
46 C.F.R., Section 502.401. This conciliation service is rarely used. This dispute
resolution mechanism is applied when all parties consent to the conciliation
service. The parties must also consent to any opinion developed as a result of
the conciliation service.

248 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The Commission also develops compromise agreements in its application of
civil penalties. The Commission's Bureau of Hearing Counsel is authorized to
assess penalties, enter into negotiations and reach a compromise with the person
involved and to obtain payment of the penalty. Any compromise agreement is
executed between a party and the Director of the Bureau of Hearing Counsel.
The regulations covering this procedure are found at 46 C.F.R., Section 505.4. If
agreement cannot be reached on the terms of a civil penalty, the matter is
referred to the Commission for a formal proceeding.

The Commission also oversees two private sector mechanisms for dispute
resolution. First, the Commission oversees a self-policing mechanism used by
shipping conferences or other rate-making associations under Section 15 of the
Shipping Act of 1916 found at 46 U.S.C. Section 14. Under this mechanism a
neutral body investigates alleged violations of agreements by members of the
conferences or rate-making associations and determines if fines are merited. All
conferences or rate-making associations of more than two members are required
to employ such self-policing mechanisms and to report to the Commission periodi-
cally on their activities. The Commission does not generally review decisions of
the neutral bodies.

Second, shippers may also file complaints with conferences and other
rate-making bodies concerning the rates and practices of the conferences. The
procedure is required by Section 15 of the Shipping Act, 46 U.S.C. Section 814 and
by 46 C.F.R. Part 527. If the conference does not respond favorably to a request,
the complaining party may file a formal complaint with the Commission.

Federal Mediation and Conciliation Service.

The function of the Federal Mediation and Conciliation Service is to assist
parties to labor disputes through conciliation and mediation. The Service is
utilized in disputes which significantly affect Commerce. FMCS mediates com-
plaints brought under the Age Discrimination Act.

Federal Reserve System.

The Federal Reserve System processes consumer complaints against state
member banks and forwards any complaints it receives against other creditors or
businesses to the appropriate state or federal enforcement agencies. In 1982 the
System received 2,840 complaints of which 1,226 were against state member banks.
The Federal Reserve banks respond to these complaints in writing. The Federal
Reserve Board monitors the complaint resolution process by periodically reviewing
complaint investigations and responses and complaint handling activities of the
Federal Reserve Banks.

Federal Trade Commission.

See Appendix III.

General Accounting Office.

The GAO provides an alternative to trial-type dispute resolution in its Bid
Protest Forum which is described in 4 C.F.R. Part 21. This Forum handles

DISPUTE RESOLUTION PROCEDURES 249

approximately 1,000 cases each year. An attorney with GAO writes the initial
draft decision. All final decisions are signed by the Comptroller General.

The GAO uses alternatives to trial-type hearings in settling doubtful claims
and in considering advance decisions. See 31 U. S.C. Section 711, 31 U.S.C 3529 and
31 U.S.C. 3702. The agency chooses when to use alternative procedures. Such
procedures were used in fiscal year 1982 in rendering approximately 1,000 advance
decisions and in determinations of accountable officers' liabilities. In the claims
area the GAO handled 1,000 waiver requests, 7,241 claims by the U.S. and 2,400
claims against the U.S. The procedures are set forth in 4 C.F.R. Ch. I, parts 22,
30-35, 53, 91-93, Ch. II, parts 101-105. Claims are handled by claims examiners,
with appeals taken to attorneys in the Office of General Counsel. Individuals
dissatisfied with GAO actions may appeal to the courts.

Interstate Commerce Commission.

Most of this Commission's cases are decided through its modified procedure
whereby the agency decides a case exclusively on written submissions under the
APA. The Commission's Office of Proceedings prepares all modified procedure
decisions.

Merit Systems Protection Board.

See Appendix II.

National Mediation Board.

The Railway Labor Act, 41 U.S.C. Section 151 et seq. created the Board to
settle railroad/employee disputes. If mediation fails, the Board is to induce the
parties to enter arbitration. Arbitrators are selected under procedures found in
45 U.S.C. Section 157.

Nuclear Regulatory Commission.

The NRC has experimented with the use of informal procedures in its
licensing proceedings. On several occasions the Chairman of the Atomic Safety
and Licensing Board Panel has selected a member of the Panel to act as a
presiding officer. This presiding officer may allow parties to present oral
arguments at his discretion. An order may be issued by the Commission based
upon written comments received by the presiding officer. Regulations have not
yet been developed to govern this type of informal dispute resolution. The
Commission's authority to conduct these informal proceedings is found in 42
U.S.C. 2239.

Office of the Federal Inspector, Alaska Natural Gas Transportation System.

This agency oversees the construction of the Alaska Natural Gas Transporta-
tion System. The agency employs informal dispute resolution mechanisms in its
determination of rate-based decisions and in its investigation of claims of racial
discrimination. The procedures are set forth in 46 Fed. Reg. 51726 and Enforce-

250 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

ment Procedures for Equal Opportunity Regulations, 10 C.F.R. Part 1534. The
agency attempts to resolve disputes through conciliation, however, if matters are
not resolved the Federal Inspector has the final decision.

Pension Benefits Guaranty Corporation.

The PBGC has an appeals board which has the discretion to grant an oral
hearing, however no such hearing has ever been held. The board handles
approximately 250 cases per year. The board's procedures are found at 29 C.F.R.
2606.52 et. seq.

The PBGC has two alternatives to the appeals board, reconsideration and
informal review. An aggrieved party may request reconsideration of a PBGC staff
decision. This reconsideration will be undertaken by a person of higher authority
than the original decisionmaker. The procedures for reconsideration are found at
29 C.F.R. 2606.31 et seq. The decision to request appeal or reconsideration
depends upon the type of determination made. The PBGC makes over 900
reconsiderations per year. A person dissatisfied with the result of a reconsidera-
tion may sue in court.

The second informal procedure used by the PBGC is an informal review
process under 29 C.F.R. Section 2606.1(c).

See discussion in Appendix II.

Postal Rate Commission.

The Postal Rate Commission currently follows a complaint case procedure set
forth in 39 C.F.R. Section 3001.85. The Commission, however, has a proposed
rulemaking [check status] which would amend its current procedure to include a
provision that would allow the Commission to use informal inquiry methods to
resolve complaint cases. Under this proposal, the Commission may choose to
conduct a preliminary investigation before filing a formal answer in a complaint
case. Under this proposal, a Commission employee would act as a facilitator of a
pending dispute. If the informal inquiry method did not resolve the dispute, a
formal complaint case would proceed.

lailroad Retirement Board.

The board's adjudications are non-APA adjudications. The agency, however,
has proposed using a board of real estate appraisers in resolving disputes con-
cerning a value of a home under the Railroad Retirement Act. See 45 U.S.C.
Section 395.8(d). The board has also considered using a similar mechanism to
resolve benefit disputes under the Rock Island Railroad Transition and Employee
Assistance Act, 45 U.S.C. Section 1001 et seq.

Securities and Exchange Commission.

The SEC does not employ any alternative methods of dispute resolution.
However, the Commission does in 17 C.F.R. 202. 5C provide for a procedure by
which the subject of a Commission investigation may submit a written statement
to the Division of Enforcement explaining why no enforcement action should be

DISPUTE RESOLUTION PROCEDURES 251

brought against him.

Additionally, the SEC has encouraged the security industry's self-regulatory
organizations to adopt a uniform code of arbitration. This arbitration is available
for resolution of certain disputes between broker/ dealers and their customers.
The Commission also relies on the self-regulatory organizations to discipline their
members for violations of security laws and the regulatory organization's own
rules. This practice is authorized by Sections 6(b)6, 15a(b)(7) and 19(g)(2) of the
Exchange Act of 1934.

252 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

APPENDIX II
CASE STUDIES OP ADMINISTRATIVE ARBITRATION

Federal Insecticide, Fungicide and Rodenticide Act.

The Federal Insecticide, Fungicide and Rodenticide Act^SO authorizes the
Environmental Protection Agency to use data received from one applicant for a
pesticide registration in support of another applicant's request for registration.
The Act requires the applicant which benefits from the use of another's data to
compensate the original data submitter for its use. 381 FIFRA's 1978 amend-
ments382 mandate the use of arbitration to resolve disputes between pesticide
manufacturers concerning the amount of compensation owed.

EPA's use of previously submitted data In support of subsequent "me-too" or
"follow-on" pesticide registration applications was first authorized by statute in
1972383 in the Federal Environmental Pesticide Control Act, 384 which amended
FIFRA to convert It from a licensing and labelling statute into a comprehensive
regulatory scheme governing the use, sale and labelling of pesticides. 385 These
1972 amendments created the data use provision which requires an applicant to
compensate an original data submitter for the benefit derived from the use of Its
data. 386 Originally, EPA was to determine the proper amount of compensation
due In cases In which the parties could not negotiate a price. 387 However,
Congress amended FIFRA In 1978, restructured the data compensation system and

380. Pub. L. No. 80-104; 61 Stat. 163 (1947), codified as amended 7 U.S.C. § 136
et seq.

381. § 3(c)(1)(D); codified at 7 U.S.C. § 136a(c)(l)( D).

382. Federal Pesticides Act, Pub. L. No. 95-396; 92 Stat. 819 (1978).

383. Federal Environmental Pesticide Control Act, Pub. L. No. 92-516; 86 Stat. 977
(1972).

384. See Ruckelshaus v. Monsanto, 104 S.Ct. 2862 (1984).

385. As enacted in 1947, FIFRA was primarily a licensing and labelling statute.
Under the Act, each pesticide had to be registered with the Secretary of
Agriculture prior to sale. The Act required a manufacturer seeking a
pesticide registration to supply the Secretary with Information necessary to
support the claims made on the label. The Act prohibited the Secretary
from disclosing a manufacturer's formula but was silent concerning the
Secretary's obligation in regard to health and safety data submitted with an
application. The 1972 amendments expanded FIFRA to regulate the use, sale
and labelling of pesticides. Congress added an environmental criterion to
the requirements for a pesticide registration. Since 1972 the administrator
of the Environmental Protection Agency must find that a pesticide will not
cause unreasonable adverse affects on the environment before registering a
new pesticide.

386. § 3(c)(1)(D); 86 Stat.

387. Id.

DISPUTE RESOLUTION PROCEDURES 253

prescribed the use of binding arbitration to resolve disputes concerning the
amount of compensation one applicant should pay to another for the use of its
data. 38^

Congress's reason for establishing binding arbitration for resolution of these
disputes is not entirely clear. 389 Although the data compensation provisions

were the subject of much debate, the central issues involved what data would be
compensable and the duration of any compensation period accorded to original
data submissions. 390 The legislative history does not explicitly reveal why
Congress instituted binding arbitration. Congress was concerned that the
resolution of the controversies that had developed over the existing compensation
scheme was consuming too many agency resources. It, and EPA, felt that these
decisions did "not require active government involvement, [but rather should] be
determined to the fullest extent practicable, within the private sector. "391 xhe
notion of using binding arbitration emerged as a compromise between the data
suppliers and the data users. 392

It operates only if the parties have failed to agree on an amount of
compensation or to a procedure for reaching agreement. Thus, the legislation
primarily encourages the parties to resolve a dispute over compensation through
private agreement and authorizes binding arbitration only as a last resort. 393

FIFRA grants original data submitters a right to compensation when data is
used for the benefit of another applicant within fifteen years of the original data
submission. 394 Under the Act, any applicant who will benefit from EPA's use of

388. 7 U.S.C. § 136a(c)(l)(D).

389. U.S. Congress, House Joint Committee on Conference, to accompany S.1678, a
bill to amend the Federal Insecticide Fungicide and Rodenticide Act, 95th
Congress 2nd Session, H. Report 95-1560, September, 1978; U.S. Congress,
House, Committee on Agriculture, Report to accompany H.R. 7073 a bill to
extend the Federal Insecticide Fungicide and Rodenticide Act, 95th Congress,
1st Session, H. Report No. 95-343; U.S. Congress, House, Committee on
Agriculture, Report to accompany H.R. 8681. 95th Congress 1st Session, H.
Report No. 95-663.

390. U.S. Congress, House, Committee on Agriculture, Report to accompany H.R.
7073, 95th Congress 1st Session, H. Report No. 95-343, p. 3.

391. Statement of Sen. Leahy, floor manager of S. 1678, 123 Cong. Rec. 25709
(1977). See the description of Congress's concern in Thomas v. Union
Carbide Agr. Products Co., 105 S. Ct. 3325, 3329-3330 (1985).

392. Hearings on Extending and Amending FIFRA before the Subcommittee on
Department Investigations, Oversight, and Research of the House Committee
on Agriculture, 95th Cong., 1st Sess., 522-523 (1977) (testimony of Robert
Alikonis, General Counsel to Pesticide Formulators Assn.).

393. 7 U.S.C. § 136a(c)(l)(D)(ii).

394. § 3(c)(1)(D) divides the data EPA may use into three categories, data
supplied to EPA before 1969, data supplied after 1969, and data supplied
after 1978. The Act permits EPA to use data supplied prior to 1969 in its

(continued...)

254

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

data submitted less than fifteen years earlier by another applicant must make an
offer to compensate the original data submitter for this use. If after ninety days
the new applicant and the original data submitter have not reached agreement on
the amount and terms of compensation either party may submit the dispute to
arbitration by filing a request with the Federal Mediation and Conciliation
Service. 395 Participation of both parties is compelled since an original data
submitter who fails to participate forfeits its right to compensation and any new
applicant who fails to participate will be denied registration. 396

For the purpose of complying with FIFRA, the Federal Mediation and Con-
ciliation Service has adopted the roster of commercial arbitrators of the American
Arbitration Association as well as AAA's FIFRA arbitration rules. 397 Requests for
arbitration are forwarded directly to the AAA which notifies the other party of
the request. 398 Unless the parties agree to a different procedure, AAA selects an
arbitrator from the AAA roster after each party has reviewed a list of potential
arbitrators and rated these individuals by degree of acceptability. 399 Unless the
parties specify otherwise, a single arbitrator hears each dispute. ^00 Neutrality is
the central qualification for serving as an arbitrator. 401 Each person appointed
as a neutral arbitrator must disclose to AAA any circumstances which could affect
his impartiality including any financial interest, bias or past relationship with any
of the parties. 402 AAA determines whether an arbitrator is or is not neutral. 403

394. (...continued)

consideration of any application for registration without the permission of
the original data submitter. This data submitter is not entitled to any
compensation for the use of its data. EPA may use data supplied to it after
1969 in its consideration of any other manufacturer's application so long as
the benefitting applicant makes an offer to compensate the data submitter
for the use of its data. The third category of data is that which is supplied
to EPA after September 30, 1978. FIFRA guarantees that the applicant who
submits data after September 30, 1978 will have exclusive use of this data
for a period of ten years. At the end of this ten year period this data
submitter will be entitled to compensation for the use of its data for a
period of five years. See, § 3(c)(l)(D)(iii).

FIFRA also provides for the use of binding arbitration to resolve the

question of compensation when pesticide registrants agree to share the cost
of supplying EPA with any additional data requested and are unable to agree
on the amounts of contribution. 7 U.S.C. § 136a(2)( B)(iii).

395. 7 U.S.C. § 136a(c)(l)(D).

396. Id.

397. 29 C.F.R. § 1440.1(b).

398. 29 C.F.R. § 1440.1(a).

399. 29 C.F.R. § 1440.1 Appendix Sec. 6.

400. 29 C.F.R. § 1440.1 Appendix Sec. 9.

401. 29 C.F.R. § 1440.1 Appendix Sec. 5.

402. 29 C.F.R. § 1440.1 Appendix Sec. 11.

DISPUTE RESOLUTION PROCEDURES 255

AAA's determination is appealable to FMCS whose decision is conclusive. ^04

Once the arbitrator is selected, the claimant or person seeking compensation
has 60 days in which to file a statement detailing the amount claimed and the
reasons to support the claim. '^OS j^e other party then has 60 days to respond. ^06
The parties may move for discovery through written interrogatories or requests
for production of documents. ^07 jhe arbitrator grants requests designed to
produce relevant evidence and allows discovery to a degree, "consistent with the
objective of securing a just and inexpensive determination of the dispute without
unnecessary delay. "^^8 jhe arbitrator is empowered to order depositions upon a
showing of good cause. ^09 The arbitrator may arrange a prehearing conference in
which the parties appear before him to consider the possibility of settling the
dispute, narrowing the issues, obtaining stipulations or otherwise expediting the
disposition of the proceeding. ^10 At the hearing, the claimant presents his case
followed by the respondent. ^11 The claimant must carry the burden of coming
forward with evidence to support his claim. '^l^ -phe arbitrator decides each issue
based upon a preponderance of the evidence. ^13 Any party may request that a
stenographic record of the hearing be kept and designated the official transcript
of the proceeding. ^14 After the hearing, the parties may submit written briefs
supporting their position and the arbitrator may at his discretion permit oral
argument on these briefs. ^^^

The arbitrator must issue a decision after the proceeding has closed. ^^^
This decision must contain findings of fact and conclusions of law with reasoning
covering all issues in dispute in the case. The decision must also contain a
determination concerning any compensation due.

403. Id.

404. Id.

405. 29 C.F.R. § 1440.1 Appendix Sec. 13(a).

406. 29 C.F.R. § 1440.1 Appendix Sec. 13(b).

407. 29 C.F.R. § 1440.1 Appendix Sec. 23.

408. 29 C.F.R. § 1440.1 Appendix Sec. 23(a).

409. 29 C.F.R. § 1440.1 Appendix Sec. 23(b).

410. 29 C.F.R. § 1440.1 Appendix Sec. 24.

411. 29 C.F.R. § 1440.1 Appendix Sec. 26.

412. 29 C.F.R. § 1440.1 Appendix Sec. 28.

413. Id.

414. 29 C.F.R. § 1440.1 Appendix Sec. 29.

415. 29 C.F.R. § 1440.1 *opendix Sec 30.

416. 29 C.F.R. § 1440.1 Appendix Sec. 32.

256 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Parties involved in cases in which the disputed amount is $25,000 or less
may opt for resolution of their dispute through an expedited procedure. ^1*^ Under
this procedure the claim proceeds to hearing within thirty days without discovery
or the submission of briefs. The arbitrator's decision consists of short summary
findings of fact and conclusions of law.

FIFRA provides that an arbitrator's decision is final and conclusive. ^^8 jy^^
decision is reviewable in court only in the case of "fraud, misrepresentation, or
other misconduct by one of the parties to the arbitration or the arbitrator. . .
."419 This narrow scope of judicial review is typical of the level of judicial
review available in commercial arbitration.

The arbitration provision has sparked a host of constitutional challenges that
are reviewed above. ^20

Pension Benefit Guaranty Corporation.

The Multiemployer Pension Plan Amendments Act of 1980'*21( ^ppAA)
amended the Employee Retirement Income Security Act of 1974'*22 (ERISA), to
impose liability upon any employer that withdraws from a multiemployer pension
plan. 423 MPPAA requires pension plan sponsors and withdrawing employers to
arbitrate disputes over the amount of an employer's withdrawal liability. ^24

As originally enacted, ERISA permitted employers to withdraw from multi-
employer plans free of any future liability so long as the plan did not terminate
within five years of that employer's withdrawal. ^25 T^g employer's obligation to
the plan ceased upon withdrawal. However, the plan itself remained liable to pay
the benefits which had been promised to that employer's employees during the
period of participation. MPPAA created withdrawal liability to prevent employers
from withdrawing and leaving the plan obligated to pay the benefits from a

417. 29 C.F.R. § 1440.1 Appendix Sec. 22.

418. 7 U.S.C. § 136a(c)(l)(D)(ii).

419. Id.

420. See discussion In text at notes 114-119; 154-165.

421. P.L. No. 96-364, 94 Stat. 1217, codified at 29 U.S.C. § 1381 et.seq.

422. P.L. No. 93-406, codified at 29 U.S.C. § 1001 et. seq.

423. A multiemployer pension plan is one which is maintained under one or more
collective bargaining agreements and covers employees of two or more
employers. Employers contribute to the plan fund at rates specified In their
agreements. These contributions are paid Into a pooled fund which is
administered by a board of trustees composed of employer designated and
union designated members.

424. 29 U.S.C. § 1401.

425. 29 U.S.C. § 1001.

DISPUTE RESOLUTION PROCEDURES 257

reduced pension fund pool.426 Upon an employer's withdrawal from a plan,

MPPAA requires the plan sponsor to determine the extent of the withdrawal
liability. '^^T Any dispute that arises concerning any determination made by the
plan sponsor is resolved through arbitration. ^28

MPPAA's legislative history does not reveal why Congress instituted compul-
sory arbitration to determine a withdrawing employer's liability to the plan
sponsor. 429 The bill which originally passed the House^SO did not contain an
arbitration provision. The Senate passed a bill^Sl jn the form of a substitute to
the House bill. This Senate bill contained an arbitration provision. There is no
Senate Report. The House amended the provision to affect the level of judicial
review, and this was accepted by the Senate. The Conference Report is silent
concerning the arbitration provision. 432

The Act directs the Pension Benefit Guaranty Corporation to promulgate
rules governing the conduct of the prescribed arbitration. 433 The PBGC published
a proposed rule on July 7, 1983.434 pBGC received 20 comments and incorpor-
ated many of the suggestions in the final rule which was published on August 27,
1985. PBGC resolved conflicting suggestions by determining which views best
fulfilled the statutory mandate to establish "fair and equitable procedures. "435
Prior to the rules' becoming effective, employers and plan sponsors arbitrated
their disputes under Multiemployer Pension Plan Arbitration Rules jointly spon-
sored by the International Foundation of Employee Benefit Plans and the American
Arbitration Association. 436 The new rules apply to arbitration proceedings
initiated, pursuant to Section 42221 of the Act, on or after September 26,
1985.437

426. U.S. Congress, Committee on Conference, 96th Congress H. Rept. 96-1343.

427. 29 U.S.C. § 1381-1399.

428. 29 U.S.C. § 1401.

429. U.S. Congress, Committee on Conference, 96 Congress H. Rept. 96-1343;
House, Committee on Education and Labor, H. Rept. 96-889.

430. H.R. 3904, May, 1980.

431. S. 1076 July, 29, 1980.

432. H. Rept. 96-1343.

433. 29 U.S.C. § 1401(a)(2).

434. 48 Fed. Reg. 31241 (July 7, 1983).

435. 50 Fed. Reg. 34679 (August 27, 1985).

436. The Multiemployer Pension Plan Rules are sponsored by the International
Foundation of Employee Benefit Plans and administered by the American
Arbitration Association. The rules became effective on June 1, 1981, and are
available from the AAA.

437. 50 Fed. Reg. 34683 (August 27, 1985).

258 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

In lieu of the PBGC's final rules governing arbitration, disputing parties may
also use other plan rules procedures if they are consistent with the PBGC
rules438 or if they are approved by the PBGC in accordance with procedures set
forth in § 2641.13.'*39 The PBGC will approve the alternative procedures if

the proposed rules will be substantially fair to all parties involved and if the
sponsoring organization is neutral. '^'^^

Under the Act and the PBGC final rules, 441 either of the parties may
initiate arbitration within the 60 day period beginning on the 121st day after the
date on which the employer requested reconsideration, or if the plan sponsor re-
sponds earlier to the request, within 60 days after the employer receives the
notification of reconsideration. The parties may jointly request arbitration for
180 days after the plan sponsor has notified the employer of the contractual
liability and demanded payment. 4^*2

The arbitrator's powers and duties are, with a few exceptions, the same as
an arbitrator conducting a proceeding under Title 9 of the U.S. Code.'*^^ The
rules require the arbitrator to follow existing law, as discerned from pertinent
authority. 4^*4 The regulation does not, however, tell the arbitrator exactly where
settled law is to be found. '^^S

The final rules differ from the proposed rules in that they do not paraphrase
the statutory presumptions that the arbitrator must make as set forth in Section
4221(a)(3) of the Act. The PBGC agreed with several comments that it was
superfluous and omitted the paraphrase from the final rules. ^^^^

Under MPPAA, a plan sponsor's determinations are presumed correct unless
it is shown by a preponderance of evidence that a determination is unreasonable
or clearly erroneous. 447 Withdrawing employers criticized this presumption,
arguing that plan sponsors have an incentive to find large amounts of liability and
thus are not impartial and do not deserve a presumption favoring their determina-
tions. For example, in Board of Trustees of the Western Conference of Teamsters
Pension Trust Fund v. Thompson Building Materials, Inc,^"*^ Thompson contended

438. § 2641.1.

439. 50 Fed. Reg. 34686 (August 27, 1985).

440. § 2641.13(d).

441. § 2641.2(a)(l)(2).

442. 29 U.S.C. 1401 (a)(1).

443. § 2641.4(a).

444. § 2641.4(b).

445. 50 Fed. Reg. 34681.

446. 50 Fed. Reg. 34681.

447. 29 U.S.C. § 1401(a)(3)(A).

448. 749 F. 2d 1396 (9th Cir. 1984).

DISPUTE RESOLUTION PROCEDURES 259

that the trustees of the plan sponsor have an interest in establishing a large
liability and therefore the presumption favoring their determination constitutes a
denial of the employer's right to resolution of disputes before an impartial
tribunal. ^^9 The court rejected this contention, finding that trustees do not have
an institutional bias and rather have a fiduciary duty to assess withdrawal liability
neutrally and reasonably. "^^O jhe court also noted that MPPAA carefully pres-
cribes the methods for computing liability and allows trustees discretion solely in
the selection of the specific method of computation to apply in a particular case.
The court held the exercise of this limited discretion insufficient to impugn the
impartiality of the trustee's determinations.

The PBGC has included discovery provisions in the final regulation based lar-
gely upon the views expressed in the comments. Discovery provisions were not
part of the proposed regulation. The PBGC believes that fairness will often
require that discovery be available to the parties due to the nature of the
withdrawal disputes. ^^1 The arbitrator controls the scope of discovery. ^^2

The arbitrator also has discretion as to the admissibility of evidence. The
proposed rules had qualified the arbitrator's discretion, however, by requiring
conformity to the legal rules of evidence if the rights of the parties would be
prejudiced otherwise. The PBGC omitted the qualification from the final rules
because it agreed with several comments that such a requirement was unnecessary,
would invite appeals based on technicalities, and would put non-lawyer arbitrators
at a disadvantage. ^53

Although the arbitrator may call a prehearing conference under the final
rules, 454 ^y^q PBGC is not authorized to do so as it suggested in the proposed
rules. Several comments objected to the proposed authorization because it would
too deeply involve PBGC in an essentially non-governmental arbitration. 455

The arbitration hearing date must be no later than 50 days after the
arbitrator accepts his appointment, unless the parties agree to proceed without a
hearing as allowed under 2641. 4(c). 456 The proposed time limit of 30 days had
been criticized by the comments so the provision has been extended in the final
rules. If the parties cannot agree on a date within a 15 day period after the
arbitrator's acceptance, the arbitrator has 10 additional days to set the date. 457

449. The denial of the right to an impartial tribunal violates the Fifth Amend-
ment right of due process.

450. 749 F. 2d at 1404-1406.

451. 50 Fed. Reg. 34631.

452. § 2641.4(2).

453. 50 Fed. Reg. 34681.

454. § 2641.4(b)

455. 50 Fed. Reg. 34681.

456. § 2641.5(a).

457. § 2641.5(a).

260 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The parties may appear In person or by counsel and will be subject to the
arbitrator's order if they fail to appear or file documents In a timely manner. 458
A stenographic or taped record of the proceeding will be made upon the request
and expense of any party. ^59 The arbitrator must establish a procedure to

allow each party full and equal opportunity to present his claims and proofs,
cross-examine witnesses and file a brief. ^60

The arbitrator may reopen proceedings for good cause at any time after the
close of the hearing and before the final award is rendered. "^^l Although the
proposed rule required the consent of both parties, the PBGC agreed with several
comments which objected to giving the parties the power to frustrate the reopen-
ing.'*62 The final rule, therefore, does not contain the consent requirement.

The arbitrator must make a written award within 30 days of the close of
proceedings. ^^63 The close of proceedings is marked by either the date the
hearing was closed, the date the last brief or reply brief was filed, the date the
reopened proceedings were closed, or If the parties waived a hearing, the date on
which final statements and proofs were filed. ^^^

Two comments objected to the time limits on the arbitrator to render an
award because they were unreasonably short and ambiguous. The PBGC clarified
the ambiguity by explicitly defining what marks the closing of proceedings but did
not adopt the time limit suggestions. The PBGC believes that the limits are ade-
quate because it is the duty of the arbitrator to make sure before he accepts the
appointment, that he will be able to render awards promptly after the close of
proceedings. 46 5

The arbitrator's final award must include a factual and legal basis for the
his findings, adjustments for amount and schedule of payments, and a provision
for an allocation of costs. 466

The requirement in the final rules that the arbitrator state a factual and
legal basis for his award is a slight revision from the proposed requirement that
the arbitrator explicitly characterize his statements as "findings of fact" or
"conclusions of law." Some comments argued that non-lawyer arbitrators would be
burdened by making the proper categorization. The AAA also criticized the need
for the arbitrator to make conclusions of law and noted, in fact, that the Federal

458. § 2641.5(c).

459. § 2641.5(d).

460. § 2641.5(e).

461. § 2641.6(a).

462. 50 Fed. Reg. 34682.

463. § 2641.7(b).

464. § 2641.7(c), (d), and (f).

465. 50 Fed. Reg. 34682.

466. § 2641.7(a)(1), (2), and (3).

DISPUTE RESOLUTION PROCEDURES 261

Arbitration Act does not require it. The PBGC agreed that the requirement is of
little value and, therefore, made clear in the final rules that the arbitrator need
only state a factual and legal basis for the award. ^67

After the final award has been rendered, the plan sponsors are required to
make copies of the awards available to the PBGC and contributing employers. 468
One comment suggested that the PBGC publish and index awards. Although the
PBGC lacks the resources to comply with the suggestion, it does agree that the
awards should be made public. ^^9

The arbitrator's award is reviewable in a United States district court. ^^O
The scope of judicial review of the award is not clear under the statute, however.
MPPAA § 4221(b) contains two distinct references concerning judicial review of
an award. 471 § 4221(b)(2) authorizes any party to bring an action in a district
court in accordance with 29 U.S.C. § 1451 to enforce, vacate, or modify an
award. 29 U.S.C. § 1451 provides that a party adversely affected by the Act may
bring an action in a district court "for appropriate legal or equitable relief or
both." This provision for review is modified by § 4221(c), which provides that in
any proceeding under § 4221(b) an arbitrator's findings of fact will be presumed
correct subject to rebuttal only by a clear preponderance of evidence. Thus §
4221(b)(2), modified by § 4221(c) appears to authorize de novo review of all issues
of law and review of factual findings under a clear preponderance of the evidence
standard. This has been the conclusion of most courts which have interpreted the
MPPAA arbitration provision. 472

The provision for judicial review described above is confused by § 4221(b)(3).
This section provides that to the extent consistent with MPPAA, arbitration
proceedings are to be enforced as an arbitration carried out under the United

467. 50 Fed. Reg. 34682.

468. § 2641.7(g).

469. 50 Fed. Reg. 34682.

470. 29 U.S.C. § 1401(b).

471. Id^

472. See, Board pf Trustees of the Western Conference of Teamsters Pension Plan
v. Thompson Building Materials, 749 F. 2d 1396, 1400 (9th Cir. 1984) (Court
interpreted MPPAA as prescribing de novo judicial review of questions of
law, while arbitrator's findings of fact are presumed correct unless rebutted
by a clear preponderance of evidence.); see also, Peick v. Pension Benefit
Guaranty Corp., 742 F. 2d 1247 (7th Cir. 1983) (Court rejected contention
that MPPAA denies employers their right to access to courts stating that,
"Arbitration is ... merely the first step in resolving conflicts arising under
the Act." 742 F. 2d at 1277. The court viewed MPPAA as providing a means
for encouraging parties to settle dispute and not as a means for reaching a
final determination.); see also I. A.M. National Pension Fund Benefit Plan C
V. Stockton TRI Industries, 727 F. 2d 1204(D.C. Cir. 1984) (Court analogized
MPPAA arbitration to administrative agency action and determined the scope
of review to be equal to that accorded to administrative adjudications).

262 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

States Arbitration Act. 473 'phg Arbitration Act provides very limited judicial re-
view, applicable only in cases of fraud, partiality and misconduct. To date at
least one appellate court has interpreted § 4221(b) as authorizing only the limited
scope of judicial review provided in the United States Arbitration Act.^^**

The courts which have interpreted MPPAA's arbitration provisions thus far
have been called upon to determine the Act's constitutionality and have not
actually reviewed an arbitration decision under the Act. MPPAA has been upheld
against assertions that its provisions violate standards of due process;'*^^ deny
employers access to an impartial tribunal;'*^^ commit a taking of property without
just compensation;"*?? violate the Seventh Amendments provision for trial by
jury;478 and constitute a violation of Article III of the Constitution by vesting
federal judicial power in arbitrators who are not federal Article III judges. ^^^

Commodity Futures Trading Commission Reparations Procedures

The Commodity Exchange Act of 1974'*^^ established a reparations procedure
by which individuals alleging injury under the act as a result of a violation
caused by a registered commodities trading professional could adjudicate their
claim within the Commodities Futures Trading Commission. The Act offers this
reparations procedure as an alternative to civil litigation or resort to a privately
sponsored dispute resolution mechanism.

473. The Washington Star Company v. International Typographical Union Negotia-
ted Pension Plan, 729 F. 2d 1502 (D.C. Cir. 1984).

474. 9 U.S.C. § 1 et seq.

475. See, Pension Benefit Guaranty Corp v. R.A. Gray, 104 S.Ct.
2709(1984)(Court held constitutional MPPAA's retroactive imposition of
withdrawal liability).

476. See discussion in text, Board of Trustees of the Western Conference of
Teamsters Pension Trust Fund v. Thompson Building Materials, Inc, 749 F. 2d
1396 (9th Cir. 1984); Washington Star Company v. International Typographical
Union Negotiated Pension Plan, 729 F. 2d 1502(D.C. Cir. 1984); Peick~v7
Pension Benefit Guaranty Corp. 724 F. 2d 1247 (7th Cir. 1983).

477. Board of Trustees of the Western Conference of Teamsters Pension Trust
Fund V. Thompson Building Materials, Inc, 749 F. 2d 1396, 1406 (9th Cir.
1984) (Taking clause does not prohibit Congress from readjusting contractual
relationships of private parties); accord, Peick v. Pension Benefit Guaranty
Corp., 724 F. 2d 1247, 1274-1276 (7th Cir. 1983).

478. Washington Star Company v. International Typographical Union Negotiated
Pension Plan, 729 F. 2d 1502, 1511 (D.C. Cir. 1984); Peick v. Pension Benefit
Guaranty Corp., 724 F. 2d 1247, 1277 (7th Cir. 1983).

479. Board of Trustees of the Western Conference of Teamsters Pension Trust
Fund V. Thompson Building Materials, 749 F. 2d 1396, 1404-1406 (9th Cir. 1984).

480. Pub. L. 93-463.

DISPUTE RESOLUTION PROCEDURES 263

The reparations procedure has processed approximately 1,000 claims each
year since its inception in 1976.^^1 From the outset, however, CEA's repara-
tions procedures frequently resulted in long delays and backlogs. ^^2 Because the
procedure was not providing for expeditious, inexpensive resolution of claims as
intended. Congress amended the reparations provision in 1982 to grant CFTC the
power to promulgate rules, regulations, and orders necessary to provide for the
efficient and expeditious administration of reparations claims. 483 Under this
authority, CFTC issued reparations rules, completely revising the reparations pro-
cedures originally established by CEA.484 CFTC's current rules create a three
track decisionmaking procedure including a voluntary decisional procedure
analogous to commercial arbitration, a summary decisional procedure for claims of
up to $10,000 and a formal decisional procedure for claims exceeding $10,000.

A person who believes he has been injured due to a registrant's violation of
the Act may apply for reparations by filing a complaint with the proceeding clerk
of CFTC's Office of Proceedings. ^85 This complaint must contain a description
of the relevant facts under which the alleged violation has occurred, a claim for
damages, and an election of one of the three decisional procedures. The Office
of Proceedings initially reviews the complaint and either serves it upon the named
registrant, terminates the complaint, or returns it to the complainant for correc-
tion of deficiencies. 486 The Office of Proceedings may terminate a complaint
only if it raises claims which are not cognizable in a reparations proceeding.

Upon receipt of a complaint a registrant must file an answer within 45
days. 487 The answer must contain a detailed statement of the facts which
constitute the ground for a defense, any counterclaims, and an election of a
decisional procedure. The answer also may include a motion for reconsideration
of the determination to forward the complaint under which the registrant may
request a review of the complaint for any patent defects such as a statute of
limitations defense. The complainant is permitted thirty days in which to reply to
any counterclaim. 488 The failure to answer a complaint or reply to a counter-
claim acts as an admission of the allegations and waives a party's right to a deci-
sional procedure. 489 The Office of Proceedings may designate a proceedings
officer to enter findings of fact and conclusions of law, including a reparations
award against a non-responding party. A default order so entered will become a

481. Raisler, Nelson, and Wright, CFTC Reparation Rules Offer Novel Adjudication
Angle, Legal Times, April 16, 1984.

482. jd^

483. Pub. L. 97-444, 96 Stat. 2308, 7 U. S.C § 18(b).

484. 49 Fed. Reg. 6602-6644.

485. 17 CFR § 12.13.

486. 17 CFR § 12.15.

487. 17 CFR § 12.18.

488. 17 CFR § 12.20.

489. 17 CFR § 12.22.

264 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

final order of the Commission unless set aside within thirty days.^^O Within
thirty days, a proceeding officer may set aside a default order upon a party's
showing that it has a reasonable likelihood of success on the merits and that no
prejudice would result from proceeding to the merits of the claim. Once thirty
days have passed and a default order has become a final order of the Commission,
the proceeding officer may only set it aside if, in addition to showing reasonable
likelihood of success and that no prejudice would result, a party establishes that
the order was obtained through fraud, mistake, excusable neglect or that the
Commission lacks jurisdiction. In either case, the proceeding officer's decision
may be appealed to the Commission.

Parties may pursue discovery under each of the three decisional procedures
through requests for production of documents, serving depositions on written
interrogatories and requests for admissions. 491 Parties may seek all relevant
subject matter not subject to a privilege, except that tax returns and personal
bank account records are discoverable only upon a showing that such information
cannot be obtained by other means. A party served with a discovery request may
seek to limit discovery through a motion for a protective order by the Office of
Proceedings. In each of the three decisional proceedings discovery must be
completed within a period of sixty days after the Office of Proceedings notifies
the parties of its commencement.

In the first year following institution of the new rules, from April 23, 1984,
to April 30, 1985, CFTC received 441 complaints. ^92 The number of complaints
increased over the last six months so that CFTC projects that it will receive
approximately 500-550 complaints in fiscal year 1985. Of the 441 complaints
received under the current rules, 125 have been forwarded for a hearing, 254
remain pending in the Complaints Section of the Office of Proceedings and 62
have been terminated through settlement (28) or due to a complainant's failure to
correct deficiencies or because the claim is barred by the statute of limitations or
other patent defense.

Among the 125 cases forwarded for hearing, 56 have been pursued through
the formal decisional proceeding, 46 through the summary decisional proceeding
and in 23 cases the litigants have elected the voluntary proceedings.

As of June, 1985, 6 of the 56 cases following the formal proceedings have
been completed. These 6 cases were all resolved through settlement on the
average of 119 days after the case was forwarded from the Complaints section.
No case under the formal decisional proceedings has yet concluded through
judgment.

490. 17 CFR § 12.23.

491. 17 CFR Subpart B §§ 12.30-12.36.

492. The statistics detailing the Commission's experience under the new repara-
tions rules are taken from a Commodities Futures Trading Commission Staff
Document in the form of an Informational Memorandum to the Commission
from Executive Director Molly G. Bayley, "Report to the Commission on the
Operation of the New Reparations Rules," June 11, 1985. In addition to the
cases processed under the new reparations rules, from April 23, 1984 to April
30, 1985, the Commission also processed 320 reparations cases which had
been filed prior to April 23, 1985, under the old reparations rules.

DISPUTE RESOLUTION PROCEDURES 265

Under the summary proceedings, judgments have been reached in 4 cases out
of the 46 forwarded to a judgment officer. In addition, one case was settled and
another was resolved through a judgment against one party and settlement with
the other parties. These case have concluded on an average of 47 days after the
cases were forwarded from the Complaints section of the Office of Proceedings to
the Hearings section.

Of the 23 cases following the voluntary proceedings, five have been decided
by judgment officers. These decisions have been reached an average of 40 days
after the cases were forwarded to the judgment officer.

In June, 1985, 254 cases were pending in the Office of Proceedings.
Approximately 80 percent of these cases had been in the Office for less than six
months and more than 50 percent had been in the Office for less than three
months. The length of the time pending before a case is forwarded for a hearing
is attributable in part to the time lags in waiting for respondents' answers and to
the time spent waiting for complainants' to correct deficiencies in original
complaints.

The voluntary decisional proceeding is patterned after commercial arbitra-
tion.^93 This procedure is adopted only upon the consent of both the com-
plainant and the registrant. Under this procedure the parties waive any right to
an oral hearing and any right they may have had to receive written findings of
fact. Commission review or judicial review. ^^'^ Upon the election of the

voluntary proceeding, the Office of Proceedings appoints a judgment officer, who
is an employee of CFTC to hear the claim. 495 jhis judgment officer hears all
motions concerning discovery and upon close of discovery makes an award on the
basis of the written documents submitted. ^96 jhe judgment officer's final

decision contains a brief conclusion concerning any alleged violation or counter-
claim and an award of damages without any finding of fact. 497 ^o damage
award may exceed the amount requested as damages by a party in its pleading.
The judgment officer's decision is final; it may not be appealed to the Commission
or to a court although it may be enforced in a United States district court. 498
Despite this finality, the Commission, upon its own motion, may review an award
to determine that it is not the result of any fraud, partiality or other miscon-
duct.499 The judgment officer's conclusion concerning a registrant's violation of
the Commodity Exchange Act is not a Commission finding for purposes of denying
or revoking a person's registration under the Act; it is considered a final
Commission order however for all other purposes and thus may have res judicata
effect.

493. 49 Fed. Reg. 6611; 17 CFR Subpart C, §§ 12.100-106.

494. 17 CFR § 12.100(b).

495. 17 CFR § 12.26(a).

496. 17 CFR § 12.101.

497. 17 CFR § 12.106.

498. 17 CFR § 12.106(d).

499. 17 CFR § 12.403(b).

266 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The summary decisional procedure is available for resolution of reparation
claims of $10,000 or less. 500 in this proceeding, as in the voluntary proceeding,
a Commission employee known as a judgment officer serves as decisionmaker. ^Ol
The judgment officer plays a very active role In the summary procedure which
primarily resolves disputes based upon written documentation. ^02 j\^q jud-
gment officer rules upon discovery related motions, may conduct predeclslon
conferences between the parties and additionally, on occasion may permit oral
testimony either In person In Washington, D.C. or through a telephonic hear-
ing.^03 Oral testimony may be received only after a party shows that oral test-
imony Is "necessary or appropriate to resolve factual Issues which are central to
the proceeding. "504 y^e judgment officer has discretion to limit the Issues

upon which oral testimony will be received. At the close of the evidence, the
judgment officer must Issue an Initial decision containing brief findings of fact
and determinations of all questions of law Including an award of damages. 505
Upon receipt of the judgment officer's initial decision, either party may appeal to
the Commission. If no appeal Is taken, or Is not taken within 30 days and If the
Commission does not review the decision upon Its own motion, the judgment offi-
cer's decision becomes a final decision of the Commission. 506

On appeal, the Commission reviews briefs filed by the parties and may at Its
discretion hear oral argument. 507 j^e Commission is not bound by the findings
or determinations made by the judgment officer although it may summarily affirm
an Initial decision which Is substantially correct. 508 xhe Commission remains
free to make any findings or conclusions It deems warranted on the basis of the
record developed. The Commission's decision is appealable to the United States
Court of Appeals under § 14 of CEA where Its findings of fact are conclusive if
supported by substantial evidence. 509

The formal decisional procedure Is the most detailed of the reparations
proceedings and is available for resolution of claims exceeding $10,000,510 Under
this proceeding an administrative law judge presides over a trial-type hearing and
decides all claims, while a proceedings officer handles prehearing motions includ-

500. 17 CFR § 12.26(b).

501. Id^

502. 49 Fed. Reg. 6613.

503. 17 CFR § 201.

504. 17 CFR § 12.209.

505. 17 CFR § 12.210.

506. 17 CFR § 12.210(d).

507. 17 CFR § 12.401.

508. 17 CFR § 12.406.

509. 7 U.S.C. § 18.

510. 17 CFR § 12.26(c).

DISPUTE RESOLUTION PROCEDURES 267

ing ruling upon all discovery motions. ^H A proceeding officer's decisions are
appealable to the ALJ assigned to the case.^l^ Either the proceeding officer or
the ALJ may preside over a prehearing conference for the purpose of narrowing
the issues for hearing or encouraging settlement or the use of the voluntary
decisional procedure. 513

An administrative law judge presides over the hearing^l^ and has the power
to dispense with oral testimony concerning any factual issues that can be
resolved solely through review of submitted documentary evidence. ^1^ However,
as a rule, administrative law judges are expected to allow the opportunity for full
oral hearings. 516 At the hearing, the parties may conduct direct and cross-
examination and introduce any documentary evidence which is relevant, material
and reliable. 517 All hearing proceedings are recorded and transcribed under the
supervision of the ALJ. 518 At the close of the hearing the ALJ may request the
parties to file proposed findings of fact and conclusions of law. 519

At the conclusion of the proceeding, the ALJ issues an initial decision
containing findings of fact and conclusions of law. 520 jhe ALJ's decision
becomes a final decision of the Commission unless a party appeals to the Commis-
sion within thirty days or the Commission itself moves to hear the case. 521 xhe
Commission's power to review an ALJ's decision is the same as its power to
review initial decision's developed in the Summary Decisional Procedure. The
Commission receives briefs and at its discretion hears oral argument and ultimate-
ly may make any findings or conclusions which it determines are warranted by the
record. A decision of the Commission is reviewable in the United States Courts
of Appeals under § 14 of the CEA where the Commission's findings of fact are
conclusive if supported by substantial evidence. 522

Superfund Arbitration.

511. 17 CFR §§ 12.300-12.304.

512. 17 CFR § 12.302.

513. 17 CFR § 12.303-304.

514. 17 CFR § 12.304, 312.

515. 17 CFR § 12.311.

516. 49 Fed. Reg. 6616.

517. 17 CFR § 12.312(d).

518. 17 CFR § 12.312(f).

519. 17 CFR § 12.312(g).

520. 17 CFR § 12.314.

521. 17 CFR § 12.314(d).

522. 7 U.S.C. § 18 (1982).

268 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The Comprehensive Environmental Response, Compensation and Liability
Act523 (CERCLA or Superfund) relies upon arbitration to resolve conflicts arising
from the Environmental Protection Agency's Administrator's determinations of
claims asserted against CERCLA's Hazardous Substance Response Trust Fund. ^24

The Superfund Act created a Trust Fund to pay for the clean up of hazard-
ous waste spills and disposal sites. ^25 j^e Trust Fund may be used to pay the
federal government's costs to clean up hazardous waste sites, the costs Incurred
by any person responding to actual or threatened hazardous substance releases
and the costs incurred by a state or federal agency in restoring, rehabilitating or
replacing natural resources harmed as a result of a hazardous substances re-
lease.^26 \ person who has responded to a hazardous substance release or a
state responsible for restoring natural resources harmed by a release may assert
claims against the fund whenever they have not recovered from any other poten-
tially liable party. EPA may award claims for response costs Incurred by any
person so long as the costs were expended in compliance with the National
Contingency Plan of the Clean Water Act and were preauthorized by EPA. EPA
may pay the costs incurred by a state acting as trustee of natural resources so
long as they were expended either in accordance with a plan developed under
CERCLA or in response to an emergency.

Upon presentation of a claim, the EPA administrator, must attempt to
negotiate a settlement and if unsuccessful, make an award from the fund or deny
the claim. 527 lYie administrator must submit denied claims for arbitration. ^28 ^
claimant may request arbitration of an award the claimant finds unsatisfactory.529

Under CERCLA, the President must establish a Board of Arbitrators to hear
claims. 530 T^e members of this Board must be selected in accordance with
procedures utilized by the American Arbitration Association. CERCLA authorizes
an arbitrator to conduct informal public hearings and issue written decisions. 531
The Act provides for judicial review of arbitrators' decisions in a United States
district court. The district court is to uphold an arbitrator's decision unless It
finds that decision constitutes an "arbitrary or capricious abuse of the members'

523. Pub. L. 96-510; 94 Stat. 2767 (1980); 42 U. S.C. 9601 et. seq,

524. The arbitration provision is found in Sec. 112(b)(4).

525. 42 U.S.C 9631-33.

526. CERCLA Sec. lli(a).

527. CERCLA Sec. 112(b)(2)-(3).

528. CERCLA Sec. 112(b)(3).

529. Id^

530. CERCLA Sec. 112(b)(4)(A).

531. CERCLA Sec. 112(b)(4)(B)-(D).

DISPUTE RESOLUTION PROCEDURES 269

discretion. "532

The Environmental Protection Agency issued a proposed rule to establish
procedures for the conduct of arbitration on March 8, 1985,^33 followed by a
60-day comment period. EPA made minor alterations to the rule and published
the final rule on December 13, 1985. ^^^ The rule provides that the EPA Adminis-
trator will appoint the members of the Board of Arbitrators. ^35 -phe Adminis-
trator will screen applicants for membership to the Board by evaluating such
criteria as background in hazardous substances or administrative procedures. ^36
In compliance with CERCLA, the Administrator will forward the names and
qualifications of those applicants he selected to the American Arbitration Asso-
ciation (AAA). 537 If lY^Q applicant meets the requirements of AAA, his name aIU
be returned to the Administrator for possible appointment to the Board. 538 Board
members will receive three year appointments and serve at the pleasure of the
Administrator. Board members may be removed for any reason the Administrator
deems appropriate except that a member may not be dismissed during the pend-
ency of a claim in the absence of a showing of bias, personal or financial in-
terest. The total number of arbitrators or board members will be determined by
the Administrator.

A member of the Board may arbitrate a claim in one of two situations: (l)
whenever the Administrator denies a claim; or (2) whenever a person dissatisfied
with an award requests arbitration. The arbitrator may only make awards which
are compensable from the Fund under CERCLA's complex scheme. Thus the arbi-
trator may not award claims which would reverse EPA decisions concerning the
preauthorization of claims under the National Oil and Hazardous Substances
Contingency Plan and may not award costs for the harm caused to natural re-
sources unless the costs are distributed under a plan developed under CERCLA or
were expended in response to an emergency. 539

The proposed rule limits the arbitrator's role to fact finding. 540 i^ deciding
a claim, the Board must apply legal standards as prescribed by EPA in the
"summary of applicable standards and principles" which EPA must develop for each
claim. 541 jhe rule also directs the Board to accord "substantial deference to EPA

532. CERCLA Sec. 112(b)(4)(G).

533. 50 Fed. Reg. 9586.

534. 50 Fed. Reg. 51196.

535. 40 CFR 305.20(a).

536. 40 CFR 305.20(b).

537. 40 CFR 305.20(b).

538. Id.

539. See 40 CFR 305.21.

540. 50 Fed. Reg. 51198.

541. 40 CFR 305.21(g).

270 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

decisions as reflected In the administrative record. "542 Additionally, the rule
absolutely prohibits the Board from reviewing an Administrator's decision to deny
a claim whenever that decision Is made "based on competing priorities for the
expenditure of Fund monies. "^43 Finally, claims by other federal agencies are not
eligible for adjudication by the Board. 544

The Administrator must submit all denied claims to the American Arbitration
Association within five days. 545 jYie Administrator must include with this denial
an explanation of the decision, a statement of the legal standard applicable to the
claim, any other supporting documentation which EPA deems necessary to explain
the reason for denial and, if known, the identity of any potentially responsible
parties. At this time the Administrator may also request AAA to use expedited
procedures to hear any claim involving $20,000 or less. 546

A claimant dissatisfied with the Administrator's award may initiate arbitra-
tion by submitting the claim to AAA within 30 days of the Administrator's
decision. 547 The claimant's submission must include an explanation of the matter
and amount in dispute, and the remedy sought. The claimant must also include a
copy of the Administrator's decision, any supporting documents the claimant deems
necessary to support its claim and the identity of any potentially liable parties, if
known. 548 Within 5 days of receipt of a claim, AAA must notify the other party
of the dispute's existence by sending that party a copy of the claim. 549

Once the claim has been submitted, AAA will distribute to the parties a list
of potential arbitrators drawn from the Board of Arbitrators. 550 After the parties
have an opportunity to rate these members in order of preference, AAA will
invite the parties to accept one arbitrator from the list to hear the claim. If the
parties do not agree upon an arbitrator, AAA may appoint a member to hear a
claim. Arbitrators must immediately disclose to AAA any circumstances likely to
affect impartiality including any bias or personal or financial interest or past
relationship with the parties, their counsel, or any potentially responsible par-
ty.551 AAA will share this information with the parties but retains sole discre-
tion to decide whether an arbitrator should be disqualified due to bias or interest.

The responding party to an arbitration has seven days after receipt of the

542. 40 CFR 305.21(h).

543. 40 CFR 305.21(f).

544. 50 F.R. 51199.

545. 40 CFR 305.30(a).

546. 40 CFR 305.30(b).

547. 40 CFR 305.30(a).

548. 40 CFR 305.30(c).

549. 40 CFR 305.30(d).

550. 40 CFR 305.31.

551. 40 CFR 305.32.

DISPUTE RESOLUTION PROCEDURES 271

notice of the claim to file an answer. ^^2 jf arbitration is initiated by a claimant,
EPA must file a statement detailing the applicable legal standards and principles
governing the dispute. Either party may file an amended pleading after arbitra-
tion has been initiated, however, once the arbitrator has been appointed new
claims may only be added with the arbitrator's consent. 553 whenever an amended
pleading is filed, the other party has seven days from the date of receipt of such
pleading in which to file an answer.

Either the arbitrator or the parties may request a prehearing conference. 554
At such a conference the parties are expected to arrange for the exchange of
information, including witness statements, exhibits and documents, and to stipulate
to uncontested facts in an effort to expedite the proceeding. Arbitrators may
encourage further settlement discussions during the prehearing conference to
expedite the arbitration proceedings. 555 jhe hearing must take place at a

site selected by the administrator with due consideration to any requests by the
claimants and it must occur no more than 60 days after the arbitrator's appoint-
ment,556 The arbitrator is responsible for making a full record of the hearing
proceedings. The hearing consists of direct examination of witnesses, cross-
examination and the submission of documentary proof. The parties may offer any
evidence they wish, subject to reasonable limits established by the arbitrator.
The arbitrator may receive the evidence of witnesses by affidavit, interrogatory,
or deposition. If the arbitrator determines that an inspection or investigation is
necessary, the arbitrator may request that the Administrator conduct an investi-
gation or inspection under CERCLA § 104(b). The administrator decides whether
or not to go forward with such an investigation or inspection.

The arbitration may even proceed in the absence of any party, who after
due notice fails to be present, fails to obtain an adjournment, or fails to have
evidence presented on his behalf. The party will be deemed to be in default and
the arbitrator will require the party who is present to submit such evidence
necessary for the arbitration to make an award. 557

After the parties have completed their presentations the arbitrator may close
the hearing, or request the submission of briefs or additional documents.

The arbitrator must make his decision within 90 days of the submission of
the claim to the Board. 558 This period may be extended upon consent of all
parties or by the Administrator when a large number of claims arising from a
single incident or set of incidents have been consolidated for hearing. The
arbitrator's decision must be written and contain a full statement of the basis and
rationale for the arbitrator's determination.

552. 40 CFR 305.40.

553. 40 CFR 305.40(b).

554. 40 CFR 305.41.

555. 40 CFR 305.41.

556. 40 CFR 305.42.

557. 40 CFR 305.42(i).

558. 40 CFR 305.43(a).

272 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Expedited procedures are used to resolve claims that do not exceed $20,000,
unless the Administrator demands full procedures. ^^^ In addition, the parties may
consent to the use of expedited procedures to resolve claims of more than
120,000. The $20,000 figure refers to the amount in dispute between the claimant
and EPA, regardless of the amount of the original claim. ^^^ The expedited
procedures differ from the full arbitration procedures in that the parties agree to
receive all required notices by telephone, followed by written confirmation. In
addition, the arbitrator selection process Is streamlined In that AAA submits a list
of five potential arbitrators to each party from which each party may strike two.
AAA will then appoint an arbitrator who will serve, subject to any finding of
partiality, bias or Interest requiring disqualification. The hearing must commence
within 60 days of the selection of the arbitrator. Most expedited cases will be
heard within one day. The arbitrator's decision is due five days after the close
of the hearing unless the parties agree to an extension.

The arbitrator's decision, whether rendered under the full procedures or
under the expedited procedures, may be appealed to the United States district
court In the district In which the arbitration took place. ^^^ CERCLA Instructs
the courts that an award or decision of a member of the Board is binding and
conclusive and Is not to be overturned except in cases of arbitrary or capricious
abuse of the member's discretion. CERCLA further provides that the arbitrator's
decision Is to have no collateral effect. An arbitrator's award Is not admissible
as evidence of any Issue of fact or law In any other proceeding under CERCLA or
any other provision of law.^^^

Finally, § 305.52 of the final rules Includes additional miscellaneous provis-
ions. Parties to arbitration must make objections, whether oral or written, at the
earliest possible opportunity or will be deemed to have waived the right to ob-
ject.^^3 The final rules also forbid the Administrator, the parties and other

interested persons from engaging in ex parte communication with the arbitra-
tor.^64

Merit Systems Protection Board.

Background. Congress passed the Civil Service Reform Act of 1978 (CSRA or
Act),^^^ to promote a more efficient "civil service while preserving the merit

559. 40 CFR 305.50(a).

560. 50 Fed. Reg. 51200.

561. CERCLA Sec. 112(b)(4)(G); 40 CFR 305.51(b).

562. jd^

563. 40 CFR 305.52(a).

564. 40 CFR 305.52(b).

565. 5 U.S.C. m 1101-8911 (Supp. IV 1980).

DISPUTE RESOLUTION PROCEDURES 273

principle in Federal employment. "566 jhe Act abolished the Civil Service
Commission and replaced it with the Merit Systems Protection Board (MSPB or
Board). Under the CSRA, the Board is an independent, quasi- judicial regulatory
agency created to protect the Federal merit systems from political abuse and to
resolve employee grievances within the systems. ^6'''

To resolve employee grievances, the MSPB began with a formal appeals
procedure (FAP) established under the CSRA. The Board, however, examined
alternatives to the FAP because of Congressional interest in expediting the
personnel actions subject to the Board's appellate jurisdiction. ^68 illustrative of
Congressional intent is the Senate report, accompanying CSRA, urging the MSPB
to develop alternative methods for resolving appealable matters including "suitable
forms of conciliation, mediation, arbitration, and other methods mutually agreeable
to the parties. "569

In 1981, a new chairman of MSPB, familiar with "expedited arbitration" as
used by unions, began to focus discussion on that procedure as interest in it
increased during the Air Traffic Controllers (ATC) union strike. The appeals from
the strikers, terminated from federal employment, eventually increased threefold
the FY 81 caseload of the MSPB.570 With the assistance of the Administrative
Conference of the United States (ACUS), the MSPB began development of what
became the "Appeals Arbitration Procedure" (AAP). The AAP, later modified as
the "Voluntary Expedited Appeals Procedure" (VEAP), is an alternative to the
more formal appeal procedure (FAP). The Board's objective was to design an
informal, simplified, less costly system to adjudicate routine, non-precedential
appeals while preserving fair, impartial forums. The Board's expectations are
reflected in its statement of goals and objectives:

• The system will not only be fair and fast, but also one which is
recognized and accepted as such by employees and agency management.

• It will encourage the informal resolution of disputes in the proceeding,
including settlement by agreement between the parties.

• It will cover as many kinds of appealable matters as are feasible for
resolution through the more informal process.

• It will improve the timeliness and cost-effectiveness of the process
leading to the resolution of disputed personnel actions.

566. S. Rep. No. 969, 95th Cong., 2d Sess. 2, reprinted in 1978 U.S. Code Cong,
and Ad. News 2723, 2724 (hereinafter, S. Rep. No. 969).

567. S. Rep. No. 969. The powers and functions of the MSPB are set out in 5
U.S.C. § 1205 (Supp. IV 1980).

568. Pub. L. 95-454, 92, Stat. 1111 (1078).

569. S. Rep. No. 969.

570. In Fiscal 1981, the MSPB issued 5,610 decisions at the regional level as part
of the regular caseload and received 10,356 Air Traffic Controller Appeals.
U.S. Merit Systems Protection Board, Study of MSPB Appeals Decisions In
FY 1981, December 1982 cited in Adams, supra note 170.

274 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

• It will exclude sensitive cases requiring more intense adjudicative
proceedings, based on the nature, gravity and complexity of the issues
involved.

• It will preserve the parties' rights to limited Board review of major
procedural and legal errors in the arbitration award. ^"^^

The MSPB introduced its proposal for the AAP in October 1982 to Federal
agencies, unions, bar associations, and public interest groups. ^^2 Comments were
requested and received in December 1982. MSPB modified the plan after review-
ing comments and distributed a new version. Bulletin No. 12, for public comment
on January 13. MSPB received comments on Bulletin No. 12 through January and
February and published interim final rules effective in the Federal Register on
March 18, 1983, announcing the introduction of appeals arbitration (AAP), and a
pilot study of the procedure to be conducted in four MSPB regions. ^^^ Comments
were Invited through July 1, 1983. The preamble to the interim rules did not
discuss the comments MSPB received nor reasons for changes from the earlier
drafts.

Several important revisions of the early proposals were included in the
interim final rules.

MSPB originally took the position that the AAP would only be available to
those appellants who were not members of a certified collective bargaining unit.
The major concern of union comments was that it would be "discriminatory" and
"anti-union" to only provide AAP to non-union members. In the interim final
rules, MSPB extended AAP eligibility to include the union appellants.
Perhaps the most important revision from the agency's viewpoint was the proposal
in Bulletin No. 12, and retained in the interim rules, to allow agencies a choice in
whether AAP would be used. Originally, agencies would have been required to
participate in AAP if the Regional Director so directed. All but one agency
commented that agency agreement should be necessary. Unions still favored
unilateral election of the AAP by the employee. ^'^'^ MSPB compromised in Bulletin
No. 12 in proposing that if an employee elected AAP, the final decision would be
made by the Regional Director after review of the petition for appeal and the
agency's response.

Another revision involved the parties' right to petition the full Board for a
review of the initial decision. Initially MSPB proposed that the Board would not
reconsider any AAP case with the exception of those requested by the Office of
Personnel Management. Other appellants could file civil suits from the arbitration
decision with a Circuit Court of Appeals or with the U.S. Court of Claims. Both
agencies and unions, in their comments, objected to the lack of appeal to the
Board. In Bulletin No. 12, the MSPB proposed a change allowing either party to

571. Merit Systems Protection Board, 48 Fed. Reg. 11399.

572. The packet was entitled Voluntary Arbitration; An Alternative to Resolution
of Employee Appeals.

573. 48 Fed. Reg. 11399. The four MSPB cities were San Francisco, Chicago,
Seattle, and Denver. Dallas later joined the pilot program.

574. Lawson, Roseann, Evaluation of the Merit Systems Protection Board's Appeals
Arbitration Procedure, p. 11.

DISPUTE RESOLUTION PROCEDURES 275

file a petition for review to the full Board if the party could (1) demonstrate
harmful procedural irregularity in the proceedings before the arbitration, or (2)
demonstrate clear error of law. 5*^5 jhe interim rules retained this change.

Appeals Arbitration Procedure. The election of the AAP begins with the
agency's notice of proposed action. The notice explains to the employee his right
to appeal and his option of using the FA? or AAP. The employee has 20 days to
appeal and has two chances to request appeals arbitration; first, at the time of
filing a petition for appeal, or, second, within 10 days from the date of the
Board's order of acknowledgement to the agency. The agency has 15 days from
the date of the Board's order to consent or decline to use AAP. Upon consent-
ing, the agency must file a designation of representative form and a summary of
facts and legal issues raised in the appeal. Final decision to process the case
under AAP or the FAP is left to the regional director after review of the petition
for appeal and the agency's response. The regional director or his designee re-
tains the right to convert the case to a formal appeals procedure (FAP), at any
time prior to issuance of the arbitration award, in the event circumstances
warrant. ^"^^

If the appeals arbitration procedure is granted, the regional director will
appoint an arbitrator, on a rotating basis, from a panel of presiding officials who
are designated for the new procedures and have received special training. ^"^"^

The initial role of the presiding official is that of mediator; to explore the
potential for a settlement and to encourage the parties to settle the case
voluntarily. If an informal settlement cannot be reached, the presiding official
will assume the role of arbitrator and proceed with the hearing if one has been
requested. The parties may still reach a voluntary settlement agreement at any
time until the issuance of an arbitration award. ^"^^ If the parties voluntarily
resolve the dispute without an award, the settlement agreement is final and
binding and the appeal will be dismissed with prejudice. If the terms are re-
corded and signed, they will be made part of the arbitration record and the Board
will retain jurisdiction to ensure compliance with the agreement. If the settle-
ment is not recorded, the Board will not retain jurisdiction to ensure com-
pliance.^79 The presiding official has the authority to take all necessary action
to conduct a speedy, fair, and impartial hearing and, unless expressly provided
otherwise in the regulations, to follow the regulations under 5 CFR Part 1201,
Subpart B.580

Unique to the AAP is the requirement of both parties to file a Joint

575. The formal appeals procedures (FAP) uses the less restrictive review stan-
dard: "contrary to law, rule or regulation."

576. § 1201.201(a)(b)(c).

577. 48 Fed. Reg. 11399. The training of presiding officials and regional directors
for the four pilot study sites was held at MSPB headquarters in Washington,
D.C. on March 14 and 15, 1983, three days prior to the introduction of the program.

578. § 1201.216(a).

579. § 1201.216(b)(l)(2).

580. § 1201.204 (C)(D).

276 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Arbitration Record (JAR) with the purpose of bringing the parties together to
narrow and focus the Issues in dispute. The JAR is to be filed within 30 days
from the date of the Board's order of acknowledgement and should include a
statement of issues, witness lists, a request for hearing and two possible dates for
the hearing. 581 Informal discovery will usually precede preparation of the JAR.
While the rights to formal discovery are waived by the parties in electing to use
the AAP instead of the FAP, the parties have the duty to include all known
relevant materials with their submissions. ^82

Either party may request a hearing which is to be held at the employment
site and must be scheduled within a 15-day period following the due date, or
receipt, of the JAR. 583 jhg ^AP hearing is similar to but more informal than
that under the FAP. Formal rules of procedure do not apply but may be liberally
construed and used as a guide to admissibility of evidence, motions, filings of
briefs, etc. 584

Agencies are required to make their employees available as witnesses when
requested by the presiding official. 585 xhe arbitrator may also request the
production of additional information or witnesses if needed for resolution of the
matter. 586 jn the event a party fails to cooperate, the presiding official may
impose appropriate sanctions. 587

Unlike the Formal Appeals Procedure, MSPB keeps no official transcript of
the AAP hearing, although the parties may provide for an unofficial one with use
of a tape recorder or court reporter.

The record is closed at either (a) the conclusion of the hearing or, if no
hearing has been convened, (b) on the date set for receipt of submissions of the
parties. The presiding official has discretion to accept additional evidence or
arguments after the closing of the record if it can be shown that the new and
material evidence was not available prior to closing of the record. 588

The presiding official is to issue the arbitration award no later than 30 days
from the date the JAR was received by the Board, (60 days from the date of the
acknowledgement order) which is half the time allowed under the FAP. 589 jf no
hearing was conducted and settlement was not reached, the presiding official is to

581. § 1201.202(c).

582. 48 Fed. Reg. 11400.

583. § 1201.205(a)(c).

584. 48 Fed. Reg. 11400.

585. § 1201.206(a).

586. 48 Fed. Reg. 11400.

587. 8 1201.213.

588. 8 1201.215(a)(b)(c).

589. 8 1201.204(b).

DISPUTE RESOLUTION PROCEDURES 277

issue a written decision within 15 days after the record is closed. 590 -phe
decision is to be briefer in scope than it is under the FAP due to its non-prece-
dential character and reliance on the joint record. It is to include a summary of
the basic issues, findings of fact and conclusions of law, a holding affirming,
revising or modifying the appealed action, and an order of appropriate relief. 591
The award will become final after 35 days if no petition for review is filed. ^92

Under the interim rules, the Board would grant only a limited review of the
decision of the presiding official. By electing the AAP, the parties waived their
right, which was available under the FAP, to petition for review on grounds of
new and material evidence. 593 The Board would only grant review of a petition
which established: (a) demonstrated harmful procedural irregularity in the
proceedings before the arbitrator, or (b) clear error of law. The Board will issue
a final decision no later than 15 days from the close of the respondent's filing
deadline. The appellant retains the right under the AAP to file an appeal of the
final order or decision of the Board with the U.S. Court of Appeals. 594

Voluntary Expedited Appeals Procedure. In response to early evaluation
findings, the MSPB made several modifications to the AAP in July 1984, before
the pilot study was completed. First, the name of the AAP was changed to "the
voluntary expedited appeals procedure" (VEAP) to reduce the confusion of the
AAP with labor arbitration and to emphasize the parties' right of choice. Second,
the MSPB also changed the standard of review of VEAP decisions to be uniform
with those of the FAP to ensure fairness regardless of forum. Finally, the MSPB
extended the time allowed for its final decision on a petition for review from 15
to 35 days to conform to that permitted by FAP. 595

Evaluation of Appeals Arbitration. The success of the AAP program can be
measured by using the MSPB's statement of goals and objectives for the AAP as a
basis for evaluation. It reflects an interest in providing federal employees and
agencies with a more expeditious, less costly means of resolving personnel
disputes while also affording a fair, impartial forum for hearing these disputes.
From the MSPB perspective, employee rights should be balanced against the
efficiency of the system. 596 xhe MSPB would also measure success by the

590. § 1201.217.

591. § 1201.217.

592. § 1201.217.

593. The waiver requirement was dropped in July, 1984 as a result of the AAP's
modification.

594. § 1201.221.

595. The provisions for judicial review are found in 5 U.S.C. § 7703.

596. Meeting of Roseann Lawson and Paul D. Mahoney,, Assistant Managing
Director for Management, MSPB, April 19, 1983. Cited in Lawson, Evaluation
of the Merit Systems Protection Board's Appeals Arbitration Procedures, Part
II - Introduction, p. 19.

278 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

number of parties who use the procedure time after time.^^'

At the onset of the program, agencies and appellants shared the concern
that procedural and substantive equity might be affected In an expedited proce-
dure and would measure success by fairness to the parties. They would consider
the procedure a success If the elements of "due process" were preserved while
ensuring that the outcomes remain consistent to those of the more formal
procedure. ^98 one attorney, who represented employees, believed that to be suc-
cessful and fair, decisions of presiding officials should reflect the facts and
Issues raised in the JAR and In the proceedings. ^^^ Another commentator
suggested that the AAP will be successful if It Is attractive and workable for
inexperienced representatives and pro se appellants. ^^^ Another appellant's
attorney believed that for the AAP to be a success, the presiding officials' awards
should withstand Judicial review. ^^^ Finally, from the Congressional perspective,
the AAP would be labeled successful If the procedure could get away from the

confrontational mode that exists at present and if the procedure could reduce
costs. 602

A study evaluating the AAP pilot program was conducted by the Public
Policy Program of the George Washington University under contract with the
Administrative Conference of the United States. The study was conducted to
evaluate the success of the AAP In achieving the objectives mentioned above. It
focused on measures of timeliness, cost effectiveness, equity and fairness. The
following Is a summary of the study's findings and recommendations.

The study applied a classic evaluation model by treating all AAP appeals
cases as members of the experimental group matched against a control group
consisting of similar FAP cases in the same regional site. The FAP cases used in
matching were chosen from those that were eligible for the AAP but instead
followed the FAP. The guidelines used for matching encouraged selection of FAP
cases which would have used roughly the same resources if converted to AAP.^^^
The study intended to isolate the true effects of the AAP.

The matching process began on July 1, 1983, in the four MSPB regions, and

597. Paul Trayers, Labor Counsel, MSPB at MSPB Training Session, March 15 and
16, 1983. Lawson, p. 19.

598. Adams, supra note 170 at 37.

599. Interview with Joseph Gebhardt, attorney practicing before the Board, May 2,
1983. Lawson, p. 19.

600. Edward Passman, attorney practicing before the Board in April 18, 1983
article in Federal Times. Lawson, p. 20.

601. Interview with Joseph B. Scott, attorney practicing before the MSPB, May
18, 1985. Lawson, p. 20.

602. Interview with James Cowen, Chief Counsel, Subcommittee on Civil Service
and General Services, Senate Government Affairs Committee at the time of
the debate and passage of the Civil Service Reform Act. Mr. Cowen was the
minority counsel to the Subcommittee. Lawson p. 21.

603. Adams, supra note 170 at 41.

DISPUTE RESOLUTION PROCEDURES 279

then after October 1, 1983, in the Dallas region which joined the pilot program
late. The matching stopped on March 31, 1984. Fifty-four appeals cases formed
the experimental groups. ^^^

The data used to develop the measures of the AAP's timeliness, cost-effect-
iveness, and equity and fairness were drawn from administrative records and
surveys. The observed differences between the two groups in the four measures
of success were tested statistically to determine if they reflect differences due to
the appeals procedures used or merely differences due to random error. ^05 jhe
statistical findings were supplemented by field observations of the implementation
of the AAP.

Implementation of the AAP. The study assessed how faithfully the design of
the AAP program had been followed in the field and examined departures from
the design to measure the impact on the program's success.

The results were mixed. The MSPB found that it could increase the number
of parties exposed to AAP by being flexible in allowing parties to use the AAP
even after the election time expired. As a consequence, however, the presiding
officials and the parties themselves felt extra pressure to meet the 60 day sche-
dule.^^^ The MSPB was also flexible in solving the logistical problems of creating
a JAR by allowing the parties to submit separate statements. 607

The presiding officials varied in their emphasis on their roles as mediators in
effectively facilitating voluntary settlements. 608 xhe study group has recom-
mended more extensive training of the presiding officials.

The study also found that the regions applied different AAP eligibility stan-
dards. San Francisco, for example, was very strict in accepting the expediting
appeals cases and in closing the appellants' ten-day window for electing AAP.
The study group has recommended setting a uniform standard closer to the more
flexible one applied in Chicago and Dallas. 609 The experience in Chicago indi-
cated that persistent outreach efforts by MSPB officials also can significantly
increase the number of agencies and appellants electing to use the AAP. During
the 18 month study, only 102 appeals, just over two percent, of 4,475 appeals
filed, were processed under the AAP and VEAP. Chicago handled 59.3% of the
total.

Timeliness and Cost-Effectiveness. The study found that the AAP is

604. The distribution of appeals was as follows: Chicago - 32, Dallas - 4, Denver
- 1, San Francisco - 15, and Seattle - 2.

605. The statistical procedure employed was a "pair wise test of mean differences
for correlated samples" from T. H., Wonnacott and R. J. Wonnacott, Intro-
ductory Statistics, 2nd ed., New York: John Wiley and Sons, Inc., 1972, pp.
171-173. Adams, supra note 170 at 58.

606. Adams, supra note 170 at 92.

607. Id. at 62.

608. JW. at 92.

609. Id.

280 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

unequivocally more expeditious than the FAP. The AAP cases in the pilot study
were processed in less than half the time of their matched FAP cases. ^10 Also,
the odds of cases reaching voluntary settlement are one out of seven, which is
better than twice those in similar FAP cases. ^^^

For the MSPB, the AAP is clearly cost-effective at a savings of over 40
percent per case. The agencies have also found the procedure to be less costly
in cases where travel was required, where a hearing was requested and witnesses
called, and when there was an interest in voluntary settlement. ^12 j-y^Q savings
for the appellants was difficult to judge due to the variance among the appeals
observed. The difference from the FAP is not statistically significant for that
group.

Equity and Fairness. The study focused on whether the gains of cost-ef-
fectiveness and time came at the expense of equity and fairness in both substance
and procedure. These issues were examined using data drawn from administrative
records and mail survey of experimental and control groups.

One of the most important concerns of agencies and appellants was whether
the AAP decisions would be consistent with those under the FAP. The study
made an indirect test by describing the likelihood that the appeals decision would
support the initial agency decision in matched AAP and FAP cases. No difference
in the outcome was observed. 613

Another measure of equity was whether AAP was more accessible to appel-
lants who wished to represent themselves. The results do not point to pro se
appellants' ready adoption of the AAP where only 25% of the experimental (AAP)
group involved pro se appellants compared to 39% pro se appellants in the control
group and 29% pro se appellants in a larger group of FAP cases in the five study
sites. 61^ The study recognizes that appellants have strong incentives under both
procedures to employ counsel.

Another measure of equity is the parties' continued willingness to use the
AAP. While the evidence does not indicate a steady increase in the number of
appeals adjudicated under the AAP, it does show a continued willingness to use
the procedure. In Chicago for example, at least seven agencies consented to use
the AAP a second time after using it once. 615 xhe reason the overall number of
cases adjudicated under the AAP remained low was that many of the agencies
were reluctant to try the AAP at all. Throughout the pilot study, agencies in
three study sites for example consented to use the AAP in little more than ten
percent of the appeals eligible whereas appellants consented in no fewer than 25%

610. jd. at 95.

611. jd. at 96.

612. jd. at 121.

613. jd. at 120.

614. jd. at 127.

615. Id. at 130.

DISPUTE RESOLUTION PROCEDURES 281

of the cases.

616

Both the appellants and the agencies who used the AAP were also relatively
satisfied with the fairness of the various procedural steps of the AAP. The first
procedural step examined was the preparation of the Joint Arbitration Record
which is unique to the AAP and intended to bring the sides together to reduce
and focus the areas of dispute. The presiding official's response was that the
JAR worked "reasonably" well despite initial logistical problems. The agencies and
appellants also agreed that the JAR expressed all the important facts and issues
but more so from the agency's perspective than the appellants'.

Initially, the parties had expressed concern about the AAP's requirement that
they waive their rights to formal discovery which is available, if necessary, under
the FAP. The parties' response to the study's questionnaire revealed that less
than half of the appellants felt they were able to obtain the information needed
to prepare the JAR while six out of ten agency representatives either agreed or
strongly agreed that they were able to get the needed information. In comparison
to the responses from the FAP group, the AAP fared well although the difference
is not statistically significant. ^^"^

The parties were also satisfied with the use of the informal hearing under
the AAP. There is no significant difference in satisfaction between the AAP and
FAP in this respect. This response is consistent with the presiding officials'
observations that they had already considered the FAP hearings to be rather
informal.

Finally, there was some concern that fairness might be sacrificed in the
expedited schedule that parties are required to follow in presenting their case.
Although the parties responded favorably to the question of whether the AAP
allowed enough time for presenting an appeal, their satisfaction is significantly
less than the parties appealing under the FAP.^^^

The study found that the parties' general perception was that the AAP was
fair and equitable. Seventy-six percent of the appellants strongly agreed or
agreed that the AAP was equitable and eighty percent of the agency representa-
tives reached the same conclusion. ^^^ A comparison of these responses to the
responses from the control group showed no statistical difference in the level of
the parties' satisfaction.

616. Id.

617. Id. at 136.

618. Id. at 141.

619. Id. at 142.

282 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

APPENDIX III
AGENCY OVERSIGHT OF PRIVATE DISPUTE RESOLUTION MECHANISMS

Securities and Exchange Commission Oversight of Self Regulatory Organisations

The Securities and Exchange Commission oversees the activities of the
national securities exchanges and the over the counter securities markets. The
SEC's relationship with the exchanges is referred to as self-regulation oversight.
As one commentator notes:

Under a commonly held perception of this relationship, the
exchanges and the National Association of Securities Dealers
(NASD) supervise their respective markets while the Com-
mission asserts its reserve power only if the SRO's (self-
regulatory organizations) initial exercise of authority is
inadequate. ^20

In an often quoted passage William O. Douglas, one-time Chairman of the
SEC and later Supreme Court Justice describes the relationship between the
exchanges and the SEC:

The exchanges would take the leadership with Government
playing a residual role. Government would keep the shotgun,
so to speak, behind the door, loaded, well oiled, cleaned,
ready for use but with the hope it would never have to be
used."^^

This general description of the SEC's role in the regulation of securities
markets may understate the central position the SEC actually holds in the field of
securities regulation. Although the emphasis is upon self-regulation, the SEC
plays more than a residual role. The SEC's power over this self regulation is
clearly set forth in the Securities Reform Act of 1975. This Act sanctioned the
Commission's broad authority over the exchanges. An exchange must apply to the
Commission to register as a national securities exchange. ^^2 -phe Commission is
also empowered to "abrogate, add to, and delete from the rules of a self-regula-
tory organization as may be necessary to insure the fair administration of the
SRC and to insure compliance with the Securities Exchange Act.''623 fhe

Commission must also receive notice of all disciplinary actions taken by SRO's
against their members and is empowered to review these actions. The Commission
may also review denials of membership or participation in an SRO. Finally, the
Commission may suspend, revoke, censure or impose limitations upon the activity
of an SRO if it finds "after notice and opportunity for hearing, that such
self-regulatory organization has violated or is unable to comply" with the
Securities Exchange Act or rules promulgated under it, or the SRO's own rules.

620. David A. Lipton, The SEC or the Exchanges: Who Should Do What and
When? A Proposal to Allocate Regulatory Responsibilities for Securities
Markets, 16 UC Davis LR 527, 528 (1983).

621. Id. quoting W. Douglas, Democracy and Finance 82 (1940) (speech delivered
on May 20, 1938).

622. 15 U.S.C. 78s(b)(l).

623. 15 use 78s(c).

DISPUTE RESOLUTION PROCEDURES 283

The Commission also may at its discretion conduct investigations to determine
whether any person has violated, is violating or is about to violate any provision
of the Security Exchange Act, its rules or the rules of a National Securities
Exchange. The Commission may not, however, seek an injunction or mandamus
order against any person for violation of a rule of a national securities exchange
unless that exchange is unable or unwilling or otherwise has not taken such
action. 624 Thus the Commission has significant power with which to exercise
oversight over the self-regulatory organizations.

An example of the interaction between the Commission and the exchanges is
the experience of the SEC's encouragement of the use of arbitration for the
resolution of disputes between registered broker-dealers and their customers.
Binding arbitration clauses are not enforceable with respect to Federal Securities
laws, 625 but the Commission has strongly endorsed the use of "fairly administered
arbitration procedures as the most cost effective means of resolving certain
disputes between broker-dealers and their customers. "626

On June 9, 1976, the Commission invited comments concerning the develop-
ment of a nationwide dispute settlement procedure for resolving disputes between
registered securities broker-dealers and their customers. 627 -phe Commission
sought to establish a uniform system for resolving disputes involving small claims
to be administered by the SROs. The Commission explained "this system could
provide for the efficient and economical disposition of grievances and should not
be burdensome, complex or costly to the investor; in other words, the system
could function in a manner similar to a small claims court." The Commission
anticipated that "a streamlined dispute grievance procedure will increase the
effectiveness of existing arbitration facilities made available by the American
Arbitration Association, The American, Boston, Cincinnati, Midwest, New York,
Pacific and Philadelphia Stock Exchanges, the Chicago Board Options Exchange,
and the National Association of Securities Dealers." The comments received by
the Commission were to be placed in file No. S7-639.

On November 15, 1977, the Commission requested comments on a proposed
dispute resolution mechanism prepared by the SEC's Office of Consumer Affairs.
The Office of Consumer Affairs recommended a three part integrated nationwide
system for complaint processing and resolution of investor disputes after conclud-
ing that "existing mechanisms for resolving such controversies viz. litigation and
industry sponsored arbitration could be more responsive to the needs for inves-
tors."628 The first stage of the mechanism recommended by the Office of
Consumer Affairs consists of requiring brokerage firms to establish a system for
the receipt, processing and disposition of investor complaints. The firms would be
required to keep records of this system and periodically report on the system to
the Commission and the SROs. The second stage would consist of the creation of
a uniform mediation/arbitration program. This program would be administered by
an independent organization which would attempt to mediate all disputes and

624. 15 U.S.C. 78a.

625. See, Wilco v. Swann, 346 U.S. 427 (1953).

626. Securities Exchange Act Release No. 19813, May 26, 1983.

627. Securities Exchange Release No. 12528.

628. Securities Exchange Release No. 12974.

284 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

provide arbitrators for disputes where mediation is unsuccessful. This stage would
include a streamlined arbitration process for resolution of disputes of less than
$5,000. The third stage concerns claims of less than $1,000. These claims would
be decided by a network of small claims adjusters on the basis of written submis-
sions.

On April 26, 1977 in Securities Exchange Act Release No. 13470 the Commis-
sion deferred direct action on the development of arbitration procedures in
response to the securities industry's self-regulatory organizations' decision to
establish a conference to consider the implementation of a nationwide investor
dispute resolution system. The Commission states "Although the Commission does
have extensive authority over the self-regulatory organizations, their rules and
procedures, it is of the view that it would not be useful at this time to interpose
itself in this area since the Industry has manifested Its intention to take affirma-
tive action." The SRO's organized the Securities Industry Conference on Arbitra-
tion (SICA) which drafted a Uniform Code of Arbitration which has been adopted
by all ten of its self-regulatory members and approved by the Commission.

The simplified procedures established by SICA may be applied in any dispute
between an Investor and a broker-dealer in which the claim involves an amount of
$2,500 or less. A person with a claim commences this process by filing a claim
letter, a submission agreement (an agreement to submit to arbitration and to abide
by its decision), and a $15 deposit with the Director of Arbitration of an SRO.
The Director of Arbitration notifies the respondent of the claim and allows the
party twenty days in which to file an answer and/or counterclaim. The Director
also selects an arbitrator to hear the dispute from a roster maintained by the
sponsoring SRO. The arbitrator may request that two additional arbitrators be
empaneled to hear any dispute. The parties will be notified of the name(s) and
affiliations of the arbitrator(s). Each party may request that an arbitrator be
disqualified if the party has cause to believe the arbitrator cannot make a fair
and impartial award.

Once selected, the arbitrator will make a decision and grant an award on the
basis of the written submissions of the parties unless the investor requests or
consents to an oral hearing. The arbitrator may require the parties to submit
additional documentary evidence. The arbitrator's decision need not detail the
reasons for an award and this decision is final.

This example illustrates the relationship between the SEC and the self-regu-
latory organizations. The SEC proposed the establishment of uniform arbitration
procedures for the administration of small claims, but deferred governmental
action when the SROs undertook to institute a program themselves.

Federal Trade Commission

The Federal Trade Commission encourages the development of informal dis-
pute settlement procedures to resolve disputes concerning written warranties as
well as disputes concerning matters within the Commission's jurisdiction under
Section 5 of the Federal Trade Commission Act. The use of informal dispute
settlement procedures to resolve warranty disputes Is encouraged in the Mag-
nuson-Moss Warranty Act629 xhe FTC also encourages the use of informal
dispute settlement procedures through the use of consent orders under Section 5

629. 15 U.S.C. 8§ 2301-2310.

DISPUTE RESOLUTION PROCEDURES 285

of the FTC Act. The most significant effort in this area involves the consent
order approved in the case.^^O

Informal Dispute Settlement Under the Magnuson-Moss Warranty Act. The
Magnuson-Moss Warranty authorizes the establishment of informal dispute settle-
ment procedures by one or more warrantors to resolve disputes concerning written
warranties. The Act states, "Congress hereby declares it to be its policy to
encourage warrantors to establish procedures whereby consumer disputes are fairly
and expeditiously settled through informal dispute settlement mechanisms. "^31 j^^q
Act directs the Federal Trade Commission to issue rules prescribing the minimum
requirements for an informal dispute resolution mechanism. These rules appear at
15 CFR Section 703. A warrantor who complies with the Act and the rule
promulgated under it may make resort to the mechanism a condition precedent to
a civil suit under the Act. The Commission is authorized to review these
mechanisms. The Conference Report makes clear, however, that this authority is
not intended to preclude the courts from "reviewing the fairness and compliance
with FTC rules of such procedures, "^32

The Federal Trade Commission issued its Informal Dispute Settlement
Procedure Rule on December 31, 1975.^33 jhe Commission noted, "the intent of
the Act is to provide for a fair and expeditious settlement of consumer warranty
disputes, through informal mechanisms established voluntarily by warrantors. "^34
The rule seeks to "avoid creating artificial or unnecessary procedural burdens so
long as the basic goals of speed, fairness and independent participation are
met. "635

Under the rule, a warrantor must inform a consumer of the existence of the
mechanism on the face of the warranty. This notice must include the name and
address or toll-free telephone number of the mechanism. The notice must inform
the consumer that the mechanism is a prerequisite to a suit under the Magnu-
son-Moss Act but is not a prerequisite to any other legal remedy.

The warrantor must provide a consumer with either a form to file with the
mechanism or a toll-free telephone number to call in the event a dispute
arises. 636 jhe warrantor must also provide the consumer with a description of
the mechanism procedures. 637 ^ warrantor is free to maintain its own wholly
internal complaint resolution procedures in addition to establishing a mechanism
under Magnuson-Moss so long as consumers are not required to seek redress from

630. In the Matter of General Motors Corporation, Docket No. 9145 (1983).

631. 15 U.S.C. § 2310(a)(1).

632. Consumer Products Warranty and FTC Improvements Act; Conference
Report to accompany S.356, December 18, 1974, p. 26.

633. 40 Fed. Reg. 60190 (1975).

634. 40 Fed. Reg. 60193.

635. 40 Fed. Reg. 60193.

636. 16 CFR 703.2(c)(1).

637. 16 CFR 703.2(c)(3).

286 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

this Internal process.

The cost of the mechanism is to be borne by the warrantor. The Commis-
sion's rule prohibits warrantors from charging consumers a fee for use of the
mechanism. 638 This prohibition satisfies the concerns raised in the House

Committee Report which states, "Informal dispute settlement procedures must also
prohibit saddling the consumer with any costs which would discourage use of the
procedures. "639 jf^^ Commission's prohibition on charging a fee for use of the
mechanism has been criticized as encouraging frivolous complaints. 640 j^q
Commission adopted this position, however, because, 1) the warrantor may compel
a consumer to use the mechanism prior to suing under the Act, and 2) the
decision of the mechanism Is non-binding. 641

A mechanism established under the Act must function Independent of the
warrantor's control. 642 ^he rule requires that a mechanism be "sufficiently

insulated" from a warrantor's control or influence but does not prescribe the
structure of the mechanism. The majority of the decisionmakers in a given
dispute must be persons "having no direct involvement in the manufacture,
distribution, sale or service of any product. "643 q^e rule also includes the general
obligation that "members [of the mechanism] shall be persons interested in the
fair and expeditious settlement of consumer disputes. "644

The minimum operating procedures for a dispute settlement mechanism are
set forth In 16 CFR 703.5. The mechanism must first notify both parties upon its
receipt of a complaint. The mechanism is further directed to "investigate, gather,
and organize all information necessary for a fair and expeditious decision. "645 j^
the event that information obtained from the parties Is contradictory, the
mechanism must offer each party the opportunity to submit a written rebuttal or
explanation. The mechanism may allow oral presentations only in disputes where
both the warrantor and the consumer consent. The rule does not require the
mechanism to offer this option nor does it prescribe the form of oral presentation
which may be offered.

The mechanism must issue a decision within 40 days of receiving a com-
plaint. This time limit may be extended if the delay is attributable to the
consumer. The mechanism decision is non-binding. Upon making its decision, the
mechanism must determine the extent to which the warrantor will abide by its

638. 16 CFR 703.3(a).

639. House, Committee on Interstate and Foreign Commerce, Con-
sumer Product Warranties and FTC Improvements Act, Report to accompany
HR 7917, June 13, 1974, p. 40.

640. 40 Fed. Reg. 60204.

641. Id^

642. 16 CFR 703.3(b).

643. 16 CFR 703.4(b).

644. 16 CFR 703.4(c).

645. 16 CFR 703.5(c).

DISPUTE RESOLUTION PROCEDURES 287

terms and inform the consumer of this fact. The mechanism must also monitor
the performance of the parties and keep statistics of the number of disputes
resolved and the degree of warrantor compliance.

The informal dispute settlement mechanism authorized by Magnuson- Moss is a
voluntary procedure. A warrantor who establishes a mechanism may, however,
make resort to it a prerequisite to a lawsuit under Magnuson- Moss. Although the
mechanism decision is non-binding, it is admissible in court. 646

Informal Dispute Settlement Under Section 5 of the FTC Act. The FTC has
begun to encourage the establishment of informal dispute settlement procedures
under its authority granted in Section 5 of the Federal Trade Commission Act to
prevent businesses from pursuing unfair or deceptive trade practices. A principal
example of this effort is a recent agreement reached between the FTC and
General Motors (GM). In 1983 the Commission approved a proposed consent
agreement with General Motors Corp. (GM) settling In the Matter of General
Motors Corporation. 647 jhe complaint filed by the FTC in August, 1980 alleged
that GM violated Section 5 of the FTC Act by failing to notify customers of
serious problems or defects in its products. The complaint defines serious
problems or defects as "the occurrence or likely occurrence of an abnormal
number of failures or malfunctions of a component, or group of components or
systems where such failures or malfunctions are costly to correct or may sub-
stantially affect the quality, reliability, durability or performance of a motor
vehicle. "648 The complaint lists three components as illustrative of the existence
of defects in GM motor vehicles. Specifically, the complaint alleged defects
existed in 1) the THM 200 transmission, used in five to six million automobiles
since 1976, 2) the camshaft used in fifteen million 305 and 350 cubic inch V-8 en-
gines since 1974, and 3) the fuel injection pumps and fuel injectors used in half a
million diesel engines since 1977. The complaint alleges GM knew or should have
known of the existence of problems or defects in its products and failed to notify
consumers of these facts. The failure to disclose the existence of serious
problems or defects is alleged to constitute an unfair or deceptive act or practice
in or affecting commerce in violation of Section 5 of the FTC Act.

Under Section 5 of the Act after the Commission issues a complaint a
hearing is held to allow the party to show why the Commission should not issue
an order compelling the party to cease and desist from the violation charged.
The Commission's decision is reviewable by the U.S. Court of Appeals; findings of
fact, however, if supported by evidence are conclusive. After the practice has
been determined to be unfair or deceptive and a cease and desist order has
become final, the Commission may seek consumer redress under Section 19 of the
Act. Under this Section the Commission may commence a civil action against a
party subject to a cease and desist order and obtain consumer relief if a court is
persuaded that the act or practice involved is one which a reasonable man would
have known under the circumstances was dishonest or fraudulent. In such a
situation a court may grant relief as it finds necessary to redress injury to
consumers resulting from the deceptive act or practice. Section 19(b) states,
"such relief may include, but shall not be limited to, rescission or reformation of
contracts, the refund of money or return of property, the payment of damages.

646. 15 U.S.C § 2310(a)(3), 16 CFR 7035(j).

647. Docket No. 9145.

648. Complaint, p. 1.

288 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

and public notification" of the deceptive act or practice. In the case of the Gen-
eral Motors agreement, the Commission chose to forego this litigation option In
favor of the settlement agreement.

Under the consent order signed by the Commission, CM agreed to establish a
nationwide arbitration program to settle customer complaints concerning CM
powertraln components, including transmissions, camshafts and fuel injection
systems. This arbitration program expands upon an existing arbitration program,
the Council of Better Business Bureau's National Mediation/ Arbitration program in
which CM has participated since 1981. The program established under the consent
order modifies BBB's existing arbitration program in several fundamental respects.
Under BBB's existing program, upon receiving a consumer complaint the BBB staff
contacts the business involved in the dispute and attempts to resolve the dispute
through mediation between the consumer and the business. If mediation fails, the
parties may agree to enter into binding arbitration. The consumer pays no fee
for participation in the program. The mediation/arbitration steps remain the same
under the FTC consent order except that under the consent order the arbitration
result Is binding only upon GM; the consumer remains free to reject this result
and seek compensation In court.

Arbitrators are drawn from the rolls of BBB's trained volunteer arbitrators.
The consumer and GM each receive a list of 5 potential arbitrators whom they
must rank in order of preference. BBB then appoints the Individual with the
highest mutual rating as arbitrator. Under the consent agreement GM must
strike from consideration any arbitrator who has heard three or more disputes
involving the components specified in the order. This situation should not arise
however as it Is BBB's practice to limit Its arbitrators to no more than two cases
for the same division of GM. This serves to avoid unfair selection advantage. ^49
Technical experts may be provided by the BBB to assist the arbitrator in
making a decision. The parties, however, remain free to bring their own techni-
cal experts to testify at the arbitration.

The arbitrator is to render a decision within 10 days. The BBB states that
"decisions by the arbitrators, who represent a cross section of their communities,
will be based on standards of consumer expectation rather than legal or en-
gineering standards. "650 jYie decisions are intended to reflect the consumers
conception of fairness.

GM agreed to submit all complaints concerning powertraln components to
this arbitration process. Arbitration will be offered initially in 39 cities, however
BBB is prepared to administer GM cases in all of its 156 Bureaus. 651 This
program is open to all individuals with complaints concerning GM powertraln com-
ponents, regardless of whether the consumer still owns the automobile.

GM agreed to notify by direct mail all those who have complained either to
the FTC, a state agency or GM about a specified component of the existence of

649. Comments of Council of Better Business Bureaus, FTC Docket No. 9145, p. 2036.

650. Comments of Council of Better Business Bureaus, FTC Docket No. 9145, p.
2026.

651. Letter Trom Dean W. Determan, BBB Mediation/ Arbitration Division to Carol
Crawford, FTC Bureau of Consumer Protection, June 17, 1983, FTC Docket
No. 91455, p. 1740-1.

DISPUTE RESOLUTION PROCEDURES 289

the arbitration program. GM also agreed to publicize the arbitration program in
full page advertisements in national magazines to appear initially twice and later
three times each year. GM will also maintain a toll-free telephone number to
provide information concerning this program. The consent agreement binds GM
for a period of eight years.

In addition to agreeing to submit all powertrain component disputes to the
BBB's arbitration process GM also agreed to make its product service publications
(PSPs) available to consumers for the next eight years. PSP's are notices and
articles distributed to GM dealers and employees which describe repair and main-
tenance procedures for GM vehicles. These documents may help consumers
identify the source of problems they have experienced with GM cars. GM also
agreed to prepare an index of these previously internal documents and to make
the index and the documents themselves available to the public. These indexes
will begin with the model year 1982. Under the consent agreement GM also
agreed to publicize the availability of the PSP's in the same manner as it will
publicize the existence of the arbitration process. GM is permitted to charge
consumers for each PSP ordered in accord with a price scale established in the
consent order. Consumers may also obtain subscriptions of all PSPs for a given
model year, beginning in 1984, at a cost not to exceed a reasonable cost or the
cost charged to GM dealers.

The Federal Trade Commission and GM also developed "Background State-
ments" or fact sheets which consumers may submit to an arbitrator. A separate
background statement was prepared to address the THM 200 transmissions,
camshafts and lifters, and diesel fuel injection systems. The purpose of these
statements is to provide arbitrators with a general background of the dispute
involving these specific powertrain components.

This consent agreement has been described as the best alternative available
by which the Commission may obtain redress for consumers who purchased GM
cars with powertrain defects. The Commission's rejection of GM's offer to
establish this arbitration program would have left GM car owners awaiting
resolution of the FTC's complaint against GM through litigation — a process
estimated to take up to ten additional years. As FTC Commissioner Patricia P.
Bailey comments, "the settlement offers the commission the fastest and indeed the
only feasible way to redress the injuries suffered by many GM owners. Our sole
alternative is continued litigation which would take until at least the end of the
decade to resolve. "652 Commissioner George W. Douglas agrees with Commis-
sioner Bailey noting "while the settlement is not perfect — as is true of any
negotiated agreement — it nevertheless provides an immediacy of relief and a far
higher degree of certainty for a much wider range of injured consumers than the
Commission could expect to secure through litigation. "653 The GM consent

agreement was criticized by FTC Commissioner Michael Pertschuk. He argued
that despite the attractiveness of several of the features of this program, arbi-
tration which resolves consumer disputes on an individual case-by-case basis is
inappropriate in a situation where "there is proof of systematic defects common to
an entire class of similarly situated consumers. "654 Commissioner Pertschuk
contends "the only rational and equitable remedy for the common injury suffered

652. Statement issued April 26, 1983.

653. Statement issued November 16, 1983, FTC Docket No. 9145, p. 2722.

654. Statement issued, April 26, 1983.

290 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

in a case like this is automatic compensation for damages, not standardless
mini-trials pitting individual consumers against the largest company in the
world. "655 He would have preferred the Commission settle the case by obtain-

ing direct automatic refunds for consumers as had been obtained in several cases
in the past. Commissioner Pertschuk notes however that CM refused to agree to
any direct redress program in settlement negotiations.

The majority of FTC Commissioners believes GM's establishment of a private
dispute resolution mechanism designed to speedily resolve disputes, coupled with
the increased disclosure of information contained in GM's PSPs and the availabil-
ity of FTC/GM background statements afforded the Commission the best oppor-
tunity for providing GM car owners with a viable remedy for injuries suffered as
a result of purchasing defective GM cars. The Commission preferred this consent
agreement to the alternative of pursuing resolution of the dispute through
protracted litigation.

During the 60 day public comment period which followed the Federal Reg-
ister's publication of the consent agreement the Commission received comments
from consumers, consumer advocates, GM, the Council of Better Business Bureaus,
state attorneys general and other interested parties. GM defends the consent
order as a reasonable negotiated compromise to a suit the FTC had little chance
of winning. Initially GM notes the long delays and difficult course the Commis-
sion would have to pursue in order to obtain consumer redress through litigation.
The Commission would have to win in an administrative proceeding under Section
5 of the FTC Act, succeed through appeal, then file suit in a U.S. District Court
under Section 19 for consumer redress and succeed through that appeal. GM
contends that the FTC's Section 5 case is grounded in a novel ill-defined legal
theory. The FTC alleged GM committed an unfair or deceptive trade practice in
violation of Section 5 by failing to disclose to consumers the existence of
abnormally high rates of failure in certain of its products. GM comments
"exhaustive legal research of this theory corroborates that neither the Commission
nor any court has ever announced a duty to disclose abnormal failure rates. "^56
GM contends that even if this theory were accepted by the Commission and the
courts it has a strong factual defense with which to prove that its products
performed satisfactorily.

GM argues that an FTC effort under Section 19 of the Act, which is neces-
sary to obtain consumer redress, has less chance for success than a case under
Section 5. GM points out that in order to succeed under Section 19 the Commis-
sion must prove to a court that GM's failure to disclose failure rates constitutes
conduct which "a reasonable man would have known under the circumstances was
dishonest or fraudulent." GM concludes that such a judgment would be difficult
to obtain where the Commission relies upon a legal theory being applied for the
first time which consists of vague terms such as the failure to disclose the exis-
tence of abnormal failure rates. Finally, GM explains its motivation for settling
the case as resulting from a desire to resolve a lawsuit which has generated a
great deal of adverse publicity.

The attorneys general of 29 states filed a joint comment concerning the
FTC/GM consent agreement. The attorneys general focused on several aspects of
this agreement rather than upon the relative merits of settlement versus litiga-

655. Statement issued November 16, 1983, FTC Docket No. 9145, p. 2716.

656. FTC Docket No. 9145, p. 2198.

DISPUTE RESOLUTION PROCEDURES 291

tion. Their comments criticize the notification procedures provided in the
agreement, the mediation stage required in the BBB program, and the use of
arbitration to resolve these disputes.

The agreement requires GM to notify individuals who have registered com-
plaints with either the FTC, a state agency or GM of the existence of the arb-
itration program. The attorneys general contend that notice should be sent to all
owners of record. They criticize the order's national advertisement requirement
as lacking specificity. GM may comply with this requirement by explaining and
promoting the arbitration process without mentioning the allegations of the FTC
complaint or the specific products named in the complaint.

The attorneys general also criticize the BBB requirement for mediation prior
to arbitration. They view this step as excessive. The comment states "most
owners who have complained about defects have already failed to resolve their
disputes by dealing with GM's zone managers. To require them to repeat this
once-failed process may strike some consumers as a frustrating waste of time.
Consequently, they may well decide pursuing remedies is not worth the
trouble. "657 i^e attorneys general also criticize the current rate at which BBB
resolves disputes through mediation (ninety percent). They felt that such a high
percentage of dispute resolution through mediation, in the absence of set param-
eters for relief, indicates that personal factors such as a consumer's sophistication
or perseverance rather than the merits of a case determine whether a consumer
receives redress.

Finally the attorneys general criticize the use of arbitration to resolve a
large number of suits alleging common or systemic defects. They argue that the
background or fact statements prepared by GM with the FTC fail to provide
enough information to insure any uniformity in the resolution of disputes.

The Council of Better Business Bureaus' comments to the consent order
report the results of a study concerning 180 completed arbitration cases concern-
ing GM components specified in the order. One-half of these cases concerned the
THM 200 transmission, one-half concerned camshafts and one case involved a
diesel fuel injection failure. These arbitrations account for approximately 11% of
all complaints filed with BBB concerning these components. The remaining 89% of
these complaints were resolved through mediation. The BBB has no data on the
result of the mediations. Data on mediations will be kept under the terms of the
consent order. In arbitrated cases consumers received awards in 54% of the
cases. BBB reports that 43% of these awards were for the full amount of the
repair bill. The average award to the consumer in a transmission case was $348
and in a camshaft case $363. Reasons cited by arbitrators for not finding in
favor of the consumer include the car being too far out of warranty (39 cases),
poor maintenance (31 cases), and the lack of proof of repairs or maintenance (24
cases). 658

The Center for Auto Safety also filed comments with the FTC concerning
the consent order. The Center criticized the use of arbitration to resolve these
disputes, the background statements prepared by GM and the FTC, BBB's capacity
to handle the number of complaints which may be filed, and the dates from which

657. FTC Docket No. 9145, p. 1893.

658. All statistics taken from comments submitted by Council of Better Business
Bureaus, FTC Docket No. 9145, p. 2039-40.

292 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

GM's product service publications will be made available. The Center also noted a
further drawback to the agreement. According to the Center for Auto Safety,
GM has entered Into negotiations with several GM consumer groups, particularly
owners of GM diesel motor vehicles. The Center reports for example that a
consumer group, Dieselgate, negotiated a claims procedure with GM which has
handled over 2,000 claims and resulted in payments to consumers averaging more
than $1,000. The Center reports at least two other groups. Lemon on Wheels
(NY), and DOGMAD (CA), have also processed hundreds of claims each. The
Center predicts that the consent order will crowd out these successful private
efforts as GM will direct all claims to the BBB program.

Despite the variety of criticisms levelled at the consent agreement the
Commission approved it on November 16, 1983. The Commission's responses to
those who filed public comments stress the substantial and immediate benefits the
agreement provides. It cautions critics to weigh the imperfections of the redress
mechanism established by the consent order against the prospect of litigating the
case an additional seven to ten years.

BACKGROUND REPORT FOR RECOMMENDATION 86-4

THE SPLIT-ENFORCEMENT MODEL:
SOME CONCLUSIONS FROM THE OSHA AND MSHA EXPERIENCES

George Robert Johnson, Jr.

George Mason University

School of Law

Arlington, Virginia

Report to the Administrative Conference of the United States
August 30, 1986

294 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

I. INTRODUCTION

When the Occupational Safety and Health Acti (OSHAct)
was enacted, it adopted a relatively novel and seldom-used
feature in federal administrative practice-- the split-
enforcement model for agency adjudications. In this model, a
major area of regulatory activity is divided between two
wholly separate, independent agencies. This model contrasts
with the more frequently encountered arrangement in which all
administrative or regulatory functions-- rulemaking,
enforcement, and adj udicat ion--are housed within a single
agency. In the case of the OSHAct, one agency in the
Department of Labor, the Occupational Safety and Health
Administration (OSHA), has the responsibility for setting and
enforcing health and safety standards. Challenges to those
standards are adjudicated by the independent, three-member
Occupational Safety and Health Review Commission (0SHRC).2

A similar division of responsibilities exists in the
area of mine safety and health. The Federal Mine Safety and
Health Amendments Act of 19773 (MSHAct) assigns to the Mine
Safety and Health Administration (MSHA), also within the
Department of Labor, the task of developing and promulgating
mandatory safety and health standards for the nation's mining
industry. Challenges to those standards are adjudicated by

129 U.S.C. §§651-678 (1982).

2The Occupational Safety and Health Review Commission
would refer to this administrative model as the "split-
function" model. They point out that enforcement is not
split between the Department of Labor and the Review
Commission. Indeed they are correct: all the elements of
enforcement-- investigation, citation, and prosecution-- are
vested in the Department of Labor; only adjudicatory
authority is lodged in the review commission. Nonetheless,
for the purposes of this discussion, we shall often refer to
the arrangement as the "split-enforcement" model. That
formulation, however, is intended to suggest nothing
different from what the review commission would mean by
"split-function model."

330 U.S.C. §§801-962 (1982).

SPLIT ENFORCEMENT MODEL 295

the independent Federal Mine Safety and Health Review
Commission (MSHRC), composed of five members. 4

Why, in these areas, has there been such a departure from the
traditional, cohesive administrative schemes that prevail in
other regulatory areas? Why has there been the perceived
need so completely to separate the rulemaking and
adjudicatory functions from each other? How has this
arrangement worked? Are there modifications that might be
made to improve the regulatory processes in these areas?
Should this bifurcated model be followed in other
administrative areas? In the area of occupational safety

and health, the success of the split-enforcement model has
been mixed, at best. Better results seem to have been
achieved in the mine-safety area. How can these differences
be explained?5

The purpose of this report then is two-fold: first, to
examine just how the split-enforcement model has worked--
particularly in the areas of occupational safety and health
and mine safety and health; and second, to suggest how the
scheme may be improved in these areas and in others where its
use may be contemplated.

Section II of the report reviews the statutes and the
legislative histories of these two programs. Section III
examines some of the problems and early conflicts in the OSHA
program, with particular emphasis on the "deference"
conflicts between the Department of Labor, in which OSHA is
housed, and the independent Occupational Safety and Health

4previously this "split-enforcement" arrangement has
been used in federal income tax dispute cases. The Board of
Tax Appeals, the predecessor to the United States Tax Court,
was empowered to hear disputes from the Internal Revenue
Service. See 26 U.S.C. §7441.

The current system for enforcing certain provisions of
the Federal Aviation Act divides responsibilities between the
Federal Aviation Administration and the National
Transportation Safety Board. See 49, App. U.S.C. §1 903(a) (9).

5Some recent Congressional proposals to create a
separate and independent Social Security Review Commission to
adjudicate appeals from the denial of social security or
disability benefits have been advanced. During the 98th
Congress, two bills to create an independent Social Security
Review Commission, H.R. 3541 and S. 1911, were introduced.
Neither bill was enacted. Earlier proposals to adopt a

split-enforcement arrangement were also considered in
connection with the Fair Housing Amendments Act of 1979.
Congress, however, eventually settled for the traditional
unitary model in that legislation.

296 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Review Commission. Section IV looks at the same questions in
the context of MSHA-MSHRC. Section V evaluates one of the
frequent justifications cited for adopting this model-- the
enhanced prospects for due process. Section VI attempts to
draw some conclusions and proposes some recommendations
regarding future uses of the split-enforcement concept.

II. THE LEGISLATIVE HISTORY

A. Occupational Safety and Health

The OSHAct requires every covered employer to "furnish
to each of his employees employment and a place of employment
which are free from recognized hazards that are causing or
are likely to cause death or serious physical harm to his
employees. "6 Congress gave the Secretary of Labor broad
authority both to adopt any existing safety standard and, by
rule, to "promulgate, modify, or revoke any occupational
safety or health standard. ... "7

629 U.S.C. §654(a)(1) (1982).

7See generally, 29 U.S.C. §§654- 661 (1982). The OSHAct
also authorizes the Secretary to conduct inspections and
investigations of employment sites. If the Secretary
concludes "that an employer has violated a requirement. . .
standard, rule. . . order. . . or regulation (of OSHAct)," he
issues a citation to the employer, who, within fifteen
working days, must notify the Secretary whether the employer
intends to contest the citation. If the employer fails to
contest the citation within the fifteen-day period, the
citation and any penalty assessed under it become final, and
neither is subject to review by any court or by any other
agency. If, on the other hand, the employer notifies the
Secretary that the employer intends to contest the citation,
"the Secretary shall immediately advise the Commission
(OSHRC) of such notification, and the Commission shall afford
an opportunity for a hearing . . . (and) thereafter issue an
order, based on findings of fact, affirming, modifying, or
vacating the Secretary's citation or proposed penalty, or
directing other appropriate relief, and such order shall
become final thirty days after its issuance."

The hearing, initially before an administrative law
judge (ALJ), is conducted in accordance with section 554 of
the Administrative Procedure Act, but without regard to
section 554(a)(3). The report of the administrative law
judge becomes the final report of the Commission within
thirty days after the judge's report, unless within that
period a Commission member has directed that the AL J ' s report
be reviewed by the Commission.

SPLIT ENFORCEMENT MODEL 297

The adoption of the occupational health and safety
statute stirred intense controversy and disagreement from the
very beginning. Even though there was considerable unanimity
of opinion that American workers needed federal legislative
protection in their workplaces, there was little agreement
about how those federal standards would be promulgated and
enforced. A principal focus of the legislative debate
concerned the arrangement of the rulemaking, enforcement, and
adjudicatory functions of the agency that would be
responsible for this new program. Who would make the rules,
and how extensive would be his authority to interpret those
rules and to penalize violators of them?

One of the original bills8 introduced in Congress would
have followed the traditional administrative model and
reposed all three functions-- rulemaking, enforcement, and
adjudication-- in the Department of Labor. That bill enjoyed
enthusiastic support from Democrats and from organized labor,
which apparently felt that it could expect more vigorous and
stringent protection from its traditional government ally.
Another bill, 9 more strongly endorsed by business interests,
would have divided the three administrative functions among
three separate agencies-- one to promulgate the regulations,
a second agency within the Department of Labor to enforce
them, and a third independent agency to adjudicate
challenges to them. As it finally emerged from Congress, the
OSHActI 0 embodies a compromise, engineered in the main by
then-Senator Jacob Javits of New York. Both the Javits
compromise and the more far-reaching bill that called for the

Judicial review may be obtained in any United States
court of appeals for the circuit in which the violation is
said to have occurred or in which the employer has its
principal office. Either the Secretary of Labor or any
person who claims to be adversely affected or aggrieved by
the Commission's order may petition for a review of the
Commission's decision. Section 660 (a) also provides the
District of 'Columbia Circuit as an additional forum,
available to "any person adversely affected or aggrieved by
an order of the Commission issued under subsection (c) of
section 659. ..."

8h.R. 843, 90th Cong., 2d Sess. (1967).

9h.R. 13373, 91st Cong., 1st Sess. (1969); S. 2788, 91st
Cong., 1st Sess. (1969).

lOoSHAct, Pub. L. No. 91-596, 84 Stat. 1590 (1970).

298 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

complete three-way division of responsibilities were
concerned that so concentrated a grant of power to the
Secretary and the Department of Labor, as envisioned by the
Democrats' original bill, would create an appearance of
unfairness and, therefore, compromise the prospects for due
process in adjudicatory challenges to the Department's
standards. In a statement of his individual views
accompanying an early version of the act,''1 Senator Javits
remarked that:

...[Hjearing and determination of enforcement cases by
an independent panel more closely accords with
traditional notions of due process than would hearing
and determination by the Secretary. In the latter case
the Secretary is essentially acting as prosecutor and
judge. Any finding by the Secretary in favor of a
respondent would essentially be a repudiation of his own
Department's employees. While this type of enforcement
has been used in connection with other statutes, is
contemplated by the Administrative Procedures (sic) Act,
and is not j urisdict ionally defective on due process
grounds, the awkward mechanics it imposes on heads of
Departments who wish to exercise their adjudicatory
power personally in order to preserve due process has
not been appreciated. What happens is that one official
of the Department (e.g., the Deputy Solicitor) will take
the position of prosecutor and another official (e.g.,
the Solicitor) will take the position of a neutral in
order to advise the Secretary.

More important, because of the awkwardness of this
procedure and the heavy burden of personally reviewing
hundreds of enforcement cases, it is highly likely that
the Secretary of Labor will not even exercise his power
under the Committee bill personally, but will delegate
it to a panel of officials within the Department....
The net result will be enforcement by a panel anyway,
but not one which is independent .... 1 2

lis. Rep. No. 1282, 91st Cong., 2d Sess., reprinted in

1970 U.S. CODE CONG. & AD. NEWS 5177, 5218. See also,

LEGISLATIVE HISTORY OF THE OCCUPATIONAL SAFETY 7 HEALTH ACT
OF 1 970, 1 95 (1 970).

1 2id,. The Javits amendment also reflected a concern
for speed of enforcement. The amendment allowed for
immediate, self -enforcing orders at the conclusion of the
administrative proceeding. The original Senate bill provided
that no enforceable order to correct a violation would issue
until both the administrative proceeding and any availed-of
judicial proceedings had ended. Javits believed that his

SPLIT ENFORCEMENT MODEL 299

Even though Javits recognized that the unitary model
existed in other statutes and was "not j urisdictionally
defective on due process grounds," he pressed for and
prevailed in dividing the responsibilities between the
Secretary of Labor and the independent review commission. It
was Javits's view, and the view of several others in
Congress, that "the independent Panel approach would...
preserve due process more easily, and thereby instill much
more confidence in the whole program in workers and
businessmen alike. "13

B. Mine Safety and Health

The MSHAct repealed the Federal Metal and Nonmetallic
Mine Acti 4 and substantially amended the Federal Coal Mine
Health and Safety Act. 15 The result placed coverage of the
entire mining industry, metal and non-metal, under one act;
transferred enforcement responsibility from the Secretary of
Interior to the Secretary of Labor; streamlined the
procedures for promulgating and enforcing health and safety
standards; and created an independent review commission to
resolve contested citations. 16

compromise would save between six months and two years in
most contested cases.

1 3See, LEGISLATIVE HISTORY OF THE OCCUPATIONAL SAFETY &
HEALTH ACT, supra note 37.

1430 U.S.C. §721 (repealed 1977).

1530 U.S.C. §§801-962 (1982).

16see generally, 30 U.S.C. §§813-823 (1982). The MSHAct
empowers the Secretary to promulgate mandatory health and
safety standards and includes detailed provisions for the
inspections of mines. The MSHAct requires the Secretary to
conduct frequent mine inspections to determine, among other
things, whether the mine operators have complied with the
mandatory health or safety standards and other provisions of
the act. When an inspector concludes that a mine operator

300 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

In many ways the mine-safety statute resembles the
occupational safety and health statute. Both statutes divide
rulemaking and adjudicatory authority between the Labor
Department and an independent review commission. Yet there
are important differences between the two statutes and the
programs they create.

The most obvious difference-- and perhaps the most
crucial-- between the two statutes is in the breadth of their
coverage. The OSHAct potentially covers every conceivable
kind of industrial and occupational category, almost every
conceivable employment situation, almost every employer--
from General Motors to the neighborhood greengrocer. The
extent of the act's coverage is itself daunting to
contemplate. By its terms, the OSHAct applies to "every
person engaged in a business affecting commerce who has
employees." Only the United States government, the states of
the United States, and their political subdivisions are
excluded from its coverage. 17 it would appear to be an
almost impossible task for OSHA to know with any accuracy
just how many "persons" are, at any particular time, subject
to its jurisdiction. Furthermore, except for the statutory

has violated the act or one of the standards issued pursuant
to it, "he shall with reasonable promptness, issue a citation
to the operator," which must specify "a reasonable time for
the abatement of the violation." An operator's failure to
abate the citation may result in an order, requiring all
persons to be withdrawn from the area of the mine affected by
the citation, until the Secretary of Labor determines that
the violation has been abated. For each citation, the
Secretary may propose a civil penalty, which may not exceed
ten thousand dollars for each violation.

The MSHAct also permits operators to contest citations
and proposed penalties within thirty days of their issuance.
If, within the thirty-day period, the operator does not
notify the Secretary that the operator intends to contest the
citation, both the citation and the proposed penalty become
"a final order of the Commission. . . not subject to review
by a court or agency." If the operator files a timely
contest, the case is heard by an administrative law judge of
the review commission. Any person adversely affected or
aggrieved by a decision of an ALJ may file, within thirty
days after the issuance of that a decision, a petition for
discretionary review by the Commission. If not satisfied
with the Commission's decision, such person, within thirty
days of the issuance of the decision, may obtain judicial
review in an appropriate court of appeals.

1729 U.S.C. §652(a).

SPLIT ENFORCEMENT MODEL 301

charge requiring "every employer to furnish each of his
employees employment and a place of employment which are free
from recognized hazards, "18 there is little identity of
interests or commonality to unite those subject to OSHA's
regulatory jurisdiction.

The MSHAct, on the other hand, applies to a discrete and
insular employment sector, whose membership, although varied
in size and geographic location, is more similar and
homogeneous with respect to the industrial activities and the
occupational hazards to which they are exposed. According to
one MSHA official, at almost any given moment, it is possible
for MSHA to determine with substantial accuracy the number of
persons and mines subject to its j urisdiction. 1 9 MSHA

regulates only one industry. OSHA, by comparison, regulates
virtually everything else. 20

In another contrast, the mine-safety legislative
history, however, discloses no spirited debates or
disagreements regarding use of this bifurcated administrative
arrangement. On the contrary, the Committee report
accompanying the bill that became law states rather
matter-of-factly that:

[t]he Committee realizes that alternatives to the
establishment of a new independent reviewing body
exist.... The Committ ;e also recognizes that there are
organizational and administrative justifications for
avoiding the establishment of new administrative
agencies. However, the Committee believes that the
considerations favoring a completely independent
adjudicatory authority outweigh these arguments.

The Committee believes that an independent
Commission is essential to provide administrative

18id. at §654(a).

1 ^Interview with Frank O'Gorman, Federal Mine Safety and
Health Administration, Arlington, Virginia (February 3, 1986).

20There is at least one other difference. Unlike
OSHRC, MSHRC is composed of five members who are empowered to
act in panels. One commentator has called for enlarging
OSHRC from its current three to five members. See Rothstein,
infra note

302 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

adjudication which preserves due process and instills
much more confidence in the program. 21

Again, preserving due process and eliciting more confidence
in the program are asserted as reasons for this novel
administrative arrangement. Is some fundamental change at
work here?

The idea of separation of functions is not a novel
concept in administrative law. 22 it is almost axiomatic that
some functions should be separate from others, that the
prosecutor should be distinct from the investigator and from
him who would decide disputed questions of fact. 23 That is
basic to the American idea of due process. Yet, in
administrative law, due process has never been held to
require that those functions be as separate, as independent
as they are in the OSHA-OSHRC and the FMSHA-FMSHRC schemes. 24

21 Senate Committee on Human Resources, FEDERAL MINE
SAFETY AND HEALTH ACT OF 1977, S. Rep. No. 181, 95th Cong.,
1st Sess. (1977), reprinted in 1977 U.S. CODE CONG. & AD.
NEWS 3401 , 3446-7.

22The Administrative Procedure Act provides for a system
of internal separation of functions in agencies that exercise
both rulemaking and adjudicatory authorities. The main
provisions are in section 554(d) of the APA. The provision
is applicable only to cases "of adjudication required by
statute to be determined on the record after opportunity for
an agency hearing" with certain exceptions laid down at
section 554(a) and section 554(d).

23According to Professor Kenneth Davis, "What the
Administrative Procedure Act calls °separation of functions'
is designed to prevent contamination of judging by the
performance of inconsistent functions, including primarily
prosecuting and investigating, and secondarily instituting
proceedings, negotiating settlements, and testifying. Many
agencies, either through agency heads or their staffs or
both, perform all these various functions. The problem is to
separate inconsistent functions in such a way as to protect
the judging function." See generally, Kenneth Culp Davis,
ADMINISTRATIVE LAW TEXT (3rd Edition), Chapter 13.

24The case law generally rejects the notion that the
combining of judging with prosecution or investigation is i£
so facto a denial of due process. See, e.g. MARCELLO v.
BONDS, 349 U. S. 302 (1955).

SPLIT ENFORCEMENT MODEL 303

In fact, one of the advantages traditionally associated with
the American administrative agency is its unique combination
of rulemaking, enforcement, and adjudicatory functions. 25
What, then, can explain these breaks with tradition?26

During the OSHA legislative debates. Senator Javits
conceded that the traditional administrative arrangement is
"not defective on due process grounds." The legislative
report on the MSHAct, on the other hand, asserts that such a
complete separation "is essential to provide due process and
[instill] much more confidence in the program." Little else,
however, is said in either legislative discussion regarding
what is in some ways a really radical decision-- the decision
to separate the traditional administrative functions in so
unconventional a fashion.

And how would these divisions of responsibility really
work? In the legislative history of the MSHAct, Congress
does attempt to clarify its intentions with respect to how
this division of administrative responsibilities between MSHA
and MSHRC should function. At one point, the Committee
report provides that, "[s]ince the Secretary of Labor is
charged with responsibility for implementing this Act, it is
the intention of the Committee, consistent with generally
accepted precedent, that the Secretary's interpretations of

25See, e.g., B. Schwartz, ADMINISTRATIVE LAW §1.5 (2nd
Ed. 1984), citing, REPORT OF ATTORNEY GENERAL'S COMMITTEE ON
ADMINISTRATIVE PROCEDURE (1941 ) .

26no other administrative models of separation go as far
as the examples provided by the OSHA-OSHRC and FMSHA-FMSHRC
schemes. The National Labor Relations Board (NLRB), however,
does provide an example of a different kind of separation.

The Taft-Hartley Act of 1947 provides for a General
Counsel of the NLRB, who is appointed directly by the
President for a four-year term. The General Counsel is
completely independent of the Board. His authorities include
investigating and prosecuting labor violations. He has final
authority to investigate charges, issue complaints, and
prosecute those complaints before the Board, which under the
statute is an adjudicatory agency only. The substance--if
not the form-- of the NLRB, therefore, is of two separate
agencies with the independent Office of General Counsel
performing the investigating and prosecuting functions and
the five-member Board limited to hearing and deciding cases.
See, 29 U.S.C. §1 53.

304 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

the law and regulations shall be given weight by both the
Commission and the courts. "27

Even such a meager statement of Congressional intention
is absent from the OSHAct. Was this "directive" included in
the mine-safety statute in view of the evidence that the
OSHAct agencies and the courts reviewing their decisions were
often confused regarding the extent of their respective
responsibilities? Can the confusion between OSHA and OSHRC
be attributed to the absence of clear congressional
directives to the two agencies? If so, has this statement in
the MSHAct obviated similar confusion between MSHA and MSHRC?
And what of the congressional champions' principal reasons
for advocating such a complete separation of functions: has
this administrative arrangement resulted in more fairness and
due process or instilled more confidence in either regulatory
program?

Is it the statutes themselves, the ways in which the
agencies created under them are expected to operate, or is
there something unique about these regulatory programs that
may explain these departures? What conclusions may fairly be
drawn from these experiences-- in the case of OSHA-OSHRC, now
more than fifteen years; in the case of FMSHA-FMSHRC, almost
ten?

III. INSTITUTIONAL CONFLICTS: The OSHAct

In principle the idea of separate, independent
adjudication is appealing. It is so fundamental a feature of
Anglo-American law. Who could quarrel with the concept? Yet
the independent adjudication under the OSHAct has not met
with universal acclaim. In fact, confusion regarding the
precise nature of OSHRC' s role was a major source of the
early and persistent criticism of the OSHA program. An
earlier study chronicled many of the Commission's initial
problems. Among the problems cited were the Commission's
tremendous caseload and its delay in deciding contested
cases-- due, in large measure, to one commissioner's "protest
policy", which effectively directed every case for full
Commission review; and the lack, of unanimity among the
Commissioners, which delayed the decision process because of
the frequency of separate opinions, 28

27senate Committee on Human Resources, FEDERAL MINE
SAFETY & HEALTH ACT OF 1977, S. Rep. No. 181, 95th Cong., 1st
See. (1977), reprinted in 1977 U.S. CODE & AD. NEWS 3401.

28see Rothstein, OSHA After Ten Years: A Review and
Some Proposed Reforms, 34 VANDERBILT L. REV. 71 (1981). See
also Sullivan, Independent Adjudication and Occupational

SPLIT ENFORCEMENT MODEL 305

OSHA was born with a problem that really was not of its
own making. Section 6(a) of the OSHAct directed the
Secretary "as soon as practicable" to promulgate as a
national health and safety standard "any national consensus
standard, and any established federal standard. "29 These
"received" standards were to be promulgated without the
necessity of complying with the provisions of the APA.30
OSHA, therefore, began its life with several regulations that
it had no hand in devising. The administrative problems
developed almost immediately. 31

Some of OSHA's early problems may be attributed to its
forced reception of these consensus standards, many of which
had been privately adopted and which previously had
functioned primarily as optional, aspirational, measures. 32

Safety and Health Policy; A Test for Administrative Court
Theory, 31 AD. L. REV. 177 (1979).

2929 U.S.C. §655(a) (1982).

30id.

31 See, Rothstein, supra note .

32professor Rothstein' s text on occupational safety
highlighted some of the early problems encountered because of
this wholesale adoption of industry standards without public
comment.

At one point he writes:

The overwhelming majority of safety standards
were adopted from already existing private
standard's. These standards are hardly models of
clarity and precision and have been subject to
considerable criticism.

Because of the poor quality of many standards
the Commission and courts have been forced to
choose between two competing interests. On the one
hand, the immediate safety of employees suggests
the need for the broadest possible construction and
the widest application of standards to best
effectuate the remedial purpose of the Act. On the
other hand, due process considerations favor a
strict construction of standards so that
employers will not be penalized without having
received adequate prior notice of the required

306 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Review of standards promulgated pursuant to section 6(a)
would present special difficulties. What, in their origins,
were mainly intended to be voluntary standards are by virtue
of section 6(a) transformed into enforceable government
requirements. What should be the government's attitude
regarding these "standards"? Do they become enforceable as
the original non-government promulgators might have intended?
Or, might the government insist on a different level of
compliance or compliance by companies which, although members
of the target industry, may not have subscribed to the
original, voluntary standards? And finally, is the
government, by adopting these consensus standards, saddled
with the entire "legislative history" from the industrial
organizations that developed them? These are but some of the
questions that appear neither to have been asked nor
considered in the legislative discussions of the OSHAct.

The review commission, or at least one member of the
Commission, has taken the view that, because such standards
themselves did not emanate from the Secretary, the Commission
should be free to re-interpret such standards whenever it
disagrees with the construction or effect that the Secretary
might give to them. 33 As one might expect, that view has
led to several disputes between the Labor Department and the
review commission. Not only should the Commission be free to
make its own determination regarding the meaning of a
consensus standard, but, according to this view, it should
also be free to interpret the meaning of any established
federal standard promulgated under 6(b). 34

OSHA officials, of course, are not impressed with that
argument. Instead they argue that OSHA was given the
rulemaking authority and that its judgment regarding the
meaning of the rules-- be they 6(a) or 6(b) rules — should be

conduct.

See, M. Rothstein, OCCUPATIONAL SAFETY AND HEALTH LAW §125
(2d Ed. 1983).

33interview with E. Ross Buckley, Chairman, Occupational
Safety and Health Review Commission, Washington, D.C. (August
8, 1985).

34standards other than the consensus and other received
industry standards, promulgated on the Secretary's own
initiative are often called "6-b" standards, referring to the
section of the OSHAct that empowers the Secretary to issue
new safety standards. See, 29 U.S.C. §655.

SPLIT ENFORCEMENT MODEL 307

conclusive. Furthermore, they maintain that since the vast
majority of standards promulgated are still 6 (a) -standards,
the Commission could, under the guise of adjudicating,
effectively set occupational health policy, thereby
eviscerating the authority Congress sought to repose in the
Secretary. 35

Whether they be 6(a) or 6(b) standards, a major source
of contention has existed over how authority under the act is
intended to be distributed between OSHA and OSHRC. An
examination of some of the principal disputes between these
agencies confirms the struggle that periodically has raged
between OSHA and the Commission. Not only that, but this
examination also reveals that the federal courts have not
been much more successful than have the two agencies at
determining just how this allocation of responsibilities
should operate.

A. A. AMORELLO AND SONS; The Problem of Deference
1 . Before the Commission

One might well read the Commission's duty to "issue an
order, based on findings of fact, "36 as narrowly
circumscribing the Commission's role to ascertaining whether,
in fact, the cited employer has done what the Secretary
forbade (or has refused to do what the Secretary has
decreed). That language does not imply — at least, it does
not unavoidably imply — that the Commission would have any
role whatsoever in evaluating the wisdom, utility, or the
subjective necessity for the challenged standard. Rather,
the language seems more plausibly to suggest that the
Commission make the more objective, neutral determination
that the cited employer either did or did not violate the
Labor Department's standard. Yet, neither the Commission nor
many reviewing courts have been willing consistently to
ascribe to the Commission that singular responsibility.

Donovan v. A. Amorello and Sons37 is one of the more
recent cases to have faced the conflict that has frequently
flared between OSHA and OSHRC.

35interview with Frank White, Associate Solicitor, and
Daniel Mick, Counsel for Regional Trial Litigation,
Occupational Safety and Health Administration, Washington,
D.C. (August 28, 1985) .

3629 U.S.C. §659(c) (1982).

37761 F.2d 61 (1st Cir. 1985).

308 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

OSHA had charged Amorello, a Worcester, Massachusetts,
contractor, with violating an OSHA regulation which states:

No employer shall permit earthmoving. . .equipment which
has an obstructed view to the rear to be used in reverse
gear unless the equipment has in operation a reverse
signal alarm distinguishable from the surrounding noise
level or an employee signals that it is safe to do so, 38

In response to a complaint regarding an unshored trench,
an OSHA compliance officer and his supervisor visited an
Amorello worksite in Worcester, Massachusetts. There they
observed a front-end loader operating in reverse. According
to the Commission decision, "(n)either the compliance officer
nor his supervisor heard a backup alarm. "39 Even though,
later during the inspection, the compliance officer was shown
that the loader was equipped with an alarm, his report
concluded that Amorello was in violation of the standard
because "a backup alarm was required to be in operation while
the loader was in motion because the view to the rear was
obstructed. "40

The administrative law judge who heard Amorello's
contest did not decide the issue of whether the company's
loader had an obstructed view. Rather, he vacated that item,
because the compliance officer subsequently admitted that he
had heard an alarm during the inspection. The ALJ then
determined that, because of this "credibility finding," the
compliance officer's testimony "was otherwise entitled to no
weight. "41

At the Commission hearing, OSHA argued that the ALJ's
reasons for refusing to credit the compliance officer's
testimony were unsound. Furthermore, OSHA contended that a
violation was proved "because the standard requires either a
reverse alarm or a signalman if the view to the rear is

3829 C.F.R. §1926.602(a)(9)(ii) (1984).

3911 OSHRC 2040 (1984).

40id.

41 See, Brief for Petitioner (Secretary of Labor) at 5,
DONOVAN V. AMORELLO AND SONS, INC., 761 F.2d 61 (1st Cir. 1985).

SPLIT ENFORCEMENT MODEL 309

obstructed to any extent. "42 OSHA maintained that the
operator's view to the rear was obstructed by an exhaust pipe
and by the position of the loader's engine. The ALJ decided
that the Secretary's citation should be vacated. By a vote
of 2-1, the Commission affirmed the ALJ's decision to vacate
the citation. 43

Even though the Commission affirmed the administrative
law judge's decision to vacate the citation, it did so for
reasons different from those of the ALJ. The Chairman of the
Commission wrote that:

[the] evidence establishes that the loader's operator
had a clear view to the rear, unblocked by any part of
the loader, except for two feet immediately behind it,
where the view was limited only by the location of the
loader's engine. The question therefore reduces to
whether the two-foot limitation created by the engine
compartment amounts to an "obstructed view to the rear"
within the meaning of the standard, (emphasis added) I
think not. 44

According to the Chairman's opinion, this condition was not
within the meaning of the standard because it "is not a
significant obstruction created by a special part of the
vehicle. . .that obstructs the operator's view during the
entire course or a significant portion of the rearward
travel. "45 in addition, the majority commissioners
justified their decision on the basis that the operator's
rear field of vision was limited "only during the first two
feet of travel; after that, the operator's field of vision
encompassed areas previously seen to be clear. "46 The
Chairman's opinion concludes with the observation that "the
phrase "obstructed to the rear' did not appear in the
proposed version of this standard...." Because the
originally proposed standard would have required backup

42id.

4311 OSHRC 2040 (1984)

44id.

45id.
46id.

310 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

alarms on all earthmoving equipment, the opinion found that
the phrase "obstructed view to the rear" was not meant "to
govern minor limitations that are common to nearly all
earthmoving equipment . "4 7 The Commission thus concluded
that, because there was no "significant" obstruction, there
was no violation of the OSHA regulation.

Commissioner Buckley, concurring in the Chairman's
decision, wrote that the obstructed view existed for a
distance of only two feet from the rear of the loader, that
the inspectors did not see the machine operate during the
first two feet of its rearward motion and, therefore, that
they could not know the alarm was not working.

Commissioner Cleary, dissenting, rejected the reading of
his colleagues and maintained that the citation should be
affirmed. In his view, the purpose of the standard is "to
ensure that employees are not in the path of earthmoving
equipment. "48 As he saw it, the majority's interpretations
would defeat the purpose of the standard. Furthermore,
Cleary acknowledged that his colleagues had "effectively
rewritten [the standard] to limit its applicability to
°signif icant ' obstructions. "49 The result, he said, would
be to except obstructions that are common to nearly all
earthmoving equipment from the coverage of the standard.

Cleary could discern no reason to conclude that the
addition of the phrase "obstructed to the rear" to the
proposed standard would render the standard inapplicable to
minor limitations. But perhaps most significantly, Cleary
would have affirmed the Commission's decision, because, as he
said:

The majority interpretations also introduce a
mischievous element of subjectivity into a standard that
objectively sets forth the circumstances under which
compliance is required. Heretofore, an employer could
confine his inquiry to whether the view of the operator
was obstructed within the plain meaning of the term. An
employer now must also determine whether the obstruction
is "significant." But there is little guidance as to
when a "significant" obstruction exists..., I am
unclear as to when an obstruction ceases to be a "minor
limitation" and becomes "significant" and I suspect
employers who apply this standard in the future will
share my confusion. Under the rationale in the

47id.
48id.
49id.

SPLIT ENFORCEMENT MODEL 3 1 1

concurring opinion, instead of determining whether
the entire path to the rear of equipment is in the
operator's view, an operator must take "several factors"
into account to decide whether the view is obstructed.
Little guidance is provided as to how to apply these
factors or when these factors combine to yield a
conclusion that an obstructed rear view exists. 50

Only Cleary, among the commissioners who decided
Amorello, seems to have appreciated the institutional roles
that had been assigned the respective agencies. Cleary 's
dissenting opinion recognizes, even if does not explicitly
state so, that the Secretary may employ whatever subjective
criteria he thinks appropriate when he promulgates a
regulation. He, of course, may eschew subjective criteria
altogether. That is the nature of legislative choices--
subjective, preferential in many instances. When
promulgating rules pursuant to his statutory charge, the
legislator may call on any and all of the knowledge or
information available to him. 51 The adjudicator's role,
however, must be different. The adjudicator must evaluate
facts, evidence to ascertain whether the party charged with a
violation has followed — or, as the case may be, refused to
follow-- the legislator's decree. 52 in Amorello, the

50id.

51 See generally, B. Schwartz, ADMINISTRATIVE LAW (2d Ed.
1984) § 4.8: Rulemaking is the administrative equivalent of
the legislative process of passing a statute. Agencies
engaged in rulemaking are, as a general proposition, no more
subject to constitutional procedural requirements than is the
legislature engaged in enacting a statute. . . . Nor is the
rulemaking process bound by the principle of exclusiveness of
the record. The agency may look beyond the record and rely
on the kinds of investigative and other extrarecord materials
used by legislative committees. It may act not only on the
basis of the hearing record, but also upon the basis of
information in its own files and its knowledge and
expertise. "

52Adj udicators , as distinguished from rulemakers, are
generally limited to a "record" of some kind in making their
decisions and judgments. The adjudicator must be guided by
"all the relevant factors" and those alone; and in the
context of formal proceedings, the relevant factors must
appear within the four corners of the record. See, e.g.

312 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

majority commissioners did not discharge their
responsibilities under the act. Rather, they strayed into
the field of subjectivity and sought to exercise a function
that, by logic if not by law, belongs to the Secretary.

2. In the Court of Appeals

Having failed to persuade the Commission that the
Amorello citation should be affirmed, the Secretary of Labor
sought review in the Court of Appeals for the First Circuit.
In an opinion by Judge Breyer, the court vacated the decision
of the Commission. In vacating the Commission's order, the
court held that OSHA's interpretation of its regulation
should be controlling so long as it is reasonable. 53 That
reasonableness, according to the court, should be evaluated
in light of "the agency's likely greater knowledge of the
rule's intended purpose and the agency's practical
understanding of how competing interpretations may affect the
agency's regulatory mission. "54 in siding with the
Secretary, the Amorello court based its decision on two
considerations-- the legislative history and practical
administrative requirements.

First, the court examined the legislative history of the
OSHAct, concluding that it "suggests that OSHRC's mission is
primarily factual in nature, its role is to hear charges of
violations ...[ and ] to guarantee that those charged are
adjudicated fairly. "55 The court reasoned that, even though
Congress did establish OSHRC as an independent review
commission, it intended that the Commission's powers would be

CITIZENS TO PRESERVE OVERTON PARK v. VOLPE, 401 U.S. 402
(1971). See also, 5 U.S.C. §§554, 556, & 557.

53761 F.2d 61, 63 {1st Cir. 1985). See also, DONOVAN v.
DANIEL MARR & SON, 763 F.2d 477, 483 (1st Cir. 1985)
(following AMORELLO yet saying: "This does not mean that a
persuasive interpretation by the Commission will give way to
a marginal interpretation by the Secretary; but where, as
here... the Commission's view seems, if not insupportable, at
least strained, there can be little choice as to which
reading we must accept."); ISAAC v. HARVARD UNIVERSITY,
769 F.2d 817 (1st Cir. 1985), BROCK v. SCHWARZ- JORDAN, INC.,
777 F.2d 195 (1st Cir. 1985). PRACTICO v. PORTLAND TERMINAL
CO., 783 F.2d 255, 269 (1st Cir. 1985) Campbell, dissenting.

54761 F.2d at 63.

55id. at 65.

SPLIT ENFORCEMENT MODEL 3 1 3

very limited. Because Congress did not elect to place
rulemaking authority in an agency separate from OSHA suggests
that "Congress did not intend OSHRC to possess broad powers
to set policy through the creation of rules — powers that
other agencies sometimes exercise in adjudicatory (as well as
rulemaking proceedings ). "56

Second, the Amorello court found that "practical
administrative considerations favor looking to OSHA for a
more authoritative interpretation of a regulation. "57 OSHA
chose the language of the regulation; it is more likely to
have "an institutional memory" of its meaning and purpose. 58
Because OSHA is both the "legislating" and "enforcing"
authority, that dual responsibility "provides it with expert
knowledge of the practical outcomes of different
interpretations. "59 The court does not gainsay that OSHRC
too has acquired some expertise from adjudicating disputes
over OSHA regulations and that expertise is entitled to some
weight in appropriate circumstances. "But," the court says,
"that experience arises out of its having adjudicated many
cases; it is likely factual in nature; and it necessarily
concerns examples of rule violations (which are presumably
less typical than instances of compliance) . "60

The Amorello court, it may be said, decided the question
of whose interpretation should prevail by examining the
intended functions of the two agencies. The court reviews
the functions of the two agencies in the context of the
entire administrative apparatus that Congress has here
created. In addition, it also examines what Congress
asserted to have been its primary aims when it departed from
the traditional administrative arrangement when this statute
was adopted.

Even though Congress chose to divide the administrative
responsibilities between two agencies, it nonetheless gave to
OSHA the rulemaking and enforcement authority. While the
concept of such divided responsibilities may have been novel,
what constitutes rulemaking surely is not. Furthermore, it
is almost a canon of administrative law that courts should

56id.

57id. at 66.

58id.

59id.

60id.

314 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

defer to an agency's interpretation of its own regulation
unless that interpretation is demonstrably irrational. 61
Moreover, it is clear that, in devising the OSHA-OSHRC
administrative scheme. Congress intended merely to give to
the independent review commission only one of the functions
that traditionally more integrated agencies exercise. Had
Congress intended an even more radical departure-- such as
giving the Commission authority both to interpret regulations
and to adjudicate disputes arising under them-- it would seem
to demand more specificity and clarity of statement on that
point than the OSHAct's legislative history reveals.

But that notion itself seems basically incompatible with
the chief purpose that has frequently been cited for this
administrative division. As unedifying as the legislative
history here may be, one thing does seem clear: Congress did
not want the framer of the rule to decide disputes arising
under the rules that he had formulated. It is equally
apparent that Congress did not intend that the adjudicator be
able to formulate the rules on which he would then sit in
judgment. What the First Circuit sought to do here is what
courts should do whenever they are called upon to discover
legislative purpose, legislative intent-- particularly when
that purpose, that intent may not be readily discernible from
the language of the statute: to give force and effect to the
legislation so as not to defeat the legislature's overall
aim. The judicial inquiry in such a case as this one then is
simple: What was the legislature's purpose, its intent in
separating these functions? The answer is almost deceptively
simple as well-- to remove the resolution of adjudicatory
challenges from the control of the rulemaker and, as a
corollary, to remove the rulemaking responsibilities from the
control of the adjudicatory authority. To permit the
Commission to "rewrite" an OSHA regulation in this way and
then to decide that Amorello does not violate that regulation
would be to permit what Congress had legislated to prevent.

61 See, e.g. , UDALL v. TALLMAN, 380 U.S. 1, 16-17, 85 S.
Ct. 792, 13 L.Ed. 2d 616 (1965).

SPLIT ENFORCEMENT MODEL 315

B, Similar Judicial Responses

The position of the First Circuit has been taken by
other courts. The Fifth Circuit also has maintained that, in
choosing between the Secretary's interpretation of his
agency's regulation and OSHRC's construction, the Secretary's
interpretation, if reasonable should govern. One case,
Brennan v. Southern Contractors Service62 involved an OSHA
rule, which required use of a safety net where the use of
other safety devices would be impractical. After the fatal
fall of one of its employees. Southern was cited for
violating the regulation. A safety expert testified before
the ALJ that safety belts rather than safety nets would be
practical. 63 in light of that testimony, the ALJ
determined that the regulation required safety nets "only if
one of the other safety devices is impractical, "64 whether
it was being utilized or not. The Commission affirmed the
ALJ's construction of the regulation.

The Fifth Circuit reversed the Commission, holding that
the Commission's interpretation would undermine the purpose
of the OSHAct — "to protect the health and safety of workers
and to improve physical working conditions on employment
premises. "65 Significantly, the Court also held that "the

62492 F.2d 498 (5th Cir. 1974). See also SCHWARZ-
JORDAN, INC., 777 F.2d 195 (5th Cir. 1985) ("This court has
held that the Secretary' s interpretation is controlling as
long as it is one of several reasonable interpretations,
although it may not appear as reasonable as some others.")
Id. at 197.

63id. at 500.

6429 C.F.R. §125. 105(a) (1973).

65492 F.2d at 501. But see FIEGEN, infra. See also,
EVERGLADES SUGAR REFINERY V. DONOVAN. 685 F.2d 1076, 1081
(5th Cir. 1981). Cf . , H.B. ZACHIRY CO. v. OSHRC, 638 F.d
812, 817 (5th Cir. 1981). But see, COCA-COLA CO. v.
ATCHISON, TOPEKA AND SANTA FE RY. CO., 608 F.2d 213, 222 (5th
Cir. 19 79); USERY v. KENNECOTT COPPER CO., 577 F.2d 1113,
1119 (10th Cir. 1977); DIAMOND ROOFING CO. v. OSHRC, 528 F.2d
645, 649 (5th Cir. 1976).

316 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

promulgator's interpretation is controlling as long as it is
one of several reasonable interpretations. "66

A Tenth Circuit panel reached a similar conclusion in
Brennan v. OSHRC and Kesler and Sons Construction Company. 6 7
That case, however, involved the construction of a statutory
term rather than a regulation. Initially Kesler had been
cited for noncompliance with certain OSHA-mandated safety
standards. The citation ordered immediate abatement for all
violations and assessed penalties on the company. Kesler did
not contest the citation. The company was then later cited
for failing to correct the violations. Kesler contested the
notification of failure to correct and the penalty
assessment. Following the required hearing, the ALJ found
that the company had failed to correct the cited violations,
yet he reduced the penalty. On review by the Commission,
OSHRC reversed the ALJ. The OSHA-OSHRC dispute centered on
section 9 of the statute, which provides that a citation fix
a reasonable time for abatement. 68 The citation issued by
the Secretary had ordered immediate abatement. The
Commission, however, maintained that there could be no
reinspection until the expiration of the fifteen-day period
during which the employer was allowed to contest the
citation. In the court's view, the Commission's
interpretation of the statute would amount to permitting an
employer "fifteen working days to correct a condition calling
for immediate abatement, even though he did not contest the
citation. "69 in siding with the Secretary, the court said,
"the interpretation given a statute by the administrative
agency charged with its enforcement should be accepted by the
courts, if such interpretation be a reasonable one. And this

66492 F.2d at 501 .

67513 F.2d 533 (10th Cir. 1975).

6829 U.S.C. §658(a) (1982).

69see, 29 U.S.C. §659(a): "If, within fifteen working
days from the receipt of the notice issued by the Secretary,
the employer fails to notify the Secretary that he contests
the citation or the proposed assessment of penalty, and no
notice is filed by an employee or representative of
emp 1 oy ee s . . . w i th in such time, the citation and the
assessment, as proposed, shall be deemed a final order of the
Commission and not subject to review by any court or agency."

SPLIT ENFORCEMENT MODEL 317

is true even though there may be another interpretation of
the statute which is itself equally reasonable. "70

By their decisions, these courts have recognized that
interpreting agency regulations and statutory provisions is
an essential aspect in the formulation of policy. That
responsibility-- the formulation of policy-- these cases
suggest, is vested in the Secretary and the Department of
Labor.

Other courts have been even more explicit in maintaining
that the policymaking responsibilities under the OSHAct
reside with the Secretary. Examples of this view come from
the Ninth Circuit and, more recently, from both the Third and
the District of Columbia circuits.

In a case that involved the ability of the Secretary of
Labor to compromise penalties that had been assessed by a
Commission order, the Ninth Circuit held that:

Policy-making is arguably a by-product of the
Commission's adjudication. But the Act imposes
policy-making responsibility upon the Secretary, not the
Commission. Whatever "policies" the Commission
establishes are indirect. Only those established by the
Secretary are entitled to enforcement and deference in
court. 71

In a similar case, the Third Circuit, reviewing the
legislative history of the OSHAct, concluded that "the Review
Commission's mandate was strictly limited to
adjudication. "72 The court amplified its position, saying
that contrary to assertions of the Commission "that it is a
major policy-making body under OSHA, the fact is that the Act
confers all rulemaking responsibilities on the Secretary, not
the Commission. "73 The court went on to hold that "the

Review Commission was designed strictly as an independent
adjudicator, with no rulemaking authority other than for

70513 F.2d at 554.

71 DALE MADDEN CONSTRUCTION INC. V. HODGSON, 508 F.2d 278
(9th Cir. 1974).

72MARSHALL V. SUN PETROLEUM PRODUCTS, 620 F.2d 1176 (3rd
Cir. 1980).

73ld. at 1183.

318 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

procedural hearings, no direct policy role in administering^
the Act "74

That position is also echoed in a recent decision of the
District of Columbia Circuit. According to that court,
citing Atlas Roofing, 75 "the [OSHjAct creates public rights
that are to be vindicated by the Secretary through government
management and enforcement of a complex administrative
scheme.... [W]e are persuaded that enforcement of the Act is
the sole responsibility of the Secretary. "76

What these cases demonstrate is that, even though
Congress may have departed from the traditional
administrative structure when it divided rulemaking and
adjudicatory authority between these two agencies, it did not
depart so radically from the traditional administrative
functions that it would, at the same time and with no
legislative statement to indicate why, also divest the
rulemaker of the authority to be the interpreter of its own
rules and of the statute pursuant to which they have been
promulgated.

C. The Contrary Position

It is by no means the unanimous judicial position that
the Secretary's view is entitled to greater deference when it
differs from that of the Commission. Several courts have, in
fact, sided with the Commission and maintained that OSHRC was
intended to exercise an independent judgment on the meaning
of OSHA-promulgated standards. As a matter-of-fact, a
majority of the circuits that have considered this issue
appear to have sided with the Commission. 77

Yet nothing in the legislation itself, the debates, or the
accompanying reports can support such a conclusion.
Nonetheless, the cases are there.

74id. at 1184.

75ATLAS ROOFING CO., INC. v. OSHRC, 430 U.S. 442 (1977).

76oiL, CHEMICAL AND ATOMIC WORKERS v. OCCUPATIONAL
SAFETY AND HEALTH REVIEW COMMISSION, 671 F.2d 643, 649 (D.C.
Cir. 1982).

77For example, the Fourth, Sixth, Eighth, and possibly
Second circuits favor the Commission. The First, Fifth, and
Tenth circuits favor the Secretary. See generally, text and
accompanying notes at pp. .

SPLIT ENFORCEMENT MODEL 319

Brennan v. Gilles and Cotting, Inc. 78 is one such case.
Gilles and Getting, Inc. (Gilles) was the general contractor
on a construction project at NASA's Manned Space Flight
Center in Greenbelt, Maryland. Gilles had subcontracted the
glass construction work on the project to Southern Plate
Glass Company (Southern). Following the collapse of a
scaffolding which caused the death of two workers on
Southern's payroll, the Secretary of Labor issued citations
against both Southern and Gilles for "serious violations"79
of the safety regulations governing scaffolds. 80 Southern
did not contest its liability, but Gilles challenged both the
citation it had received and the proposed penalty. The ALJ
decided two things: first, that the fatal scaffolding had
been constructed in violation of OSHA's safety regulations;
and second, that under the statute, Gilles, as the general
contractor, was liable for safety violations that posed
hazards to the employees of his subcontractors. 81 in a
split decision, OSHRC reversed the decision of the ALJ. In
exonerating Gilles, the Commission essentially maintained
that none of Gilles's employees was "affected" by the
hazardous condition of the scaffolding and that Gilles should
not be held jointly responsible for the dangers that
Southern's scaffolding created for Southern's employees. 82
The Secretary appealed.

In reviewing OSHRC' s decision, the Fourth Circuit
limited its inquiry to the issue of "whether, in addition to
a subcontractor, a general contractor should be responsible
for safety violations hazardous to a subcontractor's

78504 F.2d 1255 (4th Cir. 1974).

79see, 29 U.S.C. §666(j) (1982).

8029 C.F.R. §1926.451 (1984).

81504 F.2d at 1256, 57. According to the ALJ, Gilles
was legally responsible under the Act because (1) Gilles's
workers, as well as those of other subcontractors, had
"access" to the hazard and could be exposed to injury from
the scaffolding's collapse, and (2) in construction projects
where subcontractors are also used, it is logical and
necessary that overall safety and accident prevention be the
responsibility of the general contractor.

82id. at 1257.

320 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

workers. "83 in other words, the issue reduced to a question
of statutory interpretation: whether the term "employer" as
used in the Act should be interpreted to cover general
contractors as °joint emp 1 oy e r s ' . . . or ^statutory
employers ' . "84

The court readily admitted that the statute does not on
its face resolve the question. 85 The answer, therefore,
must be sought by divining the purpose of the legislation.
In attempting so to do, the court rejected the mechanical
application of the common-law definitional tests for
"employee", as the Commission had urged. Because the states
vary so in their "common" law analyses of "employee," such an
approach would have been unavailing. The court correctly
pointed out that "[a]s a Congressional enactment of
nationwide application, OSHA requires a single consistent
definition of ^employer' throughout the country so that there
will be uniform application of this national legislation in
all states. "86 According to the court, the operative
consideration, therefore, should be "the purpose of the
statute and not the technical distinctions of the common
law. "87 Having concluded that the "purpose of the statute"
should inform the construction to be given "employee" in this
case, the court nevertheless decided that the question of
whether the general contractor should be concurrently liable
for his subcontractor's workers "can be answered either
way. "88 it then inexplicably held that "since Congress has
chosen the Occupational Safety and Health Review Commission
as the enforcing agency [emphasis added], the choice between
these two alternatives is appropriately committed to it. "89
Rather summarily this court rejected the Secretary's view

83id. at 1260.

84id.

85id.

86id. at 1261 .

87id.

88id.

89id. at 1261-62

SPLIT ENFORCEMENT MODEL 321

that it is the Department of Labor to which such discretion
is committed.

The court conceded that the Secretary's rulemaking
authority is broad. However, it here maintained that "it is
the power to adopt rules or policies in adjudication
[emphasis in original] which we are concerned with in this
case. The statute vested adjudicatory functions in the
Commission. "90 The court examined the legislative history
and maintained that:

As is made clear by the lengthy Congressional debates
over enforcement procedures and the successful floor
amendment withdrawing the Secretary's authority over
adjudications... Congress deliberately created the
Commission separate and independent of the Secretary. 91

Yet that does not answer the relevant questions. There
is no dispute that Congress created the Commission to be
"separate and independent of the Secretary." The real
question is how are these two concededly independent agencies
intended to administer one regulatory program. The Fourth
Circuit, it seems to me, misconstrues the intention of
Congress in at least four respects.

First, contrary to the court's assertion. Congress did
not choose the Occupational Safety and Health Review
Commission as the "enforcing agency." The authority to
enforce the statute clearly resides with the Secretary and
OSHA. Second, the fact that adjudicatory authority is
withheld from the Secretary does not necessarily mean that
Congress also intended to withhold from the Secretary the
authority to decide who might properly be subject to the
coverage of the Act and its regulations. Third, the court
worries that accepting the Secretary's approach would render
the Commission as "little more than a specialized jury, an
agency charged only with fact-finding. "92 Even if that be
true, it is a choice that the legislature apparently has
made, and no court should seek to re-allocate that
legislatively^ determined division of responsibility.
Finally, the court's assertion that "it is the power to adopt
rules or policies in adjudication which we are concerned with
in this case" ignores what the Commission has actually done
in this instance. This is not an instance where the
Commission has adopted "rules or policies" with respect to

90id. at 1262.

91 Id.

92id.

322 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

how the adjudication would proceed before the Commission.
That, it seems to me, would occasion no problem at all. If
that were the case, the Commission essentially would be doing
what almost all other agencies are empowered to do-- to adopt
rules of procedure to aid in discharging its duties and
responsibilities. Rather, what the Commission has done here
instead, and done with the approval of the court, is to
decide what the general and substantive reach of a standard
should be. And that is clearly a legislative determination,
not an adjudicatory one, and as such, it is one for the
Secretary to make. It is true, as the court points out, that
"Congress intended that [the Commission] would have the
normal complement of adjudicatory powers possessed by
traditional agencies .... "93 But it is also true that
Congress intended that the Commission have only adjudicatory
powers. At least, in that respect, the Commission-- and with
respect to legislative authority, OSHA-- are not traditional
agencies. This decision of the Fourth Circuit would upset
this congressional determination and, thereby, confer upon
the Commission more authority than Congress intended it to
exercise.

Other circuits have come to substantially similar
conclusions when confronted with a disagreement between the
Secretary and the Commission. The Eighth Circuit has also
concluded that, in such a circumstance, it is the Commission
to whom the courts should defer. This court has gone so far
as to say that "the Secretary may recommend an interpretation
of a regulation to the Commission, but his recommendation
does not necessarily control the Commission's conclusion. "94

An early case from the Second Circuit appeared to adopt
the view that it is the Secretary's determination that should
be accorded special weight. 95 in one of that court's first
enforcement proceedings under the OSHAct, it concluded that,
because "Congress apparently placed primary reliance upon
promulgation by the Secretary of specific regulations... [i]t
is especially important that these regulations be construed
to effectuate congressional objectives. "96 That statement
would seem almost inexorably to place the Second Circuit on

93id.

94BRENNAN v. OSHRC and RON M. FIEGEN, INC., 513 F.2d 713
(8th Cir. 1975).

95BRENNAN V. OSHRC and GEROSA, INC., 491 F.2d 1340 (2d
Cir. 1974).

96491 F.2d at 1343.

SPLIT ENFORCEMENT MODEL 323

the side that advocates deferring to the Secretary on matters
of interpretation. A more recent Second Circuit case,
however, casts some doubt on such an inference. 97

Western Electric, Inc. had been cited by the Secretary
for violating an OSHA emergency regulation that required
employer testing for the presence jot vinyl chloride, a known
carcinogen. Western Electric did not begin immediately to
test for the presence of vinyl chloride because the company
hygienist concluded that the plant did not use the raw
materials that were suspected of producing the gas.
Nonetheless, because of his concern for the workers' safety,
the hygienist monitored the area he believed to be most
susceptible to releasing vinyl chloride. OSHA, however,
cited Western Electric for failing to monitor other areas as
well. The ALJ, "relying on the plain language of the
standard, which requires physical monitoring of any operation
releasing vinyl chloride gas... held that Western Electric
had violated the standard by failing to monitor [other
areas], "98 The review commission, however, set aside the

AL J ' s findings, maintaining that Western Electric could
"reliably predict from the physical circumstances that the
concentration of vinyl chloride would be well below the
danger level set by the Secretary. "99 The Secretary, on the
other hand, argued that such an interpretation of the
standard was unreasonable in that "the standard expressly
requires physical monitoring of every operation in which
vinyl chloride is released . . . ."100

A Second Circuit panel reversed the Commission's
decision. The reversal came, however, because the court
determined that the Commission's interpretation was
unreasonable. The court seemed to imply that, had the
Commission's interpretation been a "more reasonable" one, it
might have upheld the determination. The panel remarked
that:

this court has consistently held that its role is to
decide whether the Commission's interpretation of

the regulation is unreasonable and inconsistent with

97MARSHALL V. WESTERN ELECTRIC, 565 F.2d 240 (2d Cir.
1977). But see, BROCK v. SCHWARZ- JORDAN, INC., 777 F2d 195

(5th Cir. 1985).

98565 F.2d at 243-44.

99id. at 244.

lOOid.

324 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

its purpose, the normal standard for review of the
interpretation of a regulation by an agency charged
with its administration. 1 O"!

If what the court intended to suggest here is that, so long
as there are reasonable but different interpretations of a
regulation by OSHA and the review commission, it could or
would enforce the review commission's interpretation, I think
the court is wrong. That the review commission might give
the regulation a reasonable interpretation is irrelevant.
What is relevant is that Congress has reposed that authority,
the authority to decide what a standard means in the
Secretary, and it should not matter that others could or
would be equally reasonable in their interpretations of the
same standard. It is not their decision to make.

Such an attitude, I submit, reveals a fundamental
misunderstanding of what Congress intended when it divided
the administrative functions in this novel way. While it may
be true that Congress did not wish to have the administrative
functions combined as they are in the traditionally arranged
agencies, there is no evidence whatsoever to indicate that
Congress intended the Commission to set the substantive
standards or to substitute its judgment for that of the
Secretary, the administrative officer to whom responsibility
for the substantive standards was committed. However sparse
the legislative history may be-- and it is true that it could
have been more helpful-- logic and administrative efficiency,
if nothing else, argue that the role of the Commission is to
adjudicate alleged violations of the standards, nothing more.
What the standards mean, to whom they should apply-- those
are legislative determinations, decisions that, absent a
congressional directive to the contrary, are ordinarily
vested in the promulgator of the rule. It then is an obvious
usurpation for either the Commission or a reviewing court
unilaterally to deprive the Secretary of that authority.

It is clear from the legislative history of the OSHAct
that Congress, in trying to settle the quarrel over how the
administrative functions would be allocated, was concerned
primarily with resolving a political problem. By adopting
this "split-enforcement" arrangement. Congress solved the
immediate political problem-- who would make the rules, who
would resolve disputes arising from those rules. Yet it is
not clear that Congress solved the "administrative" problem
it had been so preoccupied with. Perhaps while focusing too

lOTld. See also, BRENNAN v. OSHRC and GEROSA, INC.,
491 F.2d 1340, 1344 and n. 1 (describing as "simplistic" the
thought that the meaning of a regulation might best be
fathomed by its author, here the Secretary). Accord,
BRENNAN v. OSHRC and UNDERHILL CONSTRUCTION CORP., 513 F.2d
1032 (2d Cir. 1975).

SPLIT ENFORCEMENT MODEL 325

critically on the who. Congress may have ignored some of the
more important ramifications of the choice it had settled on,
or perhaps it did not fully appreciate the significance of
the choices it had made or their likely consequences. It
might have been expected that, when a single regulatory
program is divided between two agencies, some conflicts would
develop. Nowhere in the legislative history, however, is any
thought or discussion devoted to that possibility, that
eventuality. No guidance is provided regarding how potential
conflicts should be resolved. It is almost as though
Congress were totally oblivious to the possibility, the
likelihood that tension and some measure of confusion would
develop between these two agencies. Neither the agencies
involved nor the courts, however, are given any legislative
indication of how Congress intended potential institutional
conflicts to be resolved. Simply to repose rulemaking and
enforcement authority in one agency and adjudicatory
authority in another may have seemed, at first, a neat
resolution to a vexing political problem. It, however, was
but the beginning of several others.

V. INSTITUTIONAL CONFLICTS: The MSHAct

Even though Congress did attempt to clarify the division
of responsibilities between the Mine Safety Administration
and the Mine Safety and Health Review Commission, there
nonetheless have been some "turf fights" between the two
agencies. The disagreements, however, do not appear to have
been as frequent as those between OSHA and OSHRC. In one
case, a court indicated that a bulletin from the Labor
Department interpreting a provision of the MSHAct "is
entitled to deference unless it can be fairly said not to be
a reasoned and supportable interpretation of the Act. "102
Because that case involved a situation where the Secretary
and the review commission-- although not the administrative
law judge-- were in agreement on the interpretation of the
act, it provides no basis for determining how the court would
have decided the issue had the two agencies disagreed
regarding the interpretation.

At least one court has had the opportunity squarely to
face that issue, but the court declined to do so because, as
the court put it, "the Commission's construction [was]
plainly incorrect and insupportable by the terms of the
Act, "103 The case involved a question regarding the right of

102MAGMA COPPER COMPANY v. SECRETARY OF LABOR, 645 F.2d
694, 696 (9th Cir. 1981 ).

103UNITED MINE WORKERS OF AMERICA V. FEDERAL MINE SAFETY
AND HEALTH REVIEW COMMISSION, 671 F.2d 615 (D.C. Cir. 1982).

326 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

a representative of mine workers to participate in so-called
"spot" inspections of the mines without suffering a loss of
pay, 104 The Commission had held that the representatives
were entitled to pay only for what are called "regular"
inspections, that is, inspections of a mine in its entirety.
The Secretary's position was that the act entitled the
representatives to receive their pay-- often called walk-
around money-- for any inspection they observed.

The court sided with the Secretary's reading of the
statute. But it felt no necessity to decide the more general
question, observing that:

, . . [the] Secretary of Labor has raised the issue
of whether, as a general procedural matter, his
interpretation of the Act or that of the Commission
is entitled to "special weight." The Court need
not decide what weight should generally be afforded
to a decision by the Commission relative to that
given a conflicting interpretation by the
Secretary, since in this instance, the Commission's
construction is plainly incorrect and insupportable
by the terms of the Act and therefore entitled to
no deference. 1 05

Nonetheless, in pressing its claim before the D.C.
Circuit, the Secretary made many of the same arguments that
have frequently been advanced in the OSHA-OSHRC dispute: the
rulemaking, enforcement, and prosecution powers under the
MSHAct are assigned to the Secretary. It is the Secretary
who promulgates safety and health standards, carries out
statutorily mandated inspections, enforces citations and
orders, proposes and collects civil penalties, and defends
his actions before administrative and judicial tribunals.
The Commission, on the other hand, is given but three
functions, all of which are analogous to judicial functions:
to adjudicate contested cases, to assess civil penalties, and
to approve settlements in cases pending before it. 106

The Secretary also maintains that deference should be
paid to the Secretary's construction of the act's provisions
because "as opposed to the Commission, he was involved in the

10430 U.S.C. §813(a) & (f) (1982).

105671 F.2d at 623, n. 26.

1 06see Brief of Petitioner (Secretary of Labor) at 52,
MARSHALL v. UMW, 671 F.2d 615 (D.C. Cir. 1982).

SPLIT ENFORCEMENT MODEL 327

development of the Act. The Commission, on the other hand,
is a creature of the Act. "107

Even though the court did not resolve the deference
issue in the walk-around money case, the Labor Department
considers the case a major victory for the Secretary and the
Department in clarifying the agencies' respective roles. 108

Another "turf" battle between the Secretary and MSHRC
has now made its way to the District of Columbia Circuit for
resolution. 1 09 The issue in this case is whether, under the
MSHAct, the Secretary may cite the owner-operator of a mine
for a violation committed by its independent contractor. 1 1 0
The Secretary's says yes. MSHRC' s answer is no. According
to the Secretary, there is a history of judicial precedent
which endorses his right under the act to determine whom to
prosecute-- precedent which the Commission, attempting to
enhance its "policymaking" role under the act, has chosen to
ignore. 1 1 1

107id. at pp. 53-54.

108interview with Cynthia Attwood, Associate Solicitor,
and Michael A. McCord, Counsel, Appellate Litigation, Mine
Safety and Health Administration, Office of the Solicitor,
Arlington, Virginia (September 7, 1985).

109DONOVAN V. CATHEDRAL BLUFFS, Docket No. 84-1492,
(D.C. Circuit).

1 1 Osee , Brief of Petitioner (Secretary of Labor),
DONOVAN V. CATHEDRAL BLUFFS, Docket No. 84-1492, filed,
January 18, 1985, District of Columbia Circuit.

1 1 1 CATHEDRAL BLUFFS is, among other things, a case
regarding the extent of the Secretary's "prosecutorial
discretion" in enforcing the Mine Act and how the exercise of
that discretion should be viewed by the Commission. The
Secretary's view is that the Act gives him broad discretion
to determine against whom to enforce the provisions of the
Act and that the Secretary's determination cannot be
overturned without demonstrating that he has abused that
discretion. Oral argument was held in DONOVAN v. CATHEDRAL
BLUFFS SHALE OIL CO. on September 13, 1985.

The case was decided on July 29, 1986, sub, nom. BROCK

v. CATHEDRAL BLUFFS, U.S.App.D.C. , F2d.

(D.C. Cir. 1986). On the deference question, the court sided
with the Secretary, saying at n.2: "We see no reason to
depart from the view we announced, with regard to the Mine

328 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

But the number of such disputes between MSHA and MSHRC
pales in comparison to those between OSHA and OSHRC, What
can account for such differences? Why does this arrangement
appear to have worked, with minimal difficulty in the one
case, and to have been so fraught with problems in the other?

To be sure, the mine-safety statute was enacted seven
years after the OSHAct. OSHA and OSHRC are the first major
regulatory agencies to have to contend with so complete a
separation of functions. There are always unforeseen
problems in being first. FMSHA and FMSHRC have had the
advantage of observing and, therefore, avoiding some of the
initial mistakes that plagued the occupational-safety
agencies. Yet that fact alone may not explain all
differences.

On the deference question, part of the explanation for
the relative absence of disputes between FMSHA and FMSHRC
may well be attributed to the legislative history of the mine
statute, which directs both the Commission and the courts to
accord "weight" to the Secretary's determinations. 1 1 2 With
such a statement. Congress at least went on record,
suggesting that, as a primary matter, the Secretary's
construction of this statute and of the regulations
promulgated pursuant to it are to be highly valued. Of
course, such a statement does not in and of itself implement
the congressional intention, but it does minimize the
potential for conflicts, and, at the same time, it raises a
heavy presumption against anyone who would ignore or discount
the Secretary's interpretation. It may not be worth much,
but it must surely be worth more than no congressional
directive at all.

There are other possible reasons to explain the
relatively smooth accommodations that have been achieved by
FMSHA-FMSHRC. Chief among them may be the narrower scope of
their activities and responsibilities. The FMSHAct governs
only mining. There is much more finiteness in its scope.
The population is a limited one-- miners and mine operators.
And the health and safety hazards to which mining exposes its
workers tend to be the same, wherever the mine is located.
The OSHAct, on the other hand, governs everything else, and
everything else is a vast universe of companies, industries,
firms, enterprises, you name it. Their only commonality may
be that they all have employees. Mine-safety officials
emphasize the significance of this difference between
themselves and their OSHA counterparts. According to one

Act, in Carol ina Stall te , which leaves interpretive
discretion where it normally resides, with the policy-maker
rather than the adjudicator."

112566, note supra at , and accompanying text.

SPLIT ENFORCEMENT MODEL 329

FMSHA official, his agency can obtain at almost any moment a
virtually precise record of the numbers of mines and miners
subject to its jurisdiction. With such discrete
responsibilities, he maintains, FMSHAct agencies can become
really expert in the industry and in the regulatory matters
under its supervision. 1 1 3

Not only that, but the regulatory powers of FMSHA may
also explain why the FMSHAct agencies have not been as
beleaguered by conflicts as OSHA and OSHRC have been. Mine
inspectors possess enormous power under the mine-safety
statute and, therefore, may be able, in the first instance,
to induce a greater degree of cooperation from mine
operators. For example, under the statute, an inspector's
entry onto the mine is authorized. 1 1 4 Furthermore, the
statute prohibits advance notice of a mine inspection. 1 1 5 it
also empowers the Secretary to order an immediate abatement
of hazards detected and to close off access to a mine until
the violation is abated.116 in short, a mine-safety
inspection official can exact almost immediate compliance
from a mine operator. OSHA inspectors, on the other hand,
cannot obtain such immediate results. In fact, OSHA
citations to abate can be stayed until after a decision by
OSHRC. So, in an OSHAct case, there may be little reason
initially to comply with the Secretary's citation. One has
little to lose. But, because of the immediacy of the FMSHA
inspector's citation and unless the operator believes the
citation to be utterly frivolous or egregious, there is every
reason to comply at once. There is, in fact, too much to
lose, particularly when one's mining operation could be
halted or severely curtailed. MSHAct officials maintain,
however, that there is little likelihood of a frivolous or
egregious citation, because all their inspectors are or were
themselves miners, who generally would be more capable of
making realistic assessments of mining hazards than would be
inspectors unschooled in the industry. 1 1 7

1 1 3interyiew with Frank O'Gorman, Federal Mine Safety
and Health Administration, Arlington, Virginia (February 3, 1986).

11430 U.S.C. §813(a).

115id.

116id.

117interview with Frank O'Gorman, Federal Mine Safety
and Health Administration, Arlington, Virginia (February 3, 1986).

330 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

VI. GREATER DUE PROCESS?

The institutional conflicts-- the problem of deference--
has been a great problem with the split-enforcement model,
at least with the OSHAct agencies. But the deference
problem, the problem of institutional conflicts surfaced only
after the passage and implementation of the OSHA statute.
Perhaps the problem should have been forecasted or
anticipated. But, for whatever reasons, the issue did not
figure in the legislative discussions. What did figure very
prominently in the legislative discussions-- with respect to
both the OSHAct and the FMSHAct-- was the notion that such a
strict separation of rulemaker from the adjudicator would
enhance the prospects for due process and thereby instill
greater confidence in the regulatory programs. The
legislative proponents of both statutes focused much of their
discussion and attention on the enhanced prospects for due
process that this split-enforcement scheme was expected to
ensure. Have those predictions been borne out? Does the
split-enforcement arrangement ensure, any more so than the
traditional, cohesive agency structure, that due process will
be enhanced, that the regulatory programs themselves would be
perceived to be more credible?

It is very difficult-- if not impossible-- empirically
to demonstrate that the one arrangement is "better" than the
other in providing due process. Even though the traditional
model has withstood constitutional challenges to its housing
all the administrative apparatus under one roof,118 the
impression persists that no agency that may, at the same
time, be responsible for licensing, policing, adopting rules,
and deciding challenges can be completely fair and objective
when those rules or policies are challenged before it. That
impression appears to be based on the view that no matter how
many bars, barriers, or Chinese walls are erected to shield
the policymakers and the prosecutors from the quasi- judicial
authorities, the agency itself still maintains a vested
interest in ensuring that a particular result is reached,
that particular policies are protected or advanced. Whether
that assumption is provable or not, it is^ a frequent
impression.

The answer then may well be that it does not ultimately
matter whether the split-enforcement model does, in fact,
ensure any more due process or instill any more confidence
than the traditional administrative arrangements. What may
matter more is what advantage one thinks or believes the one

118see, e.g. WITHROW v. LARKIN, 421 U.S. 35 (1975);
FEDERAL TRADE COMMISSION v. CINDERELLA CAREER AND FINISHING
SCHOOLS, 404 F.2d 1308 (D.C. Cir. 1968).

SPLIT ENFORCEMENT MODEL 331

model may possess over the other. And that, of course,
depends on whom one talks to and on what one's interests in a
particular regulatory program may be.

One industry observer maintains that the split-
enforcement model with the consequent independent adjudicator
"balances" the sometimes over-aggressiveness of the
rulemaker, in this instance — the OSHA rulemaker. A separate
and independent adjudicator evens out the odds.119 implicit
in that observation, it seems to me, is the belief that
recourse to an agency other than the one that promulgated the
challenged standard is a sine qua non of due process.
According to this observer, "there is a good argument to be
made that the "policeman' should not also be "judge' and
"jury'; he's got too much to lose. How can he be "right' in
issuing a citation on one side and "wrong' when he
adjudicates it on the other?"120

This observer further maintains that even greater due
process would be assured if members of the review commission
are conversant, if not necessarily expert, in specific health
and safety areas. If the adjudicator had more of a working
scientific knowledge or knowledge of particular industries
and their hazards, the Commission could be expected to reach
a more "realistic" assessment regarding alleged violations.
According to this observer, as it now stands, many industry
officials simply calculate their costs of compliance to
determine which is more economical — acceding to OSHA's rule,
however irrational one might think it or challenging the rule
before the Commission and perhaps in the federal courts. 121
That is, due process becomes a bottom-line consideration, and
it sometimes may be cheaper (better?) to switch than fight.

As one might expect, an observer from organized labor
has a somewhat different view. Labor, it may be recalled,
advocated vesting all the administrative powers of the OSHA
program in the Department of Labor. According to one labor
official, it is not that the independent adjudicator ensures
that there will be more due process. What it does ensure--
at least, what has happened with the OSHAct-- is a process
that was not originally intended. "Too often," she
contends,, "whdt OSHRC has engaged in is a review not of the
law, but of the facts, of OSHA's judgment of the risks and
hazards, and that was never contemplated when the statute was

'I "I ^Interview with David Sarvadi, Vice President, A.F.
Meyer and Associates, McLean, Virginia (December 16, 1985).

121id.

332 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

adopted. "122 in addition, she also contends that .tihe
Commission's willingness to engage in those factual reviews
has led to interminable delays in disposing of some OSHA
citations. "Some cases from 1978," she says, "still remain
unresolved. Can that honestly be called more due process.
If so, for whom?"123

Despite those criticisms, there are some government
officials who do advocate a more general use of the split-
enforcement model. 124 in fact, the Associate Solicitor at
MSHA believes the split-enforcement model is much to be
preferred. She concedes that there may be some sacrifices
in efficiency and policy coordination. Nonetheless, she
maintains that those sacrifices are far outweighed by the
benefits that are derived from having the "institutional
conflicts" on the public record for examination, discussion,
evaluation. Intra-agency disputes, she maintains, are
frequently resolved with no public awareness of the
considerations that may have informed the resolutions. She
believes that it is much more likely that resolutions
achieved in a split-enforcement arrangement are achieved
openly and with more public knowledge and understanding of
the compromises and accommodations reached. 125 of course,
this unqualified endorsement of the split-enforcement model
comes from one whose experience with it generally has been
very good, and that may well be attributable to both the
discreteness of the mine-safety program and the clarity with
which its congressional proponents expressed themselves on
the division of authority.

From one whose agency's experiences with the split-
enforcement model have not been uniformly good, there comes
neither a wholesale condemnation nor an aversion to its more
general use. Rather there is an insistence that any future
programs employing the split-enforcement model be much more
carefully drafted so that it is clear what each agency's

1 22interview with Peg Seminario, Assistant Director,
Department of Occupational Safety and Health and Social
Security, AFL-CIO, Washington, D.C. (February 10, 1986).

123id.

124interview with E. Ross Buckley, Chairman,
Occupational Safety and Health Review Commission, Washington,
D.C. (August 8, 1985).

125interview with Cynthia Attwood, Associate Solicitor,
Mine Safety and Health Administration, Office of the
Solicitor, Arlington, Virginia (September 7, 1985).

SPLIT ENFORCEMENT MODEL 333

responsibilities are. According to this observer, if more
due process is the desideratum, it should be unarguably clear
precisely what authority each agency has. 126 Otherwise,
rather than ensuring more due process, the resulting
confusion may assure none,

VII. CONCLUSION

Is the split-enforcement model to be preferred over the
more traditional unitary arrangement? In the end, that
question may well be unanswerable. It, is of course^.,
debatable whether one model is "better" than the other.
Whatever may be one's attitude about the perceived advantages
of the split-enforcement model-- greater assurance that due
process prevails or more confidence on the part of those
subject to the regulatory authority-- there is indeed a
greater necessity that split-enforcement programs be more
carefully designed than the unitary administrative programs.

If the OSHA experience is any example, and it must be
some, a major problem likely to confront any regulatory
program divided between two agencies is that of the inherent
institutional conflicts that can develop. It might have been
in 1970 when the OSHA statute was enacted-- and it may still
be-- a salutary and commendable idea completely to separate
rulemaking and enforcement powers from the adjudicatory ones.
Whatever ideas may have informed the original decision--
greater confidence in the program, enhanced prospects for due
process, or simply a quick solution to a troubling political
problem-- it is now evident that the total separation of
functions has not worked in the OSHA program as Congress and
its other champions must have hoped.

The major oversight in the OSHA legislation, it seems to
me, though not necessarily in the concept itself, was in
Congress's failing seriously and carefully to examine the
possible administrative and judicial difficulties this
bifurcation of responsibilities would create. It may have
been possible in 1 970 to ignore the potential problems in the
expectation (the hope?) that none would develop and that,
even if some did, the two agencies themselves could solve
them. That possibility no longer exists. Nor may it be
possible any longer sanguinely to expect the twelve branches
of the Court of Appeals to solve these institutional
problems. To be sure, the Supreme Court could provide a
resolution, assuming that it considers the problems important
enough to merit the high court's attention. But not even a
Supreme Court decision would guarantee that these issues,
particularly the deference question, would be resolved in the

126interview with Frank White, Associate Solicitor,
Occupational Safety and Health Administration, Washington,
D.C. (August 28, 1985).

334 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

way the legislature would choose. 1^7 The OSHAct, the
regulatory program it established, and the review commission
it created are all creatures of the legislature. The
legislature, therefore, ought clearly to indicate how it
intends them all to function.

As for the prospects of greater due process, it simply
is not possible at this time to say whether the split-
enforcement model is better at achieving it. 128 it should
not be pretended, nor is it here intended to be suggested,
that the traditional administrative model is not susceptible
to intra-agency conflicts that may often rival those which
have been seen to exist with the split-enforcement model.
Nonetheless, such intra-agency conflicts are more easily,
even if not more readily, resolved because the ultimate
responsibility for decision devolves on a single chief
administrator or a single multi-member agency. The decision
of that administrator or that agency is definitive, subject
to reversal only by a court of competent jurisdiction or
revision by the legislature. The same cannot be said of a
regulatory program, responsibility for which is divided
between two agencies. Divided regulatory programs must be
expected inherently to encounter more administrative
problems and difficulties than might a similar program housed

1 27see, e.g. , CUYAHOGA VALLEY RAILWAY CO. v. UNITED

TRANSPORTATION UNION, U.S. , 106 S.Ct. 286 (1985).

Although not specifically addressing the deference issue,
this recent Supreme Court decision may conceivably augur the
Court's view on the deference question. In considering
whether the Commission could prevent the Secretary from
withdrawing a citation issued by his department, the Court,
in a per curiam opinion, held that "the Secretary has
unreviewable discretion to withdraw a citation charging an
employer with violating the Occupational Safety and Health
Act." Furthermore, the Court also said that "it is the
Secretary, not the Commission, who sets the substantive
standards for the work place, and only the Secretary has the
authority to determine if a citation should be issued to an
employer for unsafe working conditions, 29 U.S.C. §658 . .
. . The Commission's function is to act as a neutral arbiter
and determine whether the Secretary's citations should be
enforced over employee or union objections."

128with only the examples of OSHA-OSHRC and FMSHA-FMSHRC
from which to reason, it may be premature to attempt any
generalizations regarding the desirablitity of this model
over the traditional unitary model. Furthermore, how would
one determine which model (or which agency operating under
which model) would represent the "control" group for
comparison purposes?

SPLIT ENFORCEMENT MODEL 335

entirely under one administrative roof. Such a program is,
in a very real sense, potentially and practically, the
servant of two masters, and of possibly many more when the
reviewing courts are counted. No program can be efficient or
effectively administered in such a divided environment unless
the responsibilities of each agency are carefully delimited.

When it enacts a program using the split-enforcement
model. Congress, therefore, has a special obligation to draw
the perimeters of each agency's responsibilities. A mere
declaration or statement that one agency's determinations
should be given special weight may be sufficient. Such a
statement appears to have aided in minimizing conflicts
between MSHA and MSHRC.

The congressional proclivity to legislate very broadly
and generally, to leave the details later to be worked out,
while fraught with potential danger in the traditional model,
is particularly dangerous when regulatory responsibilities
are divided between two agencies. Therefore, in any future
use of the split-enforcement model, the responsibility of the
rulemaker, the adjudicator, and the reviewing courts should
be set forth with grater specificity that some recent
Congresses have been wont to demonstrate. The tendency to do
less should be resolutely avoided. As a general matter, the
rulemaker should clearly be created to function as the
policymaker, and the other participating agents-- both the
quasi-adjudicatory agency and the courts-- must be required
to see him that way and to restrain their impulse to usurp
that role. And once Congress has clarified the
responsibilities and authorities of the two independent
agencies, the agencies and the reviewing courts then have a
concomitant responsibility to ensure that their assigned
limitations are observed.

When considering future uses of the split-enforcement
model. Congress should also refrain from placing too much on
a program's regulatory agenda. 129 Some of the OSHAct
agencies' problems may stem from the sheer magnitude of their
tasks. Likewise, much of the success of the MSHAct agencies
must be attributed to the manageability of their charge.

In the area of occupational safety and health, the
statute and, as a result, the whole regulatory program could
be improved in one important way. The OSHAct should be
amended unambiguously to provide that, in adjudicatory

129no doubt this admonition should also caution against
repeating the OSHA experience with the "consensus" standards.
If a regulatory agency is required to adopt pre-existing
rules or standards from some other source, private or
otherwise, there is a special obligation on the part of
Congress to "instruct" the adopting agency as to how these
adopted rules or standards should be enforced in their new
administrative milieus. See, M. Rothstein supra n. .

336 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

challenges to standards promulgated by the Secretary pursuant
to his authority under the statute, the review commission
must accept the Secretary's interpretation of the standard as
conclusive, unless it clearly can be shown that the
Secretary's interpretation is arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law. 130
The same standard should guide a reviewing court in
discharging its responsibilities under the act. While such
an amendment may not completely eliminate conflicts between
the agencies (what could?), it should certainly go far toward
minimizing them. 131 The arbitrary-and-capricious standard
is, by no means, a talisman capable of magically transforming
a confusing regulatory scheme into a more intelligible and
predictable one. It is, however, a standard with which
judicial authorities have had long experience and which they
can be expected more uniformly to apply. It is, after all, a
court to which the Occupational Safety and Health Review

130see 5 U.S.C. §706 (2)(A).

131 In comments to the Administrative Conference on
this report, OSHRC concedes that certain institutional
conflicts c^d exist between OSHA and the review commission.
According to OSHRC, "This occurred in large part because OSHA
and OSHRC were the first agencies to operate under so
complete a separation of functions in administering a single
statute. Further, as the consultant's report indicates, some
ambiguities in the OSH Act and its legislative history
regarding the roles of each agency also contributed to the
conflict." OSHRC maintains, however, that "[a]s a result of
judicial decisions and its own experience, most of the
institutional disputes between the Commission and OSHA have
been resolved. Therefore, the Commission does not believe
that it is necessary to amend OSH Act to specify more clearly
the scope of the authority of the respective agencies.
However, the Commission believes that it would be helpful if
Congress uses as much specificity as possible in defining the
roles of the agencies, if the split-function scheme is
adopted in other areas of the law. Thus, some of the
uncertainty the Commission faced in its early days would be
avoided. "

See, OSHRC "COMMENTS REGARDING THE COMMITTEE ON
ADJUDICATIONS ' S PROPOSED RECOMMENDATIONS ON THE °SPLIT-
ENFORCEMENT MODEL FOR AGENCY ADJUDICATION'", pp. 5-6 (August
20, 1986).

SPLIT ENFORCEMENT MODEL 337

Commission compares itself. 132 Such an amendment would give
specific legislative endorsement to what one can only surmise
to be the unarticulated assumption on which Congress based
this bifurcated scheme. 133 The split-enforcement model may

132interview with Paul A. Tenney, Chief Administrative
Law Judge, Occupational Safety and Health Review Commission
(August 28, 1985).

13 3The OSHAct might be further improved with a second
amendment. Congress should consider amending section 12 of
the OSHAct to expand the Commission 's membership to five
from the current three. See 29 U.S.C. §661 (a) (1982).

If one but focuses on the work-load of OSHRC in
comparison to that of the larger MSHRC, one might be
persuaded, even without more, that OSHRC 's membership should
be enlarged.

For example, in fiscal year 1981, OSHRC received 3,739
notices of contest. Most of these contested decisions were
disposed of without hearings. Nonetheless, the agency's ALJs
did render 415 decisions; the Commission itself rendered 215.
In FY-1982, the corresponding figures were 1,489; 218; and
168. In FY-1983, they were 1,223; 166; and 102. The FY-1 984
numbers were 1,307; 159; and 88. The FY-1 984 figures were
1,435; 164; and 53. (STATISTICS PROVIDED BY OSHRC OFFICE OF
PUBLIC INFORMATION)

By contrast, in FY-1 981 , MSHRC AL J ' s received 2,350
penalty and contested review citations. In that period, the
Commission itself disposed of 116 cases, a number which
includes petitions for discretionary review that were
granted, petitions that were denied, decisions and orders
terminating cases, as well as cases continued from the
previous year. In FY 1982, the comparable numbers were 1,450
and 107. The FY-1983 figures were 1,243 and 67. The figures
for FY-1 984 were 1,412 and 72. In FY-1 985, the comparable
figures were 1,490 and 59. (STATISTICS PROVIDED BY FMSHRC
OFFICE OF GENERAL COUNSEL)

Of course, the contrary argument might also be advanced--
that is, that MSHRC is indeed too large and its membership
should be decreased. The major problems, however, do appear
to have existed with the smaller OSHRC and its
disproportionately heavier caseload.

Enlarging the review commission to five would allow its
work to continue with minimal interruption or delay when a
vacancy occurs. With a three-member commission, one vacancy
can seriously retard its work; two could virtually paralyze

it. See, Rothstein, supra n. .

In addition. Congress might also consider empowering the
commission to operate in panels of three, with the

338 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

well have advantages over the traditional, unitary model. It
may not. It may be that whatever advantages do exist with
the split-enforcement model are only perceived ones. Whether
the advantages of the s pi i t -enforcement model be only
perceived ones or not, it will matter little if Congress does
not take care to ensure that its intent is more clear, less
ambiguous. Otherwise, whatever benefits Congress might
intend, or whatever advantages might be expected from such an
arrangement could all be lost in confusion and in
debilitating bureaucratic struggles.

requirement that the affirmative vote of three members be
necessary to direct a case for review. The commission could
still retain the authority to decide important cases en banc.
Such an arrangement already exists and works well with the
Mine and Health Review Commission. On an expanded
commission, members would be appointed for staggering terms
of five years. A five-member commission would avoid the sort
of inertia that could hamper the commission's work when a
vacancy exists. During much of early 1985, OSHRC's work
came to a virtual halt because it had only one member. By
August 1985, the Commission was again at its full complement;
however, two of the three members at that time held recess
appointments. Such gaps in continuity could be avoided if
the OSHAct included a hold-over provision for departing
members. The absence of a hold-over provision is an obvious
deficiency in the statute. See, 29 U.S.C. §661 (a).

A larger commission would not so easily be subject to
frequent shifts in policy. To be sure, under the suggestion,
a new commissioner would be appointed every year; however,
the incremental impact of such an appointment would be less
severe and potentially less jolting than it would be on a
three-member commission. On a three-member panel the
replacement of a single member may, at any time, radically
alter commission policy. Increased confidence also was
regularly cited by proponents as a principal reason for
favoring the split-enforcement model. A measure of stability
in the adjudicatory process and in the development of
commission precedents is essential to obtaining that desired
confidence. A five-member commission should help to promote
that requisite stability.

BACKGROUND REPORT FOR RECOMMENDATION 86-5

THE MEDICARE APPEALS SYSTEM FOR COVERAGE AND PAYMENT DISPUTES

Eleanor D. Kinney, J.D., M.P.H.

Assistant Professor of Law

Program for Law, Medicine and the Health Care Industry

Indiana University School of Law - Indianapolis

735 West New York Street

Indianapolis, Indiana 46202

Report to the Administrative Conference of the United States
October 1986

340 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

ACKNOWLKDGMENTS

Many people have helped with this draft report in a variety of ways. I would
like to thank Jeffrey S. Lubbers, Research Director of the Administrative
Conference of the United States, for his guidance and support in this project. I
would also like to thank numerous indivi(hials who are actively involved with
Medicare appeals system in various capacities and who have provided invaluable
information and insights for this study. These individuals include: Ann T.
Hunsaker, Assistant General Counsel, Department of Health and Human Services;
Elise D. Smith, General Counsel of the Prospective Payment Assessment Commission;
Bruce Steinwald, Deputy Director, Prospective Payment Assessment Commission, Paul
Morton Ganeles, Chairman, Provider Reimbursement Review Board; David Kleinberg,
Deputy Associate Director, Office of Management and Budget: Robert W. McCann,
Vice President and Associate General Counsel, American Hospital Association; Jude
Duffy, Staff Attorney, American Hospital Association, Tom Gilligan, Catholic
Health Association; Steven Crickmore, Blue Cross and Blue Shield of Indiana;
Sally Hart Wilson, Staff Attorney, National Senior Citizens Law Center; Michael
C. Parks, Staff Attorney, National Health Law Program; Leonard C. Homer & Carol
Hedlund, Ober, Kaler Grimes & Shriver, Baltimore, MD; John B. Reiss, Dechert,
Price & Rhoads , Philadelphia, PA; Lawrence R. Mullen, Fnlbright & Jaworski ,
Houston, TX; Ronald N. Sutter, Powers, Pyles, Sutter & O'Hare, Washington, DC;
James E. Kemper, Ice, Miller, Dynadio & Ryan, Indianapolis, IN; Richard E.
Verville, White, Fine & Verville, Washington, DC and the Office of Senator Dan
Quaylo of Indiana.

I would also like to thank my colleague William F. Harvey, Carl M. Gray Professor
of Advocacy and Professor of Law, Indiana University School of Law --
Indianapolis, for his support in this project. I would like to give special
thanks to my research assistants, Michael D. Wright and Barbara Knotts, for their
truly excellent help with this project. Finally, I would like to thank the
typists, Brenda Morrison, Sue Smallwood, Wendy Fisk and Mabel Hart for their
patient and expert assistance in producing this report and Van Hoi ley for her
proofreading the final text.

MEDICARE APPEALS SYSTEM 341

TABLE OF CONTENTS

INTRODUCTION

CHAPTER I: THE MEDICARE PROGRAM

A. The Structure of the Medicare Program

1. Administration

2. Eligibility

3. Benefits

4 . Coverage

5. Financing

6. Payment Methods

B. The Medicare Program's Accomplishments

CHAPTER II: THE COST CRISIS AND
SEARCH FOR SOLUTIONS

A. The Crisis

1. Initial Payment Methodologies

2 Ramifications of Early Payment
Methodologies

B. The Search for Solutions

1 . Hospital Payment Reform

2. Physician Payment Reform

3. The Solution to the Hospital Cost
Problem: The Prospective Payment System

C. Ramifications fpr the American Health
Care System and Medicare Appeals

CHAPTER III: THE MEDICARE APPEALS SYSTEM

A. Historical Development of
the Medicare Appeals System

1. The Original Appeals System

2. Early Concerns and Problems

342 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

B. The Present Medicare Appeals System

1. Beneficiary Appeals Under Part A

2. Provider Appeals Under Part A

3. Appeals Under Part B

4. Waiver of Liability Appeals

C. Recent Congressional Action
on Medicare Appeals

CHAPTER IV: PROGRAM ADMINISTRATION ISSUES

A. Intermediary and Carrier Coverage
and Payment Determinations

1. Use of Unpublished Standards
and Guidel ines

2. Restrictive Interpretations
of Coverage Rules

3. Information on Coverage Determinations

B. Setting the Price under

the Prospective Payment System

C. Implementation of the PRO Program
CHAPTER V: ADMINISTRATIVE HEARING ISSUES

A. Beneficiary Coverage Appeals under Part A

1. Beneficiary Appeals under

the Prospective Payment System

2. Provider Representation of
Beneficiaries in Appeals under Part A

3. Deficiencies in Appeal Procedures
for Claims Under $100

B. Provider Payment Disputes under Part A

1. Jurisdiction of the PRRB for
Hospital Appeals under the
Prospective Payment System

2. Retrospective Correction of Errors
in Prospective Payment Rates

MEDICARE APPEALS SYSTEM 343

3. HHS Non-Acquiescence with Judicial
Decisions

4. PRRB Role and Procedures

5. Hospital Waivei' of Liability Appeals
Hearing Procedures under Part B

CHAPTER VI: AVAILABILITY OF ADMINISTRATIVE
AND JUDICIAL REVIEW

A. Administrative and Judicial Review

of Part B Coverage and Payment Disputes

B. Preclusion of Payment Issues for Hospitals
under the Prospective Payment System

C. Jurisdictional Bar to Judicial Review
under the Social Security Act

CHAPTER VII: RECOMMENDATIONS AND SUGGESTIONS
FOR FURTHER STUDY

A. Program Administration Issues

1. Intermediary and Carrier Coverage
and Payment Determinations

2. Setting the Price Under the Prospective
Payment System

3. Implementation of the Peer
Review Program

B. Administrative Hearing Issues

1. Beneficiary Appeals Under Part A

2. Provider Payment Disputes
Under Part A

3. Hearing Procedures Under Part B

C. Availability of Administrative
and Judicial Review

1 . Preclusion of Administrative and
Judicial Review of Part B Claims

344 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

2. Preclusion of Administrative and
Judirial Review of Certain Hospital
Payment Issues

3. Jurisdictional Bar to Judicial
Review Under the Social Security Act

n. Proposal for a Conference nn
the Medicare Appeals System

E. Conclusion

APPENDIXES

A. T.ist of Diagnosis-Related Groupings (DRGs)

B. Diagram of Appeals Processes for Coverage and Payment Disputes
Under Part A and Part B

C. Miscellaneous Exhibits

1. Explanation of Medicare Benefits Form.

2. Health Care Financing Administration, Your Right to Appeal
Decisions on Hospital Insurance Claims (July 1984).

3. Notice to Beneficiaries Regarding Hospital Benefits under the
Prospective Payment System.

4. Table: Provider Reimbursement Review Board, Performance
Stati.stif:s for the Periods Ending 6-30-75 Through 6-30-86

MEDICARE APPEALS SYSTEM 345

INTRODUCTION

Beneficiaries of the Medicare program and the health care professionals and
institutions that serve these beneficiaries have seriously questioned the
adequacy of the Medicare appeals system for disputes over the coverage of and
payment for Medicare benefits. Two major developments have precipitated this
inquiry. First, the prospective payment system for hospitals, adopted in 1983,
has wrought monumental changes throughout the Medicare program. Specifically,
implementation of the prospective payment system has resulted in increased
utilization of outpatient services by Medicare beneficiaries and, consequently,
in addition to changes in appeals of hospital payment issues, the number and
complexity of appeals regarding all types of Medicare benefits has increased.

The second factor is the long term, continuing and profound dissatisfaction
with certain aspects of the Medicare appeals system among beneficiaries and
providers. In the last five years, the Supreme Court and other federal courts
have made many important decisions in cases challenging the Medicare appeals
system for coverage and payment disputes. Many of these decisions have raised
basic questions about the fundamental fairness of the Medicare appeals system for
both beneficiaries and providers.

As a result of these and other developments, beneficiary and provider groups
and also Congress have become more concerned about problems with Medicare appeals
and Interested in considering reforms. Indeed, in its report on the Consolidated
Omnibus Budget Reconciliation Act of 1985, the House Ways and Means Committee
acknowledged the need for a thorough review of the Medicare appeals system:

It has been thirteen years since this Committee has looked
substantively at medicare's [sic] appeals procedure. Since
that time the medicare program has undergone major changes.
Inpatient hospital services that were reimbursed on a cost
basis are now mostly subject to the p'^ospective payment
system. An increasing amount of services once provided only
on an inpatient basis are now being provided in ambulatory
settings. As a result of these current changes, the
Committee believes that the current hearing and appeal
procedure under medicare needs to be reviewed.^

In its budget bill for FY 1987, the House Budget Committee has proposed reforms
of the Medicare Appeals System in some areas. ^

This study of the Medicare appeals system analyzes those processes available
for beneficiaries and hospitals to appeal coverage and payment determinations
under Part A and Part B of the Medicare program. The analysis reflects comments,
concerns and observations of government officials, congressional staff and
interest group representatives and their counsel who are closely involved with
the Medicare program and its appeals system.

^H.R. Rep. No. 241, Part I, 99th Cong., 1st Sess. 45-46 (1985).

-H.R. 5300, 99th Cong.. 2d Sess. (1986). See H.R. Rep. 727, 99th Cong., 2d
Sess. 95-96, 158-59 (1986). See notes 351-355 infra and accompanying text.

346 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The first chapter explains the Medicare program and touches briefly on some
of the program's monumental accomplishments. The second chapter describes the
threatening problem of escalating costs of providing services to benef iciaries--
a problem that It is fair to say has had a dispositive influence on the policies
and conduct of the Department of Health and Human Services and the Health Care
Financing Administration in administering the Medicare program. The third
chapter outlines the appeals procedures for payment and coverage disputes under
Part A and Part B of the Medicare program. The next three chapters recount
reported problems and concerns about the Medicare program and its appeals process
in three areas: (1) program administration, (2) administrative hearing, and (3)
the availability of administrative and judicial review.

Chapter VII contains some preliminary recommendations for changes in the
Medicare appeals system. However, for some issues, it is necessary to obtain
additional empirical information to understand their full dimensions.
Consequently, for these issues. Chapter VII makes suggestions for further study
with a view toward making recommendations in the future. In proposing
recommendations and making suggestions for further study, this analysis is
acutely aware that the Medicare program operates under unprecedented budgetary
pressures and that curtailment of the administrative expenses associated with the
Medicare program is in the best interest of this nation as well as. ultimately,
beneficiaries and providers of the Medicare program.

MEDICARE APPEALS SYSTEM 347

CHAPTER I : THE _MED I CARE PROGRAM

In 1965, Congress established the Medicare program to provide health
insurance for the aged.-^ At this time, the problem of access to quality health
care services for the aged was especially severe. In 1963, only 56% of the aged
had health insurance and yet had a greater risk of illness and far lower income
than other population groups.^ As President Lyndon B. Johnson stated when he
signed the Social Security Amendments of 1965, the hope was that Medicare would
remove financial barriers to quality health care services for the elderly:

No longer will older Americans be denied the healing powers
of modern medicine. No longer will illness crush and destroy
the savings that they have so carefully put away over a life
time so that they might enjoy dignity in later years. '^

Enactment of the Medicare program was truly an extraordinary event. There
was formidable ideological opposition particularly from the medical profession
that feared government control of medical practice.'^ The hospital industry was
somewhat more receptive to the concept since the program would assure predictable
payment for hospital services in an unprecedented manner.^ Nevertheless, the
passage of the Medicare program, and also the Medicaid program, faced
considerable obstacles and was probably possible only because of the 1964

^Social Security Amendments of 1965, Pub. L. No. 89-97, Title I, §§ 101-111.
79 Stat. 291 (1965) [hereinafter cited as "Social Security Amendments of 1965"],
codified as amended in. Social Security Act, Title XVIII. 42 U.S.C. § 1395 et
seq. (1982 ed. . Supp. II) .

At the same time Congress enacted the Medicaid program providing health
insurance for some poor. Social Security Amendments of 1965. Title I. § 121-122.
codified as amended in, Social Security Act. Title XIX, 42 U.S.C. § 1396 et seq.
(1982 ed. . Supp. II) .

^Gornik, Greenberg. Eggers & Dobson, Twenty Years of Medicare and Medicaid:
Covered Populations, Use of Benefits, and Program Expenditures, Health Care Fin.
Rev. 13, 14 (1985 Annual Supp.), [hereinafter cited as "Twenty Years of Medicare
and Medicaid"] .

^Remarks at the Signing of the Medicare Bill, July 30, 1965, Public Papers
of the Presidents - Lyndon B. Johnson, 1965, Vol. II, 811, 813.

■^See J. Feder , Medicare: The Politics of Federal Hospital Insurance (1977);
T. Marmor. The Politics of Medicare (1973); R. Myers, Medicare (1970); Cohen,
Reflections on the Enactment of Medicare and Medicaid, Health Care Fin. Rev. 3
(1985 Annual Supp. ) .

^See A. Somers & H. Somers, Medicare and the Hospitals (1967).

348 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

landslide victory of Democratic President Lyndon B Johnson and his subsequent
skillful management of the legislation In Congress along with the support of key
congressmen.

The political circumstances of the pnssage of the Medicare program, and also
the Medicaid program, explain their design. The initial House bill provided only
for hospital insurance for the aged: supplementary medical Insurance to cover
physicians' services was added in an effort to broaden support for the bill among
Republican congressmen. What finally emerged in the Social Security Amendments
of 1965 were three distinct programs: the Medicare Hospital Insurance Program
("Part A"), the Medicare Supplementary Medical Insurance Program (Part B") and
the Medicaid Program. Each of these programs has different benefits. Is
financed and administered independently and pays for services according to
different methodologies.

A . The Structure of the Medicare Program

The Medicare program is fundamentally different from most other federal
entitlement programs as it does not provide cash benefits directly to its
beneficiaries. Rather, the program relies on hospitals, other health care
Institutions and physicians to provide benefits to its beneficiaries. The
Medicare program even leaves the determination of the amount of covered benefits
that should be provided to beneficiaries in specific cases to physicians and
health care institutions. This arrangement is consistent with the tradition in
the American health care system that the determination of what medical treatment
should be accorded in a particular case is primarily the province of the medical
profession.^ Under state medical licensure laws^^ as well as the prevailing

"Cohen, supra note 6.

'See J. Feder, supra note 6: T. Marmor. supra note 6: Cohen, supra note
6. The Medicaid program evolved from a proposal of the American Medical
Association that sought to build on existing Medical Assistance programs for the
poor .

"Medicaid is a joint federal -state program providing hospital, physician and
extensive nursing home services for persons on the Aid to Family with Dependent
Children and Supplemental Security Income programs and, if the state elects, for
persons who. but for Income, meet the eligibility criteria for these categorical
assistance programs. Social Security Act § 1902(a)(10). 42 U.S.C. § 1396a(a)(10)
(1982 ed . , Supp. II). Medicaid is financed out of federal revenues from general
appropriations which match state expenditures for the Medicaid program. State
programs must meet certain federal requirements to qualify for these federal
matching funds. Social Security Act §§ 1901 and 1902(a), 42 U.S.C. §§ 1396 and
1396(a) (1982 ed . , Supp. II). This study does not address appeals under the
Medicaid program which are handled primarily by the states.

^Medicare has acknowledged this basic characteristic of the American health
care system in its requirement that a physician -- defined broadly under the
statute to Include osteopathic physicians, optometrists, podiatrists, dentists

MEDICARE APPEALS SYSTEM 349

accreditation standards for hospitals.'' onJy physicians, with their special iz(!d
knowledge and judgment accjuired through years of medical education and training,
can treat all types of human disease, admit palionts to hospitals and, once in
the hospital, determine the hospital resources used for their care.^^

Medicare is an enormous program, serving over 30 million individuals, ' and
is the largest federal entitlement program next to the Social vSecurity income

and chiropractors practicing within the scope of their license (Social Security
Act § 1861(r), 42 U.S.C. § 139vSx(r) (1982 ed . , Supp . II)) - certify that
services provided to Medicare beneficiaries are reasonable and necessary for the
treatment of illness. Social Security Act §§ 1814(a) and 1835(a), 42 U.S.C. §§
1395K(a) and 1395(a) (1982 ed . , Supp. II).

^^See Am(;rican Hospital Association, An Analysis i^f the; ReyisjHl Mj>di^
Staff _S tanfliU'ds^. of the Joint Commission on the Accreditation of Hospitals ( March
1984 ) .

^^i'<-J-jL. JIjIL-' .Joint Commission for the Accreditation of Hospitals,
Accreditation Manual for Hospitals ( 1984 ) .

The JCAII is a private accrediting body whose members are select(Hl, for the
most part, by the hospital industry and medical profession. A hospital that is
accredit(!d by the JCAH will be deemejd to be in compliance with Medicare's
conditions of participation for hospitals and eligible to provide hospital
services to Medicare beneficiaries. Social Security Act § 1865, 42 U.S.C. §
1395bb (1982 ed . . Supp. II); 51 Fed. Reg. 22.010 (June 17, 1986). See generally
Jost , The Joint Commission on AccrtnUtation of Hospi tals : Priyate Refill ajtlons^f
Health Care in the Public Interest. 24 B.C.L. Rev. 835 (1983).

^^In 1984, the JCAH loosened the medical staff standards which delineated
what health care professionals can serve on the medical staff of a hospital and
have privil(?ges to aclmit and treat patients in a hospital by authorizing medical
staff membership and admitting privileges for some non physician health care
professionals within the scope of their license but with appropriate sn[)ervision

by physicians . See J.oijit Commission for the Accreditation of Hospitals,

Accreflitat ion Manual for Hospitals, at 89 95 . See American Hospital Association,

An Atialysis of the Revised Medical Staff Standards of the Joint Commission on

Accreditation of H()spitals, sujjra note 12.

^^I-evits, Laz(!nby. Waldo & Davidoff, NaAilUI^J-J'f-yAllL Jl^A-J^iUlilLll^! ._i^A4'
Health Care Kin. Rev., Fall 1985. at 23 [hereafter cited as "National Health
Fxpendi tures . 1984"] .

350 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

■aintenance program for the aB«»d and disabled. '* II cnnprised an estimated 7% of
the federal budKet for FY 1986.^^'* Over 70* of Medicare expenditures in 1984 were
for hospital services under I'art A and 23* were for physician and other
outpatient services under Part n. Medicare is the largest single payer for
hospital services in the nation and. in 1984. paid 28* of the nation's total bill
Tor hospital care.^'' Approximately 36* of the revenue of the v*) , 800 community
iiospitals seiving Medicare beneficiaries comes from the Medicare program
i-esulting in hospitals' heavy reliance on this program for financial stability. ^^
Medicare is also the largest purchaser of physician and other outpatient services
and, in 1984. paid approximately 25* of the nation's bill for these services. ^^

1 . Administratiort

The Health Care Financing Administration (MCFA) within the Department of

Health and Human Services (HHS) administers the Medicare program. Before 1980.

HHS was the Department of Health. Education and Welfare (HEW). Initially, the

Social Security Administration (SSA) administered the Medicare program. In 1977.

the Carter administration created HCFA and consolidated the Medicare and Medicaid

on
programs into this agency.

HCFA contracts with private organizations to administer the claims of

benef i«;iaries and the payment of providers under the Medicare program. ^^ For

Part A, those organizations are called "fiscal intermediaries" and for Part B

th(?y are referred to as "carriers." Despite the name difference, these

''^Execnt ive Office of the President, Office of Management and Budget. Budget
of the United States, FY 1987 (1986) [hereinafter cited as "Budget of the United
St a t_e s ^ FY 1987 " ] .

'^Jd. at M-4 Sc 5-109. This figure was derived by dividing estimated
Medicare budget outlays for FY 1986 by total federal budget outlays for FY 1986.

^ ^National Health Expenditures, 1984 at 23.

^'^U\. at 20; Budget of the United States. FY 1987 at 5-108.

^^J . Schwartz and J. Martin. HospitaJ Involvement With Medicare and
Medicaid: A Statistical Profile 1 (1983) (American Hospital Association. Office
of Public Policy Analysis).

^^Budget of the United States, FY 1987 at 5-108.

2O42 Fed. Heg. 13.262 (1977).

2'social Security Act §§ 1816 and 1842, 42 U.S.C. §§ 1395h and u (1982 ed. .
Supp. II).

MEDICARE APPEALS SYSTEM 351

organizations perform essentially tlu? same functions of administering claims for
coverage ami payment. Congress adopted this unique approach for program
administration hecaiise lU ue Cross and Mine Shieid plans and other insurance
companies had the requisite expertise for administering complex health insurance
prc)grams and also becaiisc? of pressures from the; hospital industry for an
arrangement which allowed hospitals to deal with familar Blue Cross plans and
insurance companies ra1h(?r than the federal government. '^

The administration of the Medicare program is a mammoth job and includes
(Jet erm i ni ng the coverage? and amount of payment for millions of claims of
benef i<:iar ies . In FY 1987, HCFA estimates that the Medicare program will process
36() million claims an incr(?as(! of :{3"i over FY 1986i.^^ HUS has requested $957
million for the administration of the Medicare program in its FY 1987 budget
request of which $728 miJlion is for essential claims processing s(?rvices . ^"^ The
determination of coverage and the payment for each claim is performed by the
personnel of fiscaJ intermediaries, cairiers and now also peer review
organizations (PROs).^'* Congr(!SS delegated extraordinary adjudicative powers to
these private organizations with respect to resolving appeals over coverage and
payment issues arising under Part A and Part B of the Medicare program.

To provide the requisite guidance to fiscal intermediaries, carriers and
PROS as well as to hospitals and other institutional providers, HCFA uses a
massive compendium of multi -volume health insurance manuals for each of the
organizations and providers involved in the administration and provision of
health care benefits to Medicare beneficiaries.'^^' In addition. HCFA publishes a

^^see S. Law, HlmLJir^'s? : .W^Jlk WJU't J^ilP.Oll'^ 31 50 (2d. ed . 1976). H.R.
Rep. No. 213, 89th Cong., 1st Sess . . 45 47 (1965); S. Rep. No. 404. 89th Cong..
1st Sess. , 52 54 (1965) .

^^Depaitment of Health and Human Services, HHS Fiscal Year 1987 Budget
RiL'L'L'l«i (Ffib. 5. 1986) [hereinafter cited as "HHS Fiscal Year 1987 Budget
Request"] .

Id.

''Peer Revi(;w Organizations are physician dominated organizations
responsible for determining whether certain benefits provided to Medicare
beneficiaries are medically necessary and provided in an appropriate setting.
See notes 120 130 infra and accompanying text.

^^Thes(? health insurance manuals inc-lude the following: Group F'ractice
Prepayment Plan Manual (HIM-8); Hospital Manual (HIM-10); Home Health Agency
Manual (HIM- 11); Skilled Nursing Facility Manual (HlM-12); Medicare
fntermediar ies Manual (HIM-13); Medicare Carriers Manual (HIM-14); Provider
Reimbursement Manual (HIM 15); Medicare Renal Dialysis Facility Manual (HIM 29);
and PRO Manual. HCFA constantly updates these manuals through "transmittals."
For directiv(?s without ongoing effect, HCFA us(»s program memoranda. The Program
Memoranda series went into effect March 1985 and include: Program Memoranda:

352 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

special mamial lisfinK what technologies, procedures and services HHS includes as
covered bebefits under the Medicare proKram . These manuals and other program
directives are i nteipretat ive and not promulgated pursuant to the Informal
rulemaking requirements of the Administrative Procedure Act . ° As of September
1981. HCFA publishes rulings not previously published in the Federal Register to
clarify points of statutory and regulatory interpretation over which questions
arise. ^^ HCFA has not issued rulings often. Indeed. HCFA has issued only about
twelve rulings since 1981.

2. K I iHi h 1 1 J tj?

All individuals who are eligible for Social Security old age and dlsabilltv
insurance programs are eligible for Part A and Part B of the Medicare program. ^^
Hligibility for these programs is also extended to nearly all other elderly not
covered by the Social Security program^' and certain other Individuals with End

Intermediaries; Program Memoranda: Carriers; Program Memoranda:
Intermediaries/Carriers. These series replace the former series of program
directives called Int<?rmediary Letters. 1 Medicare & Medicaid Guide (CCH). at
523. There is also a comparable series for Peer Review Organizations.

HCFA gives each fiscal intermediary and carrier copies of these health
insurance manuals and distributes manuals to providers and other organizations as
needed for their work. However, HCFA does not make these manuals generally
available to the public or even to providers because of their size, cost and need
to be updated constantly. 42 C.F.H § 401.112 (1986). Portions of these manuals
that affect the public are distributed to local Social Security Administration
offices (2d. at § 401 . 130- . 132) , although beneficiary advocacy groups maintain
that such distribution does not always occur in practice.

Health Care Financing Administration, Medicare Coverage Issues Manual

HCFA-Pub. 6 reprinted in, 4 Medicare & Medicaid Guide (CCH), 1 27.201-27,221.

5 U.S.C. § 553 (1982 ed., Supp. II)

42 C.F.K. § 401 . 108 (1986) .

^^Social Security Act §§ 1811 and 1836, 42 U.S.C. § 1395c and o (1982 ed
Supp 11).

^^Social Secuirty Act §§ 1818 and 1836, 42 U.S.C. § 13951-2 and o (1982 ed.
Supp. II).

MEDICARE APPEALS SYSTEM

353

^^ Enrollment in both Part A and Part B of the Medicare
^^ There is no cost to enroll in Part A;^'* however, to

Stage Renal Disease

program is voluntary.

enroll in Part B, the eligible individual must pay monthly premiums

of all eligible individuals enroll in Part B,

About 97%

3. Benefits

Part A . The benefits under the hospital insurance component, Part A,
include 90 days of basic hospitalization for each spell of illness. ' There is
no limit on the number of covered hospital admissions so long as there is only
one admission in a single benefit period -- the time from admission until 60 days

after discharge

Part A also covers 100 days in a skilled nursing facility

Social Security Act § 1811, 42 U.S.C. § 1395c (1982 ed . , Supp II).

Social Security Act § 1803, 42 U.S.C. § 1395b (1982 ed., Supp. II)

Social Security Act § 1811, 42 U.S.C. § 1395c (1982 ed. , Supp. II)

^^Social Security Act § 1839 and 1840, 42 U.S.C.
Supp. II).

§§ 13395r and 1395s (1982

State Medicaid programs may pay Part B premiums for the elderly who also
receive Medicaid benefits. An estimated 85% of the Medicaid aged have Part B
insurance purchased by state Medicaid programs. Twenty Years of Medicare and
Medicaid at 29. Social Security Act § 1843; 42 U.S.C. § 1395v (1982 ed . , Supp.
II). Social Security Act §§ 1839 and 1840, 42 U.S.C. §§ 1395r and s (1982 ed. ,
Supp. II).

^^Twenty Years of Medicare and Medicaid at 14.

^''social Security Act § 1812, 42 U.S.C.
C.F.R. § 409.10. 27 and .60-69 (1986).

§ 1395d (1982 ed . , Supp II); 42

^^In any benefit period, a beneficiary is entitled to 60 fully paid days of
hospital care, subject only the initial deductible amount. After 60 days, a
beneficiary must pay a per diem coinsurance amount equal to one-fourth of the
Initial deductible. After 90 days, the per diem coinsurance amount doubles that
of the amount for days 61 through 90. In addition, each day of hospital care in
excess of 90 is subtracted from the beneficiary's 60 days of "lifetime reserve"
which he may use only once. Social Security Act § 1813(a); 42 U.S.C. § 1395e(a)
(1982 ed. , Supp. II) .

Covered benefits under Part A include nearly all services, except for
luxuries, generally provided in a hospital stay, namely room and board In a semi-
private room, nursing services, operating and recovery room costs, drugs and

354 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

following a hospl tal i /at ion , "^^ unlimited home health agency visits if the
beneficiary is confined to home, and limited hospice services for the
terminally 111.^^ For the hospital benefit, there Is a a deductible amounting
to the cost of the first day of the hospitalization and some coinsurance after
the 60th day of a hospital stav. There is also coinsurance for skilled nursing
but not home health services. '^

Part B. The benefits under the supplementary medical insurance component,
Part B, include physicians' services and a wide variety of other medical services
provided on an outpatient basis.'*'* These include services provided in hospital
outpatient departments and rural health clinics, outpatient surgery, diagnostic
x-ray and laboratory services, rehabilitative services, physical, occupational
and speech therapy and services of physicians' assistants and nurse practitioners
ordered by a physician. Part B also offers some home health services not covered

medical supplies furnished in the hospital, laboratory tests, radiological
services billed by the hospital, rehabilitation services, and blood. Social
Security Act § 1861(b), 42 U.S.C. § 1395x(b) (1982 ed., Supp. 11).

^^Social Security Act § 1812(a)(2)(A), 42 U.S.C. § 1395d(a ) (2 ) (A) (1982 ed.,
Supp. II); 42 C.F.R. § 409. 30-. 36 (1986).

'^^Social Security Act § 1861(m), 42 U.S.C. § 1395x(m) (1982 ed.. Supp. II).

Home health services include: part-time or intermittent nursing care
provided by or under the supervision of a registered professional nurse;
physical, occupational, or speech therapy; some medical supplies and durable
medical equipment; and other items and services. To be eligible for home health
services, the beneficiary must be "confined to home" and "in need of intermittent
skilled nursing care." 42 C.F.R. § 409.42 (1986).

^^Social Security Act § 1812(d). 42 U.S.C. § 1395d(d) (1982 ed. . Supp. II).

'^^soclal Security Act § 1813. 42 U.S.C. § 1395e (1982 ed . . Supp. II). See
note 40 supra .

"^^Social Security Act § 1813(a)(3), 42 U.S.C. § 1395e(a)(3) (1982 ed. , Supp.
II).

'*'*SociaI Security Act § 1832, 42 U.S.C. § 1395k (1982 ed . . Supp. II): 42
C.F.R. § 405.231 (1986) .

MEDICARE APPEALS SYSTEM

355

under Part A."*^ Finally, an increasingly important and costly Part B benefit is
the lease or purchase of durable medical equipment. There is no limitation on

the number of services provided under Part B.

Enrol lees pay an annual

deductible of $75.00 and pay 20% coinsurance on most covered services incurred
during the year."*^

It should be emphasized that physicians and suppliers of durable medical
equipment under Part B are not required to accept Medicare payment as payment in
full for their services.'*^ Rather, they can bill Medicare patients directly for
any amount they wish to charge and patients must then submit claims to the
Medicare program for payment. A physician or supplier may accept assignment of a
beneficiary's benefits but upon doing so relinquishes the right to bill the
beneficiary for the difference between Medicare's payment and the full charge for

the services.

As will be discussed below, physicians and suppliers, until

recently, have had little incentive to accept assignment ."^-^ In 1985, because of

Although the home health services covered by Part A and Part B are
identical, there is a slight difference between the two programs concerning the
definition of "home health agency." Under Part B, but not Part A, the term
includes any agency or organization which is primarily for the care and treatment
of mental diseases. Social Security Act § 1861(o), 42 U.S.C. § 1395x(o) (1982
ed. , Supp. II) .

^^Social Security Act § 1832, 42 U.S.C. § 1395k (1982 ed., Supp II); 42
C.F.R. § 405.231 (1986).

4'^Social Security Act § 1862(a)(1)(A), 42 U.S.C. 1395y(a) (1) (A) (1982 ed. ,
Supp. II).

^^Social Security Act § 1833(a), (b), 42 U.S.C. § 13952(a) , (b) (1982 ed. ,
Supp. II).

"^^Social Security Act § 1842(b) (3) (B) (1) , U.S.C. § 1395u(b) (3) (B) (1 ) (1982
ed. , Supp. II). See Staff of Special Senate Comm. on Aging, Medicare: Paying the
Physician — History, Issues, and Options, 98th Cong., 2d Sess. 3 (1984) (Comm.
Print) [hereinafter cited as "Medicare: Paying the Physician"].

5°Social Security Act § 1842(b) (3) (B) (ii ) , 42 U.S.C. § 1395u(b) (3) (B) (ii )
(1982 ed. , Supp. II) .

See notes 142-145 infra and accompanying text.

356 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

payment reforms enacted by Congress, ^ approximately 68.1% of physicians accepted
assignment which was a marked Increase over past years.

4 . Coverage

An important concept In Jinderstanding Medicare benefits, and particularly
the disputes over benefits that arise between beneficiaries, providers and the
Medicare program, is coverage. In brief, coverage defines the type and amount of
health care benefits that the Medicare program will pay for as well as the
conditions that must be met for payment. HCFA. in consultation with a panel of
HCFA physicians or the Public Health Service, and also. In some more minor cases,
fiscal intermediaries and carriers, determines what new procedures and
technologies will be covered Medicare benefits when the question arises.^**

The Social Security Act also specifies certain types of services that are
expressly excluded from coverage under the Medicare program.^ For both F'art A
and Part B. such services include physicals, immunizations, eye glasses and
hearing aids, personal comfort items and cosmetic surgery. ^^ The two conditions
for coverage are that services not be covered by another public insurance

^^See notes 142 & 146 infra and accompanying text.

^''Jencks & Dobson, Strategies for Reforming Medicare's Physician Payments-
Physician Diagnosis-Related Groups and Other Approaches, 312 New Eng. J. of Med.
1492 (1985).

^'*See Banta. Ruby & Burns, Using Coverage Policy to Contain Medicare Costs
and Rating, The Medicare Technology in House Coram . on Ways and Means. Proceedings
of the Conference on the Future of Medicare, 98th Cong., 2d Sess. 129-148 (1984)
(Coram. Print ) .

^'^^''Social Security Act § 1862, 42 U.S.C. § 1395y (1982 ed., Supp. II); 42
C.F.R. § 403.310 - .323 (1986). See Medicare Beneficiary Appeals Processes in
Prospective Payment Assessment Commission. Technical Appendixes to the Report and
Recommendations to the Secretary, I'.S. Department of Health and Human Services,
April 1, 1986. Appendix C, at 162, 165-66 [hereinafter cited as "Technical
Appendixes to the ProPAC Report and Recommendations to the Secretary, April 1, 1986" J .

^^Social Security Act § 1862, 42 U.S.C. § 1395y (1982 ed . , Supp. II); 42
C.F.R. § 405.310 -.323 (1986).

MEDICARE APPEALS SYSTEM 357

program"^' and that the services must be "reasonabJe and necessary" for th»
treatment of an Illness. ^

It is the condition that the services be reasonable and necessary for the
treatment of an illness that generates most of the disputes over coverage and the
bulk of appeals on coverage determinations under both Part A and Part B.^^ The
determinations require a decision on the basis of medical criteria of whether
the benefit was necessary and reasonable in a specific instance or provided in an
appropriate setting. For hospital services under Part A, PROs make this
determination."^ Fiscal intermediaries make this determination for skilled
nursing and home health services under Part A, and carriers make this
determination for Part B services."^ For Part A, another important condition for
coverage of hospital and skilled nursing services is that the care not be
"custodial.""^ Because of the inherent uncertainty of these types of coverage
decisions. Congress has authorized the Secretary of HHS to waive a beneficiary's
or provider's liability for any services not covered on the basis of medical
criteria if the beneficiary or provider did not know or have reason to know that
such services were not covered. ""^

5. Financing

Part A of the Medicare program is financed by the Hospital Insurance Trust
Fund which is funded from the mandatory Social Security payroll tax on all wage

^"^Social Security Act § 1862(a)(2) and (3), 42 U.S.C. § 1395y(a)(2) and (3)
(1982 ed., Supp. II); 42 C.F.R. § 405. 322-. 325 (1986).

^%ocial Security Act § 1862(a)(1), 42 U.S.C. § 1395y(a)(l) (1982 ed. , Supp.
II); 42 C.F.R. § 405.310 (1986).

^^Social Security Act § 1862(a)(1), 42 U.S.C. § 1395y(a)(l) (1982 ed. , Supp.
II). Medicare Beneficiary Appeals Provisions in Technical Appendixes to the
ProPAC Report and Recommendations to the Secretary, April 1, 1986, Appendix C, at
165-66.

^^See notes 237-239 infra and accompanying text.

^^See notes 235 & 303 infra and accompanying text.

^^social Security Act § 1862(a)(9). 42 U.S.C. § 1395y(a)(9) (1982 ed. , Supp.
II); Medicare Beneficiary Appeals Processes in Technical Appendixes to the ProPAC
Report and Recommendations to the Secretary, April 1, 1986, Appendix C, at 165.

^^social Security Act § 1879, 42 U.S.C, § 1395pp (1982 ed. , Supp. II). See
notes 227-231, 323 infra and accompanying text.

358 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

earners/'^ Part D is financed hy the Supplementary Medicare Insurance Trust Fund
which is funded from premiums of enrol lees and congressional appropriations.^^
Preaiuns comprise only about 25* of the Part B trust fund; the remaining 75%
cones from appropriations.

6. Payment Methods

It is important to appreciate that Congr«?8s initially gave hospitals and
physicians almost complete autonomy to structure the method and level of payment
under the Medicare and Medicaid programs. Former HEW Secretary Wilbur Cohen, a
chief architect of the Medicare program, observed: "The ideological and
political issues were so dominating that they precluded consideration of issues
such as reimbursement alternatives and efficiency options.""' Indeed, the only
constraints the Social Security Amendments of 1965 imposed on hospitals and
physicians in setting their payment levels under the Medicare program was that
the level be "reasonable" and the services provided be "necessary" for the
treatment of illness."" However, Congress and federal policy makers have been
gravely concerned about payment methodologies under the Medicare program since
its inception for reasons discussed in Chapter II and have instituted major
reforms in the payment methodologies for acute care hospitals under Part A and
are now developing major reforms in the payment methodologies for services under
Part B.

B . The Medicare Program's Accomplishments

The Medicare program's accompl ishmenLs have been substantial and this
entitlement program, although costly, has clearly been a success. Between 1967
and 1983, there was an increase in the utilization of hospital, home health and

fiQ

physicians' services by Medicare beneficiaries." Medicare has had a remarkable
Impact on improving the health status of the elderly as evidenced by a two and
one-half year increase In life expectancy among the aged since 1965 and drops of

^"•social Security Act § 1817, 42 U.S.C. § 13951 (1982 ed., Supp. II).

^^Social Secuirty Act § 1841. 42 U.S.C. § 1395t (1982 ed . Supp. II).

^^National Health Expenditures 1984 at 23, Table 9.

"'Cohen, supra note 6 at 5.

^^Social Security Act §§ 1815, 1833 and 1862(a)(1). 42 U.S.C. §§ 1395g, 1
and y(a)(l) (1982 ed.. Supp. II).

^%wenty Years of Medicare and Medicaid at 35-41.

MEDICARE APPEALS SYSTEM 359

30% or more in the age adjusted death rates for diseases such as heart disease,
stroke, diabetes and pneumonia that afflict the elderly. ^^

However, the performance of the Medicare program has been seriously
deficient with respect to its cost, the dimensions of which will be discussed
further below. But one particularly unfortunate aspect of this cost problem is
its impact on beneficiaries. Because of deductibles and co-insurance for both
Part A and Part B and the fact that physicians who do not accept assignment can
bill patients directly for the difference between Medicare's payment and their
full charge. Medicare beneficiaries are now responsible for 44% of their medical
expenses and devote nearly the same proportion of their income to medical care as
before the Medicare program. '^

But perhaps the most serious ramification over the long term is the
threatened financial solvency of both Part A and Part B of the Medicare program.
Evidence suggests that if the Medicare program continues to provide benefits at
its current levels and payment rates, the system may well be insolvent by the end
of the century.'^ The specter of insolvency is real and must be kept in mind
when evaluating the performance of HHS, HCFA and its fiscal intermediaries and
carriers in administering the Medicare program and handling beneficiary and
provider appeals.

'^^What Medicaid and Medicare did - and Did Not - Achieve, Hospitals, Aug. 1,
1985, at 41-42 (interview with Karen Davis, Ph.D.).

"^^Aiken & Bays, Special Report: The Medicare Debate - Round One, 311 New
Eng. J. of Med. 1190 (1981). See also House Select Comm. on Aging, Medicare
After 15 Years: Has It Become a Broken Promise to the Elderly?, 96th Cong., 2d
Sess. (1980) (Comm. print).

On June 10, 1986, the House Ways and Means Committee held hearings on the
problem of beneficiaries' costs associated with Part B physician services at
which measures to correct this serious problem were proposed. See Out-of-Pocket
Costs for Physician Services: Hearing Before the Subcomm. on Health of the House
Comm. on Ways and Means 99th Cong., 2d Sess. (1986).

^^See Ginsberg & Moon, An Introduction to the Medicare Financing Problem in
House Comm. on Ways and Means, Proceedings of the Conference on the Future of
Medicare, 98th Cong., 2d Sess. 1 (1984) (Comm. Print). See also Svahn & Ross,
Social Security Amendments of 1983: Legislative History and Summary of
Provisions, Social Security Bull., July 1983, at 3 Mussey, Actuarial Status of
the HI and SMI Trust Funds, Social Security Bull., June 1985, at 32.

360 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

CHAPTER I 1 : THE COST CRf SIS AND SEARCH FOR SOLUTIONS

A. The _Crisls

Congress and HEW recognized almost immediately that the costs of the
Medicare program would greatly exceed Initial projections. These predictions
proved correct and. over the following years, total Medicare expenditures rose
from $4.6 billion in 1967 to $62.9 billion in 1985. '''' During this period. Part A
expenditures rose from $3.1 billion to $43.3 billion and Part B expenditures rose

7 ^

from $1.2 billion to $19.7 billion. The most serious problem, because of its
relative size and severe inflation rate, was escalating hospital costs. As noted
above, expenditures for hospital services constitute about 70% of all Medicare
expenditures' ' and, between 1967 and 1983, rose at an annual compound rate of
17.2%.'' During this period, physician services, the second largest component of
Medicare expenditures, constituting 23% of Medicare expenditures,'" rose at an
annual compound rate of 17.4%.'^ The annual compound growth rate for skilled
nursing faci 1 i t ies services rose only 2.8% while the rate for home health
services rose 24.1%.

1 • lULt J '^-} -. Payment Met ho d o 1 o^i_e s

As noted above, the initial payment methodologies for health care
institutions under Part A and for services of physicians and suppliers under Part
B were quite favorable to providers and were based on methodologies that
conformed closely to provider billing and accounting practices. Until the Social
Security Amendments of 1983, Medicare paid all Part A providers the reasonable

'^Reimbursement Guidelines for Medicare : Hearing Before the Senate Comm. on

Finance, 89th Cong., 2d Sess. (1966); Staff of Senate Comm. on Finance, Medicare

and Medicaid: Problems, Issues, and Alternatives. 91st Cong., 1st Sess. 53. 140-
43 (Comm. Print 1970).

'^'^Twenty Years of Medicare and Medicaid at 42.

Id. at 43.

'"See note 18 supra and accompanying text.

''Twenty Years of Medicare and Medicaid at 43,
'^See note 18 supra and accompanying text.

^^Twenty Years of Medicare and Medicaid at 43

Id.

MEDICARE APPEALS SYSTEM

361

cost of covered services"^ Congress delegated the definition of "reasonable
cost" and the methodology for its determination to the Secretary of HEW to
develop through regulations."^ A provider under Part A had to and still must
accept Medicare payment as payment in full for a beneficiary's hospital stay and
cannot charge the beneficiary any additional sums for covered benefits even if
the institution's costs of providing the services exceeded Medicare's payment for
those services. "^

Payments to physicians under Part B have always been based on the
physician's charges but were limited to the physician's customary charge for the
same or similar services, the maximum prevailing charge for that service of all
physicians in the area or the physician's actual charge."'* Under its basic
payment methodology for physicians' services, Medicare pays physicians 80% of the
reasonable charge for all covered services provided. ^^ The reasonable charge for
a specific service in most cases is calculated as the lowest of the physician's
customary charge for the service, the prevailing charge for the service in that

area or the physician's actual charge

Each July, carriers update the

^•^Social Security Amendments of 1965 § 102(a), codified as amended in.
Social Security Act §§ 1861(v) and 1871, 42 U.S.C. §§ 1395x(v) and 1395hh (1982
ed . , Supp . II).

Under the retrospective cost reimbursement system. Medicare reimbursed
direct costs, such as room, board and nursing care, that are directly related to
patient care and generally pertain to services for which charges can be made.
Medicare also paid indirect costs, i.e., those not directly attributable to
patient care but incurred in the operation and administration of a hospital.
Included among indirect costs are the major capital cost of providers; i.e.,
depreciation on a provider's plant buildings and equipment; interest on capital
debt, lease expenses for capital assets, and, for proprietary providers only, a
reasonable return on equity capital. Social Security Act § 1861 (v), 42 U.S.C. §
1395x(v) (1982 ed., Supp. II); 42 C.F.R. §§ 405.402-.482 (1986).

^^soclal Security Act § 1861(v); 42 U.S.C. § 1395x(v) (1982 ed. , Supp. II).

Social Security Act § 1866(a)(1), 42 U.S.C. § 1395cc(a)(l) (1982 ed. , Supp

II).

°'*Social Security Amendments of 1965, § 102(a), codified as amended In,
Social Security Act § 1842(b)(3)(F), 42 U.S.C. § 1395u(b) (3) (F) (1982 ed., Supp,
II). See Medicare: Paying the Physician at 20.

Social Security Act §§ 1833(a)(1), 42 U.S.C. § 13951(a)(1) (1982 ed
Supp. II); 42 C.F.R. §§ 405.501-515. (1986).

^^Soclal Security Act § 1842(b)(3)(F), 42 U.S.C. § 1395u(b) (3) (F) (1982 ed. ,
Supp. II); 42 C.F.R. § 405.502(f)(5) (1986).

362 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

customary charge of each individual physician and also the prevailing charge of
all physicians with comparable qualifications in the carrier's sorvice area.®^
Unlike Part A. physicians and suppliers paid under Part B are not required to
accept Medicare payment as payment in full on any benefit claim unless they
accept the claim from the beneficiary. °

2 Ramifications of Early Payment Methodologies

The cost problem has plagued Congress and HHS policy makers since the
Inception of the Medicare program and has dominated the health policy debate
during this time. Early in the program, a consensus emerged among federal policy
Makers, Congress and other observers that cost reimbursement was a fundamental
cause of the inflation in Medicare hospital expenditures .°^ The theory was
simply that since hospitals could be assured of payment for all the reasonable
costs of covered services, they were rewarded for providing more services at
higher cost. While lucrative for hospitals, these incentives translated into
increasingly greater costs for the Medicare program and resulting pressure on
administrations of both political parties, Congress and the hospital industry to
find ways to reduce the rate of increase in Medicare hospital expenditures.^ In
1983, as will be discussed below, Congress fundamentally changed the way in which
Medicare pays hospitals for services provided to Medicare beneficiaries in the

. Q1

new prospective payment system. ^^

Physicians, likewise, had comparable incentives to provide more services at
greater cost to the Medicare program. This payment methodology also encourages
physicians and suppliers to break down services into components for which a

^''social Security Act §§ 1833(a)(2) and 1842(b)(3)(F). 42 U.S.C. §
1395f(a)(2) and § 1395u(b) (3) (F) (1982 ed . , Supp. II); 42 C.F.R. § 405.503 (1986).

°°See notes 49-53 supra and accompanying text. Suppliers of durable medical
equipment are paid according to metholodogies that are similar to payment of
physicians. See Generally Medicare: Paying the Physician.

^^See, e.g. . M. Feldstein and A. Taylor, The Rapid Rise of Hospital Costs
(1977); M. Zubkoff, I. Raskin & R. Hanft, Hospital Cost Containment (1978). A
similar consensus emerged with respect to skilled nursing facility costs and
Congress as well as HHS has inaugurated several cost containment strategies and
reforms in the reimbursement of skilled nursing facilities over the years.

^^20 Years of Medicare and Medicaid, Health Care Fin. Rev. (1985 Annual
Supp.) (comments of Senator Dave Durenberger, Congressman Dan Rostenkowski , J.
Alexander McMahon, and Michael D. Bromberg) .

^^See notes 150-191 infra and accompanying text.

MEDICARE APPEALS SYSTEM 363

charge can be made in order to maximize reimbursement.^^ The Part H payment
methodology, like the cost reimbursement system for hospitals and other health
care institutions, has encouraged unwarranted growth in Medicare expenditures for
Part B services and Congress and HHS are currently considering major reforms of
Part B payment methodoJogios . "*

B- The Search for Solutions

To control these Medicare program expenditures, Congress by statute and HEW
by regulation adopted numerous cost containment strategies and conducted several
demonstration projects to explore ways to change Medicare payment methodologies
to achieve cost savings. Most of these efforts were targeted at hospital costs
because this is where policy makers perceived the greatest problem. Some
measures were targeted at skilled nursing facilities and home health agencies as
well, although these reforms are not addressed in this analysis. In recent
years, policy makers and Congress have focused more attention on the cost of
services under Part B.

1 . Hospital Payment Reform

The Social Security Amendments of 1972. In the Social Security Amendments
of 1972 ,^'* Congress adopted several regulatory measures to control hospital
costs. The most important of these measures were in § 223 of the Social Security
Amendments of 1972.^^ Section 223 provided that Medicare should not reimburse
any costs that were uiuiecessary for the provision of patient care services, and
the regulations under § 223 imposed a limit on routine inpatient costs. ^^ With
this limit. Congress and the Medicare program departed from recognizing all the
costs of liospitals in providing care to Medicare beneficiaries and imposed
regulatory controls on payments to hospitals to force hospitals to deliver
services in a more cost effective manner.

The Social Security Amendments of 1972 also authorized the Secretary of HEW
to withhold reimbursement for capital costs associated with a capital expenditure
that a designated state health planning agency found was inconsistent with its

Jencks & Dobson. supra note 53. See also. Medicare: Paying the Physician:
Reform of Medicare Payments to Physicians: Hearing Before the Subcomm. on Health
of the Senate Comm. on Finance, 99th Cong., 1st Sess. (1985) [hereinafter cited
as "Senate Finance Comm. Hearings on Reform of Medicare Payments to Physicians" ] .

^^See notes 142-149 infra and accompanying text.

^■^Social Security Amendments of 1972, Pub. L. No. 92-603, 86 Stat. 1329
(1972) [hereinafter cited as "Social Security Amendments of 1972"].

^^Social S(;curity Amendments of 1972 § 223, codified as amended in. Social
Security Act § 1843x(v), 42 U.S.C. § 1395x(v) (1982 ed . , Supp. II).

^^42 C.F.R. § 405.460 (1986).

364 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

own herilth planning criteria, standards and health plans. ^^ The Social Security
Amendments of 1983 required states to adopt such capital expenditure review
programs under § 1122 of the Social Security Act. meeting certain critt?ria if
Congress does not incorporate capital costs into the Medicare prospective payment
system by 1986.^^ and Congress subsequently extended this deadline to FY 1987.^^
However, this provision has not been implemented and likely will not be since
Congress or FIHS will probably incorporate capital costs into the prospective
payment system for FY 1987 J^^

On the assumption that excess and unnecessary utilization of hospital
services by Medicare beneficiaries was a fundamental cause of escalating Medicare
costs and that the required utilization review of hospitals for Medicare patients
had beeti ineffective,'^^ Congress authorized establishment of federally funded,
private Professional Standards Review Organizations (PSROs) to conduct
independent utilization and quality review of hospital services under the
Medicare and Medicaid programs. ^^^ The concept was that physicians would review
the quality and appropriateness of health care services that their peers provided
to Medicare beneficiaries.

^^Social Security Amendments of 1972 § 221(a), codified as amended in.
Social Security Act § 1122, 42 U.S.C. § 1320a -1 (1982 ed . , Supp. 11).

^^Social Security Amendments of 1983, Pub. L. No. 98-21 Title VI, § 601 (o).
97 Stat. 65, 162 (1983) [hereinafter cited as "Social Security Amendments of
1983"]. codified as amended in. Social Security Act § 1886(g)(1). 42 U.S.C. §
1395ww(gr(l) (1982 ed . , Supp. II).

^^Urgent Supplemental Appropriations Act, 1986, Pub. L. No. 99-349. Title
II, § 206 (1986), amending Social Security Act § 1886(a)(4) and (g)(i); 42 U.S.C.
§ 1395ww(a)(4) and (g)(1) (1982 ed., Supp. II).

^^^See notes 167-168 infra and accompanying text.

^^^Social Security Amendments of 1965. § 102(a), codified as amended in.
Social Security Act § 1861(k). 42 U.S.C. § 1395x(k) (1982 ed . , Supp. II).

As a condition of participation in the Medicare program, hospitals had to
have a utilization review program to evaluate the medical necessity and
appropriateness of hospital services provided Medicare beneficiaries. Id. Similar
requirements were imposed on skilled nursing facilities. Id.

^^^social Security Amendments of 1972 § 249F(b), codified as amended in.
Social Security Act § 1151 et seq. , repealed. Peer Review Improvement Act of
1982. Title I. Subtitle C of the Tax Equity and Fiscal Responsibility Act of
1982. Pub. L. No. 97-248. § 143. 96 Stat. 324. 382 (1982) [hereinafter cited as
"Tax Equity and Fiscal Responsibility Act of 1982]. See A. Gosfield, PSROs: The
Law and the Health Consumer (1975).

MEDICARE APPEALS SYSTEM

365

The PSRO program had difficulties getting implemented and experienced

equivocal success. ^"^ Physicians unsuccessfully challenged the program as a

violation of the constitutional rights of physicians and their patients.-'^'*

Ultimately federal policy makers and Congress questioned the effectiveness of the

ins
program in controlling costs. ^^"^ In its early years, the Reagan administration

sought to dismantle the program on grounds that it was excessively regulatory in

addition to being ineffective.^^" Congress formally terminated the program--

while still embracing the concept of peer review as means to control utilization

under the Medicare program — when it repealed the 1972 PSRO legislation and

enacted the Peer Review Improvement Act of 1982.^^'

Medicare Payment Demonstration Projects. Shortly after the Medicare program

began, Congress authorized the Secretary of HEW to waive Medicare program

requirements in order to conduct demonstrations of different payment

methodologies . ^^^ In th«o Social Security Amendments of 1972, Congress expanded

this demonstration authority to test prospective payment methodologies. ^ Over

^"^PSRO Proposals: Hearing on S.1250, S.2142 Before the Subcomm. on Health
of the Senate Comm . on Finance, 97th Cong., 2d Sess. (1982); Proposed Phaseout of

PSRO's and Utilization Review Requirements: Hearing Before the Subcomm. on

Health of the Senate Comm. on Finance, 97th Cong., 1st Sess. (1981); Professional

Standards Review Organization (PSRO) Program: Hearing Before the Subcomm. in

Overs igh t and the Subcomm. on Health of the House Comm. on Ways and Means , 97th
Cong. , 1st Sess. (1981) .

^^'*Association of American Physicians and Surgeons v. Weinberger, 395 F.
Supp. 125 (N.D. 111. 1975). aff'd sub, nom without opinion; Association of
American Physicians and Surgeons v. Mathews, 423 U.S. 975 (1975). See generally
Gosfield, Medical Necessity In Medicare and Medicaid: The Implications of
Professional Standards Review Organizations, 51 Temp. L.Q. 229 (1978).

105

See note 103 supra and 106 infra.

^Q^PSRO Proposals: Hearing on S 1250, S 2142 Before the Subcomm. on Health
of the Senate Comm. on Finance, 97th Cong., 2d Sess., 6-11 (1982) (statement of
George Thompson); Executive Office of the President, Office of Management and
Budget, FY 1982 Budget Revisions 70 (1981).

^^"^Peer Review Improveiment Act of 1982 of the Tax Equity and Fiscal
Responsibility Act of 1982 §§ 141-150, amending Social Security Act §§ 1151-1163,
42 U.S.C. §§ 1320C-1--12 (1982 ed., Supp. II).

^O^Social Security Amendments of 1967, Pub. L. No. 90-248, § 402. 81 Stat.
821, 930 (1967) .

109

Social Security Amendments of 1972 § 222(a)

366 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

the next ten years Congress conducted severaJ demonstrations In various
states. ^^^ The hypothesis of these demonstrations was that retrospective cost
reimbursement was Inflationary as it contained incentives for hospitals to
provide excessive services and that methodologies paying hospitals a
predetermined price or requiring hospitals to stay within an overall limit or
budget regardless of costs would provide the appropriate incentives for hospitals
to contain costs.

This hypothesis was borne out in these demonstrations and prospective
payment systems for other third party payers besides Medicare. ^^^ Congress and
states were so impressed with the results ot these state prospective payment
systems that Congress authorized states to establish these systems for Medicare
and other payers on a nonexperimental basis in the Tax Equity and Fiscal
Responsibility Act of 1982^^^ and. in the Social Security Amendments of 1983,
expressly allowed states to opt out of the Medicare prospective payment system
and establish state prospective payment systems for all payers.^

The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). T E F R A
instituted major reforms to address the cost problems of the Medicare program.
In TEFRA, Congress modified the per diem cost limit established under § 223 of

^^^See Health Care Financing Administration, The National Hospital Rate-
Setting Study: A Comparative Review of Nine Prospective Rate-Setting Programs
(Aug. 1980) (reporting on these demonstrations).

It should be noted that the DRG pricing concept was tested in the New Jersey
prospective payment demonstration.

^^^See Biles. Schramm and Atkinson, Hospital Cost Containment Under State
Rate-Setting Programs, 303 New Eng. J. of Med. 664 (1980); Cromwell and Hewes,
Medicare Expenditures and Utilization under State Hospital Rate Setting, Health
Care Fin. Rev., Fall 1985, at 97; Steinwald and Sloan, Regulatory Approaches to
Hospital Cost Containment: A Synthesis of the Empirical Evidence 1 n A New
Approach to the Economics of Health Care (M. Olson, ed . 1981).

^^^Tax Equity and Fiscal Responsibility Act of 1982, § 101(a)(1), codified
as amended in. Social Security Act § 1886(c), 42 U.S.C. § 1395ww(c) (1982 ed . ,
Supp. II).

^^^Social Security Amendments of 1983 § 601(c)(1); codified as amended in.
Social Security Act § 1886(c), 42 U.S.C. § 1395ww(c) (1982 ed . , Supp. II). See
American Hospital Association, How States Can Opt Out of the Federal Medicare DRG
System: A Summary of Legal Issues (1983).

Currently, only Maryland and New Jersey have Medicare waivers to operate
state all-payer prospective payment systems.

^^''Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. No. 97-248, 96
Stat. 324 (1982).

MEDICARE APPEALS SYSTEM 367

the Social Security Amendments of 19721^^ to a limit on the costs allowed for
each Medicare patient caseH^ This change to regulation on a per case rather
than a per diem basis represented an important conceptual departure from previous
cost containment strategies as well as an important step in moving hospitals
toward a prospective payment system. Also, in TEFRA, Congress imposed a limit on
the rate of increase in a hospital's routine operating costs. ^^' Hospitals with
cost increases exceeding their target rate of increase limits were penalized
while hospitals that kept increases below their target rate received part of the
realized savings. -^^^ Allowing hospitals to retain savings was likewise a radical
departure from previous cost containment strategies. Congress conceived the
TEFRA limits as the foundation for a future prospective payment system and, in
TEFRA, directed HHS to prepare a legislative proposal for a prospective payment
system on hospitals for consideration in the next session of Congress. ^^^

The Peer Review Improvement Act of 1982. As part of TEFRA, Congress enacted
the Peer Review Improvement Act establishing a new peer review program to perform
utilization and quality of review of hospital services provided to Medicare
beneficiaries . -^^^ To conduct these review activities, Congress authorized the
Secretary to contract with private, physician-controlled peer review

^^^See notes 94-96 supra and accompanying text.

^^^Tax Equity and Fiscal Responsibility Act of 1982 § 101(a)(1), codified as
amended in. Social Security Act § 1886(a)-(b), 42 U.S.C. § 1395ww(a)-(b) (1982
ed. , Supp. II) .

1^'^Tax Equity and Fiscal Responsibility Act of 1982 § 101(a)(1), codified as
amended in. Social Security Act § 1886(a). 42 U.S.C. § 1395ww(a) (1982 ed . . Supp.
II).

^^^Tax Equity and Fiscal Responsibility Act of 1982 § 101(a)(1). codified as
amended In. Social Security Act § 1886(b)(1). 42 U.S.C. § 1395ww(b)(l) (1982 ed.,
Supp . II).

^^^Tax Equity and Fiscal Responsibility Act § 101(b)(3). codified as amended
in. Social Security Act § 1135(c), 42 U.S.C. § 1320b-5(c) (1982 ed.. Supp. II).

This statutory directive also called for HHS to develop a legislative
proposal for prospective payment of skilled nursing facilities. rd.

^20peer Review Improvement Act of 1982 of the Tax Equity and Fiscal
Responsibility Act of 1982 §§ 141-150, codified as amended in. Social Security
Act §§ 1151-1163, 42 U.S.C. 1320c-l--12 (1982 ed . , Supp. II). See Dans. Weiner &
Otter, Peer Review Organizations: Promises and Pitfalls. 31 New Eng. J. of Med.
1131 (1985); Gosfield. Hospital Utilization Control by PROs : A Guide Through the
Maze, Healthspan. Feb. 1985. at 3; Grimaldi S Micheletti, Implementation of the
Peer Review Organization Program, QRB. Nov. 1984, at 340.

368 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

organizations meeting certain rharacteristics^ '^^ for each state or. wherr
warranted, region of the country. Specifically, licensed physicians with
active admitting privileges in local hospitals must conduct and supervise PRO
reviews; and. also, only physicians can make final determinations to deny payment
for services provided Medicare beneficiaries. As of November 1985, HCFA had
contracted with 54 PROs for all states and territories. ^^^ Most PROs are former
PSROs supported by the state medical association, and in three cases the statp

1 9S

medical association is the PRO.''

The chief function of PROs is to ensure the medical necessity, quality, and
appropriateness of hospital services provided to Medicare beneficiaries.^ In
addition. Congress accorded important new monitoring functions to PROs under the
prospective payment system which will be described in greater detail below. ^^
To accomplish these functions effectively, PROs have authority to deny Medicare
payment for inappropriate or unnecessary services and to recommend that certain
providers and physicians be excluded even permanently from the Medicare program

^21to qualify as a PRO. an organization must be either a "physician
sponsored" or "physician-access" organization. Social Security Act § 1153(a)(1),
42 U.S.C. § 1320c-2(a)(l) (1982 ed . , Supp. II); 42 C.F.R. § 462.101 (198f.) A
physician-sponsored organization is composed of a substantial number, i.e.. 20%
of the practicing physicians in the community. Id. at § 462.102(b) and (c). A
physician -access organization may be a nonprofit or for-profit organization
established to conduct peer review but must demonstrate that it uses physicians
in its review functions. Id. at § 462.103. A PRO may not have any formal
association with a medical facility. Social Security Act § 1153(b)(3), 42 U.S.C.
§ 1320C-2 (1982 ed . . Supp. II).

^^^Social Security Act § 1153(a)(1), 42 U.S.C. § 1320c-2 (1982 ed.. Supp.
II); 49 Fed. Reg. 7,202, codified in 42 C.F.R. § 462.107 (1986). Congress also
authorized designation of a "Super PRO" to evaluate the performance of PRO's.
Social Security Act § 1153(d); 42 U.S.C. § 1320c-2 (1982 ed., Supp. II).

^23social Security Act § 1154(c). 42 U.S.C. 1320c-3 (1982 ed., Supp. IT).

^^"^Dans, Wiener and Otter, supra note 44. at 1132. Seven PRO's were located
outside the states and territories for which they were responsible. Id.

125

^26social Security Act § 1154(a)(1), 42 U.S.C. 1320c-3(a) ( 1 ) (1982 ed..
Supp. II).

^^'See notes 193-197 infra and accompanying text

MEDICARE APPEALS SYSTEM 369

because of their utilization patterns and practices . ^28 Congress has accorded
PROS a broader scope of review, more authority and greater flexibility than PSROs
had enjoyed. To accomplish this flexibility, Congress authorized the Secretary
to contract with PROs to perform agreed upon functions and meet agreed upon goals
during a two year contract period. ^^^ By statute, the PRO contract must specify
the negotiated objectives of the PRO against which its performance will be
judged, require the PRO to perform statutorily mandated review activities and
other functions, and state the Secretary's right to evaluate the quality and
effectiveness of the PRO in discharging its contracted functions . -^"^^

HHS ' s implementation of the PRO program has been controversial. HCFA was
very slow in getting the program started. These delays were a matter of
considerable concern to Congress which endorsed the concept that only physician-
controlled entities were qualified to make determinations about whether the
medical criteria for coverage of hospital services has been met and whether
hospitals were providing quality services to Medicare beneficiaries . ^^^ One
chief reason for the controversy is that HCFA has relied on program directives
and contract provisions to delineate the specific responsibilities of PROs under
the PRO program. ^■'^ The American Hospital Association successfully challenged

^28social Security Act § 1156(b)(1), 42 U.S.C. 1320c-5(b) (1 ) (1982 ed.,
Supp. II); 50 Fed. Reg. 15,335 (1985), codified in, 42 C.F.R. § 474.32 (1986).

"^^Qsocial Security Act § 1153(b)(1), 42 U.S.C. § 1320c-2(b) (1 ) (1982 ed. ,
Supp. II).

Under the PSRO program, the Secretary awarded grants to PSRO's, and PSRO
functions and objectives were specified by statute and regulation. See A.
Gosfield, supra note 26, at 9. Congress concluded that these characteristics of
the PSRO program were partially responsible for the poor performance of PSRO's.

^^^Social Security Act § 1153(c), 42 U.S.C. § 1320c-2(r) (1982 ed. , Supp. II).

^'^^See Peer Review Organizations: Hearings Before the Subcomm. on Health of
the Senate Comm. on Finance, 99th Cong., 1st Sess. 2 (1985) [hereinafter cited as
"Senate Finance Comm. Hearings on Peer Review Organizations" ] ; Implementation of
PRO'S for Medicare: Hearing Before the Subcomm. on Health of the Senate Comm. on
Finance 98th Cong., 2d Sess. 38-40 (1984) [hereinafter cited as "Senate Finance
Comm. Hearings on Implementation of PRO's for Medicare"] .

-^^^See PRO Manual IM85-2 replacing PSRO Transmittal No. 107; PRO Manual
IM85-3 replacing PSRO Transmittal No. 108; Medicare Hospital Manual Transmittal
No. 367, § 287. 4A; and Medicare Intermediary Manual transmittal No. 1079 § 3789c
and No. 1102; PRO Directive No. 2; Request for Proposal (RFP No. HCFA-84-015,
Feb. 29, 1984).

370 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

this impli'mentriUon method in Amgrican Hospital Association v. BowenJ-^^ In this
decision, discussed l)elow, the United States District Court for the District of
ColnmbJH invalidated many of the pro^iram dir<'ctives that HCFA nsi-d to implrmrnt
the PRO program on grounds that were not piomulgated as rules under the
Administrat iv«' Procedure? Act .^^^

Congress has exhibited considerable dissatisfaction with the imfilc^ment at ion
of tlie PRO program The Senate Finance Committee has held hearings on the
program's implementation on two occas icuis . '•^''* In the Consol iflat ed Omnibus Budget
Reconciliation Act of 1985. Congress instituted several changes in the PRO
piogram to increase the responsibilities of PROs to monitor the quality of
hospital care for Medicare beneficiaries . ^^^ Still not satisfied with the
performance of the PRO program, Congress is considering additional legislative
reforms in the budget legislation for FY 1987 to improve PRO quality of care
reviews and enhance protection for beneficiaries from PRO and hospital decisions
rf.'gai fli tig the need for continued hospital cart?. '

2 . Physician Payment Reform

Congress and federal po]if:y makers have given far less attention over the
years to reforming physiciati reimbursement than to hospital reimbursement. In
part, this is because Part B costs represented a lesser proportion of the total
Medicare cost problem . '"^*^ Another factor is that the medical prrtfession is
politically powerful and has resisted reforms in Part B. Since the inr^eption of
Medicare in 1965, Congress has adopted only a few cost containment measures for
Part B and these measures tended to address special problems of certain groups of
physicians. Spe»-.i f ical ly , major reforms of Part B before 1983 included limiting
the rale of increase in the prevailing charge to an index which reflects

^^'^No. 85 Orni (D.D.C. May 30, 1986).

'•^■^S use. § 553 (1983 ed . , Supp. TI). See notes 417-418 infra and
accompanying text.

^ '^ "^See Senate Finance Comm . Hearings on Implementation of PRO' s for
Medicare ; Senate Finance Comm. Hearings on Peer Review Organizations .

^^^'Consol idat(>d Omnibus Budget Reconciliation Act of 1985, Pub. L. No. 99-
272, Title IX, §§ 9401-9406, 100 Stat. 82 (1986) [hereinafter cited as
"Consolidated Omnibus Budget Reconciliation Act of 1985"J (codified as amended
in scattered sections of the Social Security Act).

^'^"^See H.R. 5300, § 10241, 99th Cong.. 2d Sess . (1986); S. 2706. §§ 631 633,
99th Cong., 2d Sess. (1986). See also H.R. Rep. No. 727, 99th Cong., 2d Sess.
457 460 (1986); S. Rep. No. 348, 99th Cong., 2d Sess. 146 148 (1986).

1 38

* See notes 78 79 supra and acf^ompany i ng text.

MEDICARE APPEALS SYSTEM 371

inflation, ^'^'^ reforming payment methods for physicians in teaching hospitals,^ ■
and tightening up payment methods for hospital-based physicians — i.e.,
anesthesiologists, pathologists and radiologists having contract arrangements
witli hospitals . ^^^

The Deficit Reduction Act of 1984 (DEFRA). In DKFRA, Congress instituted
the first major reform of physician reimbursement since the inception of the
Medicare program. Conceived as basically an interim measure until more
comprehensive reforms were enacted, Congress imposed a freeze on the charges of
physicans and suppliers of durable medical equipment for a fifteen-month period
commencing July 1, 1984, until September 1985.^'*^ The medical profession
unsuccessfully challenged this freeze on constitutional grounds in American

14*^

Medical Association v. Heckler . ^ ^'-

DEFRA also contained incentives for physicians to accept assignment and
become "participating physicians" in the Medicare program. Specifically, those
physicians and suppliers who voluntarily accept assignment for all Medicare
patients are permitted to raise their charges for purposes of the future
calculation of their customary charge during the freeze period whereas non-
participating physicians and suppliers are not permitted to raise charges either
in the present or for purposes of calculating future charges.^'*'* As a result of

■^^^Social Security Amendments of 1972 § 224(a), codified as amended in.
Social Security Act § 1842(b)(3)(F), 42 U.S.C. § 1395u(b) (3) (F) (1982 ed . , Supp.
II); 42 C.F.R. § 405.509 (1986).

^■^^Social Security Amendments of 1972 § 227(b)(2), codified as amended in.
Social Security Act § 1814, 42 U.S.C. § 1395f (1982 ed . , Supp. II).

^"^^Tax Equity and Fiscal Responsibility Act of 1982 § 108(a)(1), codified as
amended in. Social Security § 1887, 42 U.S.C. § 1395xx (1982 ed . , Supp. II); 42
C.F.R. §§ 405.550-.557 (1986).

I'^^Deficit Reduction Act of 1984, Pub. L. No. 98-369, § 2306, Division B,
Title III, 98 Stat. 494, 1070 (1984) [hereinafter cited as "Deficit Reduction Act
of 1984"] amending. Social Security Act § 1842(b), 42 U.S.C. § 1395u(b) (1982
ed . , Supp . II).

l'*^606 F. Supp. 1422 (S.D. Ind. 1985).

^'^'^Deficit Reduction Act of 1984 § 2306(c) amending, Social Security Act §
1842, 42 U.S.C. § 1395U (1982 ed . , Supp. II).

372 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

these Incentives, the number of physicians becoming "participating physicians"
was nearly 30% and assignments have increased dramatically. '*^

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) . I n
COBRA. Congress made additional changes in the Part B payment methodologies. The
chief measures include extending the freeze of the charges of physicians and
suppliers of durable medical equipment established in DFFRA until September 1986
and enhancing the incentives for physicians and suppliers to accept assignment
and become "participating physi cians . " ^'*^ Further. COBRA directed the Director
of the Office of Technology Assessment (OTA) to appoint an eleven member
Physician Payment Review Commission by May 1. 1986, to perform an analytical and
evaluative function for physician payment comparable to the role of the
Prospective Payment Assessment Commission under the prospective payment system
for hospitals . ^^'^

Future Reforms. Congress and HHS have given greater attention to how to
reform Part B payment methodologies lr» the last three years than ever before. In
the Social Security Amendments of 1983, Congress directed the Secretary to study
how to pay physicians according to a methodology using Diagnosis Related
Groupings (DRG's).^"*^ This mandate has precipitated an examination of how
Medicare pays physicians and other suppliers of services under Part B and has
generated prooosals for fundamental modification of Part B payment
methodologies. It is clear that Congress plans to enact legislation to reform
Part B payment methods in the near future and that these payment methods will be
fundamentally different from those Medicare uses currently.

^'*^Health Care Financing Administration, Medicare Participating Physician
and Supplier Program: Fact Sheet (Jan. 1985). Similar results were seen for
suppliers of durable medical equipment as well. Id.

^'^^Consolidated Omnibus Budget Reconciliation Act of 1985, § 9301, amending.
Social Security Act § 1842(b). 42 U.S.C. § 1395u(b) (1982 ed. . Supp. II).

^'^'^Consoll dated Omnibus Budget Reconciliation Act of 1985 § 9305, amending.
Social Security Act § 1845, 42 U.S.C. § 1395x (1982 ed . , Supp. II). This
commission has been selected and Is conducting its work.

^^^Soclal Security Amendments of 1983 § 603(a)(2)(B).

^^^See Senate Finance Comm. Hearings on Reform of Medicare Payments to
Physicians , Medicare: Paying the Physician; Jencks & Dobson, supra note 53;
Burney, Hickman, Paradise & Schieber, Medicare Physician Payment, Participation,
and Reform, Health Affairs, Winter 1984, at 5; Fox, Physician Reimbursement Under

Medicare: An Overview and a Proposal for Area-Wide Physician Incentives , and

Had ley. Critique of Peter Fox's "Physician Reimbursement Under Medicare: An
Overview and a Proposal for Area Wide Physician Incentives, in House Comm. on
Ways and Means, Proceedings of the Conference on the Future of Medicare, 98th
Cong., 2d Sess. 108-128 (1984)."

MEDICARE APPEALS SYSTEM 373

3. The Solution to the Hospital Cost Problem: The Prospective Payment System

As the solution to the problem of hospital costs, Congress enacted the
prospective payment system in April 1983. ^^^ This system, which started October
1, 1983, fundamentally changed how Medicare pays acute care hospitals for
services to Medicare beneficiaries . ^^^ Specifically, Congress discontinued
paying hospitals the reasonable cost of covered services on a retrospective basis
and began paying hospitals a prospectively determined price for each Medicare
case.

The Rate Structure. The basic premise of the prospective payment system
established under the Social Security Amendments of 1983 is that Medicare will
pay hospitals a predetermined fixed price for each patient case regardless of the
cost the hospital incurs In treating that patient. The theory is that this
approach will reverse the incentives of the retrospective cost reimbursement
system which encouraged hospitals to Incur costs and thereby increase their
Medicare reimbursement . ^^^ Under the prospective payment system, Medicare would
establish the price for a patient case beforehand and hospitals can retain
savings if they treat the patient for less than that price. Thus, hospitals have
an incentive to use less resources and reduce costs in treating patients.
Indeed, it is this change in incentives that Congress, the Administration and
also hospitals sought to accomplish with the prospective payment, as HHS stated
in its 1982 report to Congress on its proposal for the prospective payment
system :^^^

^^^Social Security Amendments of 1983 § 601(e), codified as amended in,
Social Security Act § 1886(d) passim, 42 U.S.C. § 1395ww(d) passim (1982 ed. ,
Supp. IT).

^^^The prospective payment system applies only to acute care hospitals;
rehabilitation, psychiatric and children's hospitals are not included in the
prospective payment system nor are units in acute care hospitals that provide
rehabilitative, psychiatric or pediatric services. Social Security Act
§ 1886(d)(1)(B); 42 U.S.C. § 1395ww(d) (1 ) (B) (1982 ed., Supp. II); 42 C.F.R. §
412. 20-. 32; (1986).

The Secretary is also authorized to make exceptions and adjustments under
the prospective payment system for regional and national referral centers, sole
community hospital, cancer hospitals and hospitals serving a disproportionate
number of Medicare and low income patients. Social Security Act § 1886(d)(5)(C),
42 U.S.C. § 1395ww(d)(5)(C) ; 42 C.F.R. § 412.90-. 104 (1986).

^^^See notes 89-90 supra and accompanying text.

^^^H.R. Rep. No. 25, 98th Cong., 1st Sess . 132 (1983); Secretary of the
Department of Health and Human Services, Report to Congress on Hospital
Prospective Payment for Medicare 101-110 (1982) [hereinafter cited as "HHS Report
to Congress" ] . See Hospital Prospective Payment System: Hearings Before the
Subcomm. on Health of the Senate Comm. on Finance, 98th Cong., 1st Sess. (1983)
[hereinafter cited as "Senate Finance Comm. Hearings on Hospital Prospective

374 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The ulllmate objective of PPS Is to set a reasonable price
for a known product. This provides Incentives for hospitals
to produce the product more efficiently. When PPS is in
place, health care providers will be confronted with strong,
lasting incentives to restrain costs for the first time In
Medicare history. ^^^

The Social Security Amendments of 1983 provided that the Medicare program
will base Its prices for Medicare hospital cases on a comprehensive
classification system comprised of 470 mutually exclusive categories called
"Diagnosis Related Groupings" ("DRGs").^^^ The basic premise of DRGs is that all
human disease conditions can be classified according to disease system, length of
stay, intensity of resources consumed, morbidity, and sex and that such
categories reflect the average cost of providing hospital services to all
patients with diseases that fall in a DRG.^^^

Payment System" ] ; Medicare Hospital Prospective Payment System: Hearings Before
the Subcomm. on Health of the House Comm. on Ways and Means, 98th Cong. . 1st
Sess. (1983) [hereinafter cited as "House Ways and Means Comm. Hearings on
Medicare Hospital Prospective Payment System"]; 20 Years of Medicare and
Medicaid, Health Care Fin. Rev. (1985 Annual Supp. ) (comments of J. Alexander
McMahon and Congressman Dan Rostenkowski ) .

^^"^HHS Report to the Congress at 3.

^^^Social Security Amendments of 1983, § 601(e), codified as amended In,
Social Security Act § 1886(e), 42 U.S.C. § 1395ww(e) (1982 ed . , Supp. 11).

^^^This case classification system was developed at Yale University
Initially to describe the type of patients admitted to hospitals and, later,
under contract with HCFA, to serve as a basis of a pricing system for hospital
payment. This classification system is based on the International Classification
of Diseases, Ninth Revision, Clinical Modification, developed by the World Health
Organization. The system is comprised of 23 major diagnostic categories (MDC's),
representing a broad clinical category based on body system involvement and
disease etiology and differentiated from all other clinical categories. The
MDC's are then broken down into DRG ' s according to principal diagnosis, secondary
diagnosis, surgical procedures, age and sex. There are 470 mutually exclusive
and comprehensive DRG ' s . A list of the DRG ' s is included in Appendix A. HCFA
has assigned weighting factors to reflect the relative use of hospital resources
for each of 467 DRG's. The remaining three DRG's are administrative categories
to assign certain types of cases for special treatment by the fiscal
intermediary, e.g., discharges with an operating room procedure unrelated to a
given MDC or a diagnosis based on invalid data. Preamble to Interim Final Rule,
48 Fed. Reg. 39.752 (1983), at 39,760-761. See Prospective Payment Assessment
Commission, Technical Appendixes to the Report and Recommendations to the
Secretary, U.S. Department of Health and Human Services, April 1, 1985, Appendix
A. at 14-17 [hereinafter cited as "Technical Appendixes to the ProPAC Report and

MEDICARE APPEALS SYSTEM 375

The Medicare price is determined by taking the product of an average price
per case for all Medicare cases, called the "standardized amount"^^' and the
weight of the DRG assigned to the particular patient's case, according to the
following formula:

Standardized Amount X DRG Weight = Price per Case.^^^

However, if a particular case is a so-called "outlier" and greatly exceeds the
cost and length of stay ordinarily required for a case in the DRG to which the
case would be assigned, Medicare will pay more for that case than the DRG
price. ^^^

The calculation of the standardized amount is complicated. Through FY 1986,
the standardized amount includes two components: (1) the individual hospital's
average cost per Medicare case, i.e., the "hospital-specific" component;^"" and
(2) the average cost per case for all urban and all rural hospitals, i.e., the

Recommendations to the Secretary, April 1, 1985"]. See also Yale School of
Organization and Management, Health Systems Management Group, The New ICD-9-CM
Diagnosis Related Groups (DRGs) Classification Scheme, Final Report (1982).

l^'^Social Security Act § 1886(d)(2)(D), 42 U.S.C. § 1395ww(d)(2)(D) (1982
ed. , Supp. II) .

■* ^ "Technical Appendixes to the ProPAC Report and Recommendations to the
Secretary, April 1, 1985, Appendix A, at 4.

l^^Soclal Security Act § 1886(d) (5) (A) (i ) , 42 U.S.C. § 1395ww(d) (5) (A) (1 )
(1982 ed., Supp. II); 42 C.F.R. § 412.80 (1986). See Preamble to Interim Final
Rule, 48 Fed. Reg. at 39,778 (1983).

^"^The hospital-specific component is based on the hospital's costs as
determined in its base year under the prospective payment system, i.e., FY 1982.
Social Security Act §§ 1886(b)(3)(A) and 1886(d)(1), 42 U.S.C. §§ 1395ww(b) (3) (A)
and 1395ww(d)(l) (1982 ed., Supp. II); 42 C.F.R. §§ 412. 71-. 73 (1986). See
Preamble to Interim Final Rule, 48 Fed. Reg. at 39,772-775 (1983). It is
standardized to remove the effect of the hospital's case mix and adjusted to
account for inflation, outlier payments and a factor that will assure "budget
neutrality" of the prospective payment system in FY 1984 and FY 1985. Social
Security Act § 1886(d)(1)(A); 42 U.S.C. § 1395ww(d) (1 ) (A) (1982 ed., Supp. II);
42 C.F.R. § 412.73 (1986). See Preamble to Interim Final Rule, 45 Fed. Reg. at
39,772-775 (1983). See note 163 infra and accompanying text. During the
Liu:.. on period, the proportion of the hospital-specific component declined
while the federal component increased. Social Security Act § 1886(d), 42 U.S.C.
§ 1395ww(d) (1982 ed . , Supp. II); 42 C.F.R. § 412.70 (1986).

376 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

"federal" component /* ^ ^ Howf-ver. in FY 1987, the next fiscal year, the
stanilnrdlzed amount will be based only on the federal component and there wJ ) 1 be
one price per case for all urban hospitals and one price per case for all rural
hospitals. '*^2

The federal component is calculated according to a formula with five steps:
(1) removing costs that are not included Jn the prospeci ive payment rate; (2)
updating for inflation and other changes that affect hospital performance; (3)
"standardizing" the costs per case to remove costs attributable to explainable
differences between hospitals, i.e., area wage rates, teaching status and case
mix; (4) aggregating and averaging the standardized amount for all urban and all
rural hospitals; and (5) making other adjustments required by law, e.g.. the
adjustments to assure budget neutrality*"' and reflect payments for outlier
cases.'"'* The final standardized amount is then divided into components
reflecting labor and nonlabor costs and the labor component is adjusted to
reflect the wage level for the area in which the individual hospital is
located. ^^^

Not all hospital costs are included in the ORG prices due to congressional
uncertainty about how to estimate these costs fairly and account for the large

^^^During the transition period from FY 1984 to FY 1986, the federal
component included a regional as well as national average with the proportion of
the federal component based on the national average Increasing over the years.
Social Security Act § 18R6(d) (2) (n) , 42 U.S.C. § 1395ww(d) (2) (D) (1982 ed . , Supp.
II); See Preamble to Interim Final Rule, 48 Fed. Reg. at 39,766 (1983).

l^^cjo cial Security Act § 1886(d)(l)(A)(iii), 42 U.S.C. §
J395ww(d)(l)(A)(iii ) (1982 ed . , Supp. IT); 42 C.F.R. § 412. 70 (1986).

^"^The "budget neutrality" adjustment is designed to comply with the
statutory directive that the prospective payment system not pay hopsitals more in
FY 1984 and FY 1985 than would have been paid under the retrospective cost
reimbursement system and the TEFRA limits. Social Security Act § 1886(e)(1)(B);
42 U.S.C. § 1395ww(e)(l)(B) (1982 ed . , Supp. II). The adjustment for outlier
payments to individual hospitals is designed to account for payments for outlier
cases and thus ensure that budget neutrality is maintained. Social Security Act
§§ 188R(d)(2)(E) and (F) and (3)(B) and (C); 42 U.S.C. § 1395ww(d) (2) (E) and (F)
and (3)(B) and (C) (1982 ed., Supp. II).

^^'^Social Security Act § 1886(d)(2), 42 U.S.C. § 1395ww(d) (2) (1982 ed . ,
Supp. II); 42 C.F.R. § 412.73 (1986). See Preamble to Interim Final Rule, 48
Fed. Reg. at 39,763-766 (1983); Technical Appendixes to the ProPAC Report and
Recommendations to the Secretary, April, 1985, Appendix A, at 5.

^^^Social Security Act § 1886(d)(2)(H), 42 U.S.C. § 1395ww(d ) (2 ) (H) (1982
ed., Supp. II); 42 C.F.R. § 412.63(g). See Preamble to Interim Final Rule, 48
Fed. Reg. at 39,767-768 (1983); Technical Appendixes to the ProPAC Report and
Recommendations to the Secretary, April, 1985, Appendix A, at 7.

MEDICARE APPEALS SYSTEM 377

variations in these costs among hospitals. Specifically, the costs excluded are
capital costs at least until 1987.^^^ The Secretary has just proposed
incorporating capital costs into the DRfi prices. ^'^'^ The budget legislation
currently before the Congress also contains proposals for incorporating capital
costs into the prospective payment rdlc;:./'^^ In addJHon, direct costs of
medical education are reimbursed separately . ^^^ The prospective payment system
also pays an allowance for teaching activities calculated on the basis of the
number of the hospital's interns and residents.^ "

The fiscal intermediaries conduct the i)ayment transaction under the
prospective payment system. Spec j f icai ly, the hospital's fiscal intermediary
assigns the DRG to a particular case on the basis of information suppli(!d on the
uniform hospital bill that the hospital submits for that case. Using the
hospital's standardized amount and multiplying it by the DRfi weight, the fiscal
intermediary sets the final price per case. At the end of the year, the fiscal
intermediary tallies the total paid for all Medicare cases as well as the
hospital's capital and educationaJ costs to determine the amount of final payment
for that fiscal y(?ar. Then the fiscal intermediary issues a notice of program
reimbursement (NPR) .

Updating Payment Rates. The Social Security Amendments of 1983 require that
the Secretary update payments to hospitals under the prospective payment system

l^^Social Security Act § 1886(a)(4)(C), 42 U.S.C. § 1395ww(a) (4 ) (C) (1982
ed., Supp. II). See Preamble to Interim Final Rule, 48 Fed. Reg. at 39,776
(1983) .

Capital costs are reimbursed separately according to retroac;tive cost
reimbursement principles. In the Social Security Amendments of 1983, Congress
stated its intent to include capital costs in DRG prices by October 1986 and
directed the Secretary to report to Congress by October 1984 on proposals for
incorporating capital costs into DRG prices. Social Security Amendments of 1983
§ 603(a)(1) (1983). See Department of Health and Human Services, Report to
Congress, Hospital Capital Expenses: A Medicare Payment Strategy for the Future ( 1986) .

^^'^Interim Final Rule, 51 Fed. Reg. 19,970; 19,974-88 (1986). See also
Report to Congress, Hospital Capital Expenses, supra note 166.

^^^See H.R. 5300, § 10203, 99th Cong., 2d Sess . (1986); S. 2706, § 602, 99th
Cong., 2d Sess. (1986). See also H.R. Rep. No. 727, 99th Cong.. 2d Sess. 428-430
(1986); S. Rep. No. 348, 99th Cong., 2d Sess. 139-140 (1986).

l^^Social Security Act § 1886 (a)(4), 42 U.S.C. § 1395ww (a)(4) (1982 ed.,
Supp. II). See Preamble to Interim Final Rule, 48 Fed. Reg. at 39,777 (1983).

I'^^Social Security Act § 1886(d)(5)(B), 42 U.S.C. § 1395ww(d) (5 ) (B) (1982
ed., Supp. II); 42 C.F.R. § 405.421 (1986). See Preamble to Interim Final Rule,
48 Fed. Reg. at 39,778 (1983).

378 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

.iiuuially through the informal nilemaking process.*"' Specifically, updating
hospital payment rates Involves (1) adjusting the standardized amount to reflect
inflation, hospital productivity, new technology and other factors, and (2)
readjusting the DRGs to reflect changes in resource consumption due to new
technology and other factors.''^ In updating the standardized amount, the
Secretary may not exceed inflation plus 0.25%^'^ and must take into account
changes in the hospital "market basket," I.e., the goods and services hospitals
purchase to care for Medicare beneficiaries,^''* hospital productivity,
technological and scientific advances, quality of health care and the "long term
eff<!Ct iveness" of the Medicare program.^'' The Secretary must adjust the DRG
classification and weighting factors for FY 1986 and at least once every four
years thereafter "to reflect changes in treatment patterns, technolojgv and other
factors which may change the relative use of hospital resources."^'" Updating
hospital payment rates is a highly technical process Involving sophisticated
economic and statistical analysis and necessarily requires assumptions about the
health care system and reliance on data that are, in many cases, ultimately based
on intuitive prof e.ssional judgments.

Congress was acutely aware of this character of the rate setting process and
also of the fact that the initial payment rates were imprecise and would need
modification as data on actual experience under the system was generated and,
further, that HHS was under tremendous pressure to reduce Medicare budgetary

^''^Social Security Act § 1886(e)(5)(A), 42 U.S.C. § 1395ww(e) (5 ) (A) (1982
ed . , Supp. II).

^''^The Social Security Amendments of 1983 § 601(e), codified as amended in,
Social Security Act § 1886(d)(2)(B) and (3)(A), 42 U.S.C. § 1395(d)(2)(B) and
(3)(A) (1982 ed. , Supp. II) .

^''^Social Security Act § 1886(d) (2 ) (B) , 42 U.S.C. § 1395(d)(2)(B) (1982 ed . ,
Supp. II).

Initially, the limit was inflation plus 1%, but Congress tightened this
formula in the Deficit Reduction Act of 1984. Deficit Reduction Act of 1984
§ 2310, amending. Social Security Act § 1886(b)(3)(B), 42 U.S.C. § 1395(b)(3)(B)
(1982 ed. , Supp. II) .

^'^'^Social Security Act § 1886(b)(3)(B), 42 U.S.C. § 1395ww(b) (3) (B) (1982
ed., Supp. II). See Preamble to Interim Final Rule, 48 Fed. Reg. at 39,776 (1983).

^''^Social Security Act § 1886(d) (4 ) (D) . 42 U.S.C. § 1395ww(d) (4 ) (D) (1982
ed., Supp. II). See Preamble to Interim Final Rule, 48 Fed. Reg. at 39,776 (1983).

^'^'^Social Security Act § 1886(d)(4)(C), 42 U.S.C. § 1395ww(d) (4 ) (C) (1982
ed., Supp. II). See Preamble to Interim Final Rule, 48 Fed. Reg. at 39,776
(1983) .

MEDICARE APPEALS SYSTEM 379

expenditures.^'^'' Thus, Congress created the Prospective Payment Assessment
Commission (ProPAC) to participate in the process of setting and updating the
hospital payment rates in a substantive and public fashion. ^''^ This commission,
composed of seventeen experts on health care appointed by the Director of the
congressional Office of Technology Assessment (OTA).^''^ must by statute include
representatives of the medical profession, hospital industry, and health
manufacturers as well as business, labor, health insurance programs and the
elderly. -^^^ ProPAC has two statutory responsibilities: (1) to make annual
recommendations to the Secretary on the appropriate percentage change in the
Medicare payments for hospital services, i.e., the "update factor"; and (2) to
make recommendations to the vSecretary on necessary changes in the DRGs , including
advisability of establishing new DRGs, modifying existing DRGs and changing the
relative weights of the DRGs.^^^

To assure that ProPAC has the contemplated influence in setting hospital
payment rates. Congress mandated a rather formal schedule of public
communications between ProPAC and HFIS on the annual updating of hospital payment
rates. ProPAC submits (1) an April report to the Secretary on adjustments to the
prospective payment system; (2) a February report to Congress on the prospective
payment system and the American health care system; and (3) a November report to
Congress on the Secretary's regulations updating hospital payment rates for the
upcoming fiscal year.^^^ must publish the proposed rule on updating hospital

^'^'^See Senate Finance Comm. Hearings on Hospital Prospective Payment System;
House Ways and Means Comm . Hearings on Hospital Prospective Payment System.

^''^Social Security Amendments of 1983 § 601(e), codified as amended In,
Social Security Act § 1886(e)(2), 42 U.S.C. § 1395ww(e)(2) (1982 ed., Supp. II).
See H.R. Rep. No. 911, 98th Cong., 2d Sess. 140 (1984).

^'^^Social Security Act § 1886(e)(2) and (6), 42 U.S.C. § 1395ww(e)(2) and
(6) (1982 ed. , Supp. II) .

l^^Social Security Act § 1886(e) (B), 42 U.S.C. § 1395ww(e) (2 ) (6) (B) (1982
ed., Supp. II).

"•^^Social Security Act § 1886(e)(3) and (d)(4)(D), 42 U.S.C. § 1395ww(e)(3)
and (d)(4)(D) (1982 ed . , Supp. II). See Prospective Payment Assessment

Commission, Report and Recommendations to the Secretary , U.S . Department of

Health and Human Services, April 1, 1985, at 3 [hereinafter cited as "ProPAC
Report and Recommendations to the Secretary, April 1, 1985" ] .

1^2j5j,(.ijji Security Act § 1886(d)(4)(D) and (e)(3), 42 U.S.C. §
1395ww(d)(4)(D) and (e)(3) (1982 ed . , Supp. JI). See H.R. Rep. No. 911, 98th
Cong., 1st Sess. 140 (1984); Technical Appendixes to the ProPAC Report and
Recommendations to the Secretary, April 1, 1985, Appendix A, at 11.

380

ADMINISTRATFVE CONFERENCE OF THE UNITED STATES

payment rates

183

HFul, in that rultr, must inrlude ProPAC's April

recommendnt lorjs . ' ■* PtdPAC comments on these proposed ruJes In the regular

rommettt process. ^^ After publication of the final rule by September 1 , ^^^

ProPAC reports to Congress aiuily/ing the Secretary's updating of the payment

rates in the final rule. ^

To date, HHS has not adopted many of the recommendations of ProPAC on the

methodology to use for updating hospital payment rates or recalibrating DRGs but,

rather, has selected other methodologies which have resulted in lower payment

1 flfl
rates. There have been some areas of agreement. ProPAC recommended that the

Secretary Include capital costs in the DRG prices beginning in FY 1987, a

recommendation that HHS has accepted in concept but not according to the same

^^^Social Security Act § 1886(o)(4) and (5) (A), U.S.C. § 1395ww(E)(4) and
(5) (A) (1982 ed. , Supp. II) .

184

Social Security Act § 1886(e)(5), 42 U.S.C. § 1395ww(e)(5) (1982 ed . ,

Supp. II).
1 85

* "^Although not statutorily mandated, ProPAC has submitted comments in the
informal rule making process. Propective Payment Assessment Commission, 1986
Adjustments to the Medicare Prospective Payment System: Report to the Congress,
Novembei- 1985, at 45-64 (comments on Proposed Rule, 50 Fed. Reg. 24,366 (1985))
(hereinafter cited as "1986 Adjustments to the Medicare Prospective Payment
System: ProPAC Report to the Congress, November 1985"]. See also letter from
Stuart H. Altman, Ph.D., Chairman of the Prospective Payment Assessment
Commission, to William L. Roper, M.D., Administrator of the Health Care Financing
Administration (July 2, 1986) (comments of the Prospective Payment Assessment
Commission on the Notice of Proposed Rulemaking of June 3, 1986, Concerning
Fiscal Year 1987 Changes in the Inpatient Hospital Prospective Payment System).

^^^Social Security Act § 1886(e)(5)(B), 42 U.S.C. § 1395ww(e) (5) (B) (1982
ed. , Supp. II ) .

^^"^Social Security Act § 1886(d) (4) (0) , 42 U.S.C. § 1395ww(d ) (4 ) (D) (1982
ed., Supp. II). See 1986 Adjustments to the Medicare Propsective Payment System:
ProPAC Report to the Congress, November 1985.

'^^Regarding the update of FY 1986 rates: see ProPAC Report and
Recommendations to the Secretary, April 1, 1985; Preamble to Proposed Rule, 50
Fed. Reg. 24,366 (1985); 1986 Adjustments to the Medicare Prospective Payment
System: Report to the Congress, November 1985. For the update of FY 1987 rates:
see Prospective Payment Assessment Commission, Report and Recommendations to the
Secretary, U.S. Department of Health and Human Services, April 1, 1986
[hereinafter cited as "ProPAC Report and Recommendations to the Secretary, April
1. 1986"]; Preamble to Proposed Rule, 51 Fed. Reg. 19,970 (1986).

MEDICARE APPEALS SYSTEM 381

methodology as ProPAC proposed . ^^^^* Congress has overridden HHS's recommendations
for updating hospital payment rates for prior years. ^^ The House Budget
Committee has indicated a concern that Congress may again have to act to set the
update factor for hospital payment rates under the prospective payment system. ^^^

Ensuring Quality of Care. In the Social Security Amendments of 1983,
Congress gave PROs the responsibility of monitoring hospital performance under
the prospective payment system and specifically charged PROs with reviewing and
determining for payment purposes "the validity of diagnostic information provided
by [a] hospital, the completeness, adequacy and quality of care provided, the
appropriateness of admissions and discharges, and the appropriateness of care for
which additional payments are sought. "^^^ Congress also accorded HHS authority
to impose sanctions on hospitals that exhibit inappropriate admissions and
discharge practices . ^^'^

As a condition of payment, a hospital must have an agreement with the
designated PRO for its area that enables the PRO to conduct the requisite
reviews. ^^"^ Specifically, PROs review the admission and discharge patterns of
hospitals, the use of certain procedures, admissions for certain types of
treatment and all outlier cases for which hospitals seek additional payment. ^^^

l^^Preamble to Proposed Rule, 51 Fed. Reg. at 19,983-85 (1986). See ProPAC
Report and Recommendations to the Secretary, April 1, 1986, at 5-6; 32-36;
Technical Appendixes to the ProPAC Report and Recommendations to the Secretary,
April 1, 1986, Appendix B, at 40-56.

l^^See Emergency Extension Act of 1985, Pub. L. No. 99-107, § 5, amending
Social Security Act § 1886(b)(3)(B), 42 U.S.C. § 1395(b)(3)(B) (1982 ed . , Supp.
11); Consolidated Omnibus Budget Reconciliation Act of 1986 § 9101, amending
Emergency Extension Act of 1985 § 5(c).

^^^See H.R. Rep. No. 727, 99th Cong., 2d Sess. 427 (1986).

^^^Social Security Amendments of 1983 § 602(f)(1) codified as amended in,
Social Security Act § 1866(a)(1)(F); 42 U.S.C. § 1395cc(a) ( 1 ) (F) (1982 ed., Supp.
II). See H.R. Rep. No. 47, 98th Cong., 1st Sess. 197 (1983).

193social Security Act § 1886(f) (22); 42 U.S.C. §1395ww(f ) (2) (1982 ed.,
Supp. IT); 42 C.F.R. §§ 474. 30-. 58 (1986).

^^"^Social Security Act § 1866(a)(1)(F), 42 U.S.C. § 1395cc(a) (1 ) (F) (1982
ed., Supp. II); 42 C.F.R. § 412.44 (1986).

'^^The review responsibilities of PRO's are outlined in the regulations, 42
C.F.R. § 412.44 (1986), and spelled out even more specifically in the scope of
work of the request for proposal for PRO contracts and in the contracts
themselves. See notes 129-130 supra and notes 410-416 infra and accompanying text.

382 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

A PRO must also review any cases In which a hospital advises a beneficiary that
Medicare does not cover certain services and the hospital will accordingly charge
the beneficiary for such services. ^ Congress has given considerable attention
to the performance of PROs in conducting these reviews as well as made and
considered changes In review requirements to Improve reviews of the quality of
hospital care.^^^

C . Ramifications for the American Health Care System and Medicare Appeals

The prospective payment system has had an enormous Impact on the American
health care system and also the Medicare appeals system. First and very
Important is the fact that hospitals have done very well under the prospective
payment system. Indeed, in 1984, the hospital industry made record profits -- an
Increase of 27.6* from 1983.^^^ These profits have been so great that Congress
and the HHS Inspector General have launched inquiries and have made
recommendations for changes. ^^^ In addition, the prospective payment system has
been quite successful in addressing the hospital cost problem and in curbing the
rate of inflation in hospital costs. Tn 1984, the growth in hospital spending
was the slowest in 19 years; and the 1984 Medicare inflation rate for hospital
costs was 9.6% compared to the average annual rate of 16.7% between 1977 and
1983 200 jhis record profitability for the hospital industry as well as the
demonstrated success of the prospective payment system in meeting its goals is
critically important to keep In mind when evaluating the appeals issues that
hospitals have raised.

The prospective payment system and other regulatory changes have also had a
critical Impact on the American health care system. In 1984, the number of
hospital admissions of the elderly declined for the first time since 1965,
average length of stay continued to decline, and data suggest that hospitals were

1^^42 C.F.R. § 412.44 (1986).

^^'See notes 135-137 supra and accompanying text.

^^^National Health Expenditures, 1984 at 13. See also Prospective Payment
Assessment Commission, Medicare Prospective Payment and the American Health Care
Sy.stem: Report to the Congress, 51 (1986) [hereinafter cited as "ProPAC Report
on the American Health Care System" ] .

199office of the Inspector General, Department of Health and Human Services.
Financial Impact of the Prospective Payment System on Medicare Participating
Hospitals-1984; Hospital Profits Under PPS: Hearing Before the Subcomm. on
Health of the Senate Finance Comm. , 99th Cong., 2d Sess. (1986).

200propy^Q Report on American Health Care System at 19-20; See also National
Health Expenditures, 1984.

MEDICARE APPEALS SYSTEM 383

taking care of a sicker group of patients than ever before. ^01 Tmplementation of
the prospective payment system has encouraged hospitals and physicians to treat
more Medicare beneficiaries outside the hospital, and data show that there was
greater utilization of outpatient services in 1984 compared to earlier years. ^^^
Many patients are discharged from hospitals sicker and are in greater need of
skilled nursing and home health services after discharge . ^"^ There has been
increased utilization of Part B services, and these Part B services are more
sophisticated and consequently more expensive than in previous years. ^^"^

With these changes in the utilization patterns for health care resources has
come an increased number of appeals about disputes over coverage and payment on
home health services . ^^"^ There has also been an increase in the number of
appeals of Part B coverage and payment determinations as well as the amount of
money involved in Part B appeals. ''^^ Specifically, there was a 31% increase in
request for review determinations for Part B claims between 1983 and 1984 --- the
first year of the prospective payment system.'"

^^^ProPAC Report on American Health Care System, at 19-20. See also Quality
of Care Under Medicare's Prospective Payment System: Hearings Before the Senate
Special Comm. on Aging, 99th Cong., 1st Sess. (1985) [hereinafter cited as
"Senate Special Comm . on Aging Hearings on Quality of Care Under Medicare's
Prospective Payment System" ] .

202^ . Government Accounting Office, Information Requirements for
Evaluating the Impacts of Medicare Prospective Payment on Post-Hospital Long-
Term-Care Services: Preliminary Report (PEMD-85-8, Feb. 21, 1985).

^^^ProPAC Report on the American Health Care System at 60-61 ; Government
Accounting Office, Information Requirements for Evaluating the Impacts of
Medicare Prospective Payment on Post-Hospital Long-Term-Care Services:
Preliminary Report (PEMD-85-8, Feb. 21, 1985); Senate Special Comm. on Aging,
Hearings on Quality of Care Under Medicare's Prospective Payment System, at 118.

'-^'*See Congressional Research Service, Medicare Appeals Background Paper
(Oct. 1985), reprinted in, Medicare Appeals Provisions: Hearings on S. 1158
[sic] Before the Subcomm. on Health of the Senate Comm. on Finance, 99th Cong. ,
1st Sess. 2 (1985) [hereinafter cited as "Senate Finance Comm. Hearings on
Medicare Appeals Provisions"] .

205

206

207

Id.

384 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES
IIHAF'TKR J IT: THH MKDICARE APPEALS SYSTEM

The Medicare appeals systom ran bost be characterized as a patchwork*^ -
with a large number of indf^|)pndent appeal processes to address a multitude of
diverse issues. This diversity is in large part due to the fact that Meflicare is
an enormous program serving 30 million beneficiaries spread throughout the United
States and its territories as well as a decentralized program with numerous
public and private organizations -- i.e.. HCFA, fiscal intermediaries, carriers.
PHOs. hospitals and other institutions and physicians -■ executing various
administrative and service responsibilities under the program. This report is
coricerntrd only with the appeals processes that are available for Medicarf*
beneficiaries and providers to appeal disputes over coverage of and payment for
Medicare benefits. Tonsequent ly , this chapter describes only these appeals
processes .

A . Misto r i ca 1 _I )f ^ v^e 1 opment of the Medicare Appeals System

1 . The Original Appeals System .

In designing the Medicare program in 1965, Congress determined that
administrative review by HEW and judicial review would only be accorded to
beneficiaries having disputes as to entitlement to benefits or the amount of
benefits under Part A over a certain sum.^^^ The Metlicare statute provided
further that § 205(b)2^" and § 205(g)^^^ of the Social Security Act. which
governed administrative and judicial review for other appeals under the Social
Security Act. woulfl apply to these Medicare appeals. ^^^

Congress did not authorize comparable administrative or judicial revie^w for
provider payment disputes under Part A nor offer any rationale for this decision

^^^Medi caif! Beneficiary Appeals Process in Technical Appendixes to the
ProPAC Report and Recommendations to the Secretary, April 5, 1986, Appendix C, at
163.

^^^Social Security Amendments of 1965, § 102(a), codified as amended in,
Social Security Act § 1869(b), 42 U.S.C. § 1395ff(b) (1982 ed.,"Supp. II). The
House; bill proposed an amount in controversy for administrative and judicial
review of $1,000 while the Senate amendment proposed a $100 threshold. The
conference committee determined to allow administrative appeals for amounts In
controversy exceeding $100 and judicial review for amounts of $1,000 and above.
H.R. Rep. No. 682, 89th Cong., 2d Sess. 46 (1966).

2i0socia] Security Act § 205(b), 42 U.S.C. § 405(b) (1982 ed . , Supp. II).

21'social Security Act § 205(g), 42 U.S.C. § 405(g) (1982 ed.. Supp. II).

^^^Social Security Amendments of 1965. § 102(a). codified as amended in.
Social Security Act § 1869(b), 42 U.S.C. § 1395ff(b) (1982 ed . , Supp. II).

MEDICARE APPEALS SYSTEM

385

in the legislative history. Pursuant to § 1872 of the Social Security Act, §
2n5(h) applied to provider appeals. ^^ Thus, in the early years of the Medicare
program, fiscal intermediaries heard all appeals of provider payment disputes and
no subsequent review by the Secretary of HEW or the federal courts was available.
Congress also did not authorize administrative or Judicial review of
coverage and payment determinations under Part B for either beneficiaries or
providers. Rather, Congress simply provided that carriers, as part of their
responsibilities under their contracts with HEW, would conduct fair hearings for
beneficiaries in disputes over the carriers' coverage and payment
determinations.^^'* According to the Senate Finance Committee, this approach was
justified because under Part B "claims will probably be for substantially smaller
amounts than under Part A.'"^^"^ As with claims of providers under Part A, Part B
claimants are also subject to § 205(h) with its bar to federal question
jurisdiction by virtue of § 1872 of the Social Security Act.^^^

2 . Early Concerns and Problems

Several problems emerged with the appeals process shortly after the Medicare
program got under way which Congress specifically addressed in the Social
Security Amendments of 1972. Many other concerns, i.e., the statutory preclusion
of administrative and judicial review of Part B claims, did not precipitate
congressional action and, in so far as they persist today, will be discussed
later in this report. The two problems which Congress did address in the Social
Security Amendments of 1972 are discussed below.

^^^Social Security Amendments of ige.'S, § 102(a), codified as amended in,
Social Security Act § 1872, 42 U.S.C. § 139511 (1982 ed . , Supp. II). Section
205(h) provides:

The findings and decision of the Secretary after a hearing shall be
binding upon all individuals who were parties to such hearing. No
findings of fact or decision of the Secretary shall be reviewed by any
person, tribunal, or governmental agency except as herein provided. No
action against the United States, the Secretary, or any officer or
employee thereof shall be brought under section 1331 or 1346 of Title
28 to recover on any claim arising under this subchapter. Social
Security Act § 205(h), 42 U.S.C. § 405(h) (1982 ed . , Supp. II).

2^'^Social Security Amendments of 1905 § 102(a), codified as amended in.
Social Security Act § 1842(c)(7), 42 U.S.C. § 1395u(c)(7) (1982 ed., Supp. II).
This right to a fair hearing has been extended to providers who accept assignment
of a beneficiary's Part B benefits. See note 304 infra and accompanying text.

21^S. Rep. No. 404, 89th Cong., 2d Sess . 55 (1965)

21^Social Security Amendments of 1965, § 102(a), codified as amended In,
Social Security Act § 1872, 42 U.S.C. § 139511 (1982 ed., Supp. II).

386 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The Provider Re J wbursenient Review Board (PRRB). Providers, having
Hub.Htantia] and complex disputes with fiscal intermediaries and the Medicare
program over payment under the cost reimbursement system, objected to the
informality of intermediary hearing proceedings anri the lacl< oi administrative or
Judicial review for the Intermediary's final paymerit determination. ' ' In 1972,
a federal district court. in Coral Gables Convalescent Home, Inc. v.
RU-hardson . ^ ^ ^ ruled that extant i nterme (Jiary hearing procedures with no appeal
to the Secretary and no guidance through MEW regulations violated providers'
right to procedural due process. This court ordered the Secretary to promulgate
any necessary regulations to correct these constitutional deficiencies, and the
Secretary promulgated regulations accordingly . ^^^

Providers were particularly dissatisfied with the preclusion of judicial
review of intermediary decisions in payment disputes. Some courts, compelled by
the harshness of this statutory preclusion, did find other grf)unds for federal
question Jurisdiction . '^^^ However, most courts refuser! to acknowledge federal
Jurisdiction in Medicare payment cases'^ especially after the Supreme Court's
1972 decision, Weinberger v. Salfi,^^^ r:larifying that § 205(h) 's bar to federal

2.11*1 Homer & PlatLfMi, Medicare Provider Reimbursement Disputes: An

Analysis of the Administrative Hearing Procedures, G3 Geo. L.J. 107 (1974). This
article was written by promin(;nt provith^r lawyc^rs and identifies provider
concerns with these administrative hearing procedures.

2^^340 F. Supp. 646 (S.l). Fla. 1972).

2^^See 37 Fed. Reg. 10,724 (codified at 20 C.F.H. §§ 405.490-.499 (1974)).

^^"See, e.g. , Adams Nursing Home of Williamston, Inc. v. Mathews, 548 F.2d
1077 (1st Cir. 1977); Rothman v. Hospital Service of Southern California, 510
F.2d 956 (9th Cir. 1975); Kingsbrook Jewish Medical Center v. Richardson, 486
F.2d 663 (2d Cir. 1973); Aquavella v. Mathews, 437 F.2d 397 (2d Cir. 1971).

^^^See , e.g., Faith Hospital Association v. Blue Cross Hospital Service,
Inc., 537 F.2d 294 (8th Cir. 1976), cert, denied, 429 U.S. 977 (1976); St. Louis
University v. Blue Cross Hospital Service, Inc., 537 F.2d 283 (8th Cir. 1976),
cert, denied, 429 U.S. 977 (1976); South Windsor Convalescent Home, Inc. v.
Mathews, 541 F.2d 910 (2d cir. 1976); cf^. MacDonald Foundation, Inc. v. Mathews.
571 F.2d 328 (5th Cir. 1978), vacating, dismissing and transferring on
Jurisdictional grounds. 554 F.2d 714 (5th Cir. 1977), denying rehearing of, 534
F.2d 633 (5th Cir. 1976), cert denied, 739 U.S. 893 (1978).

222422 U.S. 749 (1975) .

MEDICARE APPEALS SYSTEM

387

question jurisdiction applied to all payment claims under the Social Security Act
even when the rlaimant raised an associated constitutional issue. ^^^

Responding to these provider concerns and frankly stating that Congress had
overlooked the resolution of provider disputes in originally designing the
Medicare appeals system, ^24 Congress established the Provider Reimbursement
Review Board (PRRB) in the Social Security Amendments of 1972 to adjudicate
payment disputes arising between providers and intermediaries in cost reporting
periods ending after June 30, 1973.^^^ Congress also authorized judicial review
of PRRB decisions. ^^^

Waiver of Liability. Beneficiaries had several concerns about coverage
determinations under Part A and Part B in the early years of the Medicare
program. ^^^ The most serious problem resulted from HEW policies, precipitated by
escalating costs and high utilization rates, interpreting statutory definitions
of benefits more strictly and then denying coverage of and payment for services
already provided on a retroactive basis. ^^° This was particularly a problem with
skilled nursing benefits. In 1968, the Social Security Administration instructed
fiscal intermediaries and carriers to define covered "skilled nursing services"
more narrowly and proscribed "custodial care" more broadly to reduce utilization
and thus cost of skilled nursing home services for Medicare beneficiaries. ^^^
Following these policy changes, fiscal intermediaries denied a large volume of
skilled nursing home services on a retroactive basis, causing severe financial

OO'i

'■'■^See Comment, Federal Question .Jurisdiction Over Medicare Provider Appeals
After Weinberger v. Salfi: Toward a Principled Construction of the Statutory Bar,
65 Va. L. Rev. 1383 (1979).

224s. Rep. No. 1230, 92d Cong., 2d Sess. 248 (1972).
supra note 217, at 119.

See Homer & Flatten,

225social Security Amendments of 1972, § 243(a),
Social Security Act § 1878, 42 II.S.C. § 1395oo (1982 ed

codified as amended in,
, Supp. II).

226social Security Amendments of 1972, § 243(a), codified as amended in,
Social Security Act § 1878(a), 42 U.S.C. § 1395oo(a) (1982 ed., Supp. II).

22 'See Butler, Advocate's Guide to the Medicare Program, 8 Clearinghouse
Rev. 831 (1974); Butler, Medicare Appeal Procedures: A Constitutional Analysis,
70 Nw . L. Rev. ' 139 (1975). These articles, by a recognized advocate of
beneficiary rights, review the objections to the early Medicare appeals
procedures from the beneficiary's perspective.

228

Butler, An Advocates Guide, supra note 227, at 836-837

229

Part A Intermediary Letter No. 328 (June 1968); 20 C.F.R. § 405,125-. 127
(1974). See Butler, An Advocate's Guide, supra note 227, at 837.

388 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

hardslilp for benof icliir J es who thought Medicare would pay for tholr care and for

providers which furnished expensive servlc-es with the expectation of beioK
paid 230

Congress, concerned about these retroac:tive denials and their implications
for beneficiaries, specificdlJy sought to mitigate the harsh and unfair results
of these i)racti(:es. Tn the Social Security Amendments of 1972, Congress
authorized the Medicare program to waive the liability of beneficiaries or
providers for any services provifled that were subsequently determined not to be
covered Medicare benefits according to medical criteria, i.e.. not medically
necessary or constituting custodial care, if they did not know or had no reason
to know that the services were not covered. *^^

B . The Present Medicare Appeals System

Analytically, it is useful to think of the present Medicare appeals system
for coverage and payment disputes as a tree with the first division separating
appeals procedures for Part A from those for Part B. A diagram of the appeals
processes for disputes of beneficiaries and providers over coverage of and
payment for Medicare benefits is included in Appendix B. For Part A, the major
branch divides into two branches: one for beneficiary appeals of coverage
determinat lons232 gp^j Qpp f^j^ provider appeals of payment determinations. The
Part B branch does not divide as there is a combined process for beneficiary
appeals of both coverage and payment determinations with providers having appeal
rlgfits only if they accept assignment of Part B benefits from beneficiaries . ^33
Included in the branch for beneficiary appeals under both Part A and Part B is an
appeals process to determine whether the Medicare program should waive the

230

23isocial Security Amendments of 1972 § 213(a), codified as amended in.
Social Security Act § 1879, 42 U.S.C. § 1395pp (1982 ed . , Supp. II). See notes
323-340 infra and accompanying text.

232Benef iclaries may appeal adverse eligibility determinations under Part A
and Part B. Social Security Act § 1869, 42 U.S.C. § 1395ff (1982 ed . . Supp. II).
Appeals may be taken to an Administrative Law .Judge in the Social Security
Administration and, ultimately, to federal court and no specified amount in
controversy is required. Providers under Part A may also appeal adverse
decisions regarding their eligibility to participate in the Medicare program.
Social Security Act § 1869, 42 U.S.C. § 1395ff (1982 ed . , Supp. II). 42 C.F.R. §
405. 1501-. 1595 (1986) .

See note 304 infra and accompanying text.

MEDICARE APPEALS SYSTEM 389

liability of the beneficiary and/or the provider for a service determined to be
not a covered benefit under the Medicare program on medical grounds. ^^"^

1 . Beneficiary Appeals Under Part A

For skilled nursing and home health services, the fiscal intermediary makes
the initial coverage and payment determination regarding Medicare benefits
provided a benefif;iary including whether the services are covered according to
medical criteria, i.e., whether the services were medically necessary or
constituted custodial care.^ Beneficiaries may obtain reconsideration of this
initial determination from HCFA.^''" PROs , rather than fiscal intermediaries,
make the initial determination that a hospital service is not a covered Medicare
benefit according to medical criteria.' ' Congress has effectively delegated
the authority to determine coverage of inpatient hospital benefits to PROs,^^^
although HCFA has taken the position that the PRO determination on coverage does
not supersede HCFA's authority to enforce coverage provisions of the Social
Security Act.'^'^*^

After receiving a notice of initial determination of benefits and payment,
the first step of a beneficiary appeal of a dispute over coverage of or, less
often, payment for Medicare benefits is reconsideration by the fiscal
intermediary in the case of skilled nursing and home health benefits or by the

^'^'^There are no appeal rights for any other party besides a beneficiary or
provider affected by a HCFA coverage decision, even those coverage decisions of
HCFA, fiscal intermediaries or carriers regarding whether to pay for new medical
technologies and procedures.

See note 54 supra and accompanying text. Health equipment manufacturers
have pressed for creation of an appeals process for this type of global coverage
decision. See Health Industry Manufacturers Association, Recommendations of the
HJMA Product Introduction Coordination Task Force (May 29, 1986).

23542 c.F.R. at §§ 405 . 704 (b) (11 ) and (12) (1986)
236jd. at §§ 405.710-.717.
^^^icl. at §§ 405.710-.7t7.

23^See note 126-130, 193-197 supra and accompanying text

239

42 c.F.R. § 466.86(c) (1986) .

390 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

PRO In the case of hospital benef i ts . '^'^^ PKOs handle all appeals of their
initial determinations on benefit and coverage issues for beneficiaries and
providers. ^' The reconsideration is basically a paper review at which the
beneficiary is generally not present nor represented by counsel. In tlie PRO
reconsideration procefhir(r the beneficiary, physician or hospital may submit
additional information and examine the material on which the PRO based Its
initial determination although the PRO may not disclose the record of the PRO
deliberation or the Identity of the decision makers. ^'*^ The decision maker in
the recons ideia t ion must be a physician who did not make the Initial
determination. ^^^

The Social Sfjcurity Act § 1869(b) authtirl/.es administrative review of the
determinations by fiscal intermediaries on coverage of benefits of $100 or above
and judicial review of claims of $1,000 or above. '*^ Fiscal intermediaries,

^^Osee id. §§ 405 . 710- . 717 . (fiscal intermediary reconsideration process);
id. at §§ 473. 16. 38 (PRO reconsideration process).

2'*lsocial Security Act §§ 1862(g) and 1154(a)(2), 42 U.S.C. §§ 1395y(g) and
1320c-3(a)(2) (1982 ed . . Supp. 11); 42 C.F.R. §§ 466. 83-. 86 (1986). See Medicare
Beneficiary Appeals Process i n Technical Appendixes to the ProPAC Report and
Recommendations to the Secretary April 1, 1986, Appendix C, at 162.

Before making an initial denial determination or change in a DRfi
classification, the PRO must notify the provider and the beneficiary's physician
and allow them an opportunity to discuss the matter with the PRO's physician
advisor. 42 C.F.R. § 466.93 (1986). Once the PRO has made a determination to
deny coverage on medical grounds, it is required to give notice of this denial to
the beneficiary, the attending physician, the provider and the fiscal
intermediary. Id. at § 466.94. This notice must also advise the beneficiary of
the available right for reconsideration by the PRO. Id. at § 466.94(c).

^'^^id. at § 473.24.

^'^'^Id. at § 473.28.

^^^^social Security Act § 1869(b), 42 U.S.C. 1395ii(b) (1982 ed . , Supp. II).
This section provides:

Any Individual dissatisfied with any determination under subsection (a)
as to . . . (C) the amount of benefits under part A . . . shall be
entitled to a hearing thereon by the Secretary to the same extent as
provided in section 205(b) and to judicial review of the Secretary's
final decision after such hearing as is provided in section 205(g).

id. See 42 C.F.R. § 405.704 (1986).

MEDICARE APPEALS SYSTEM 391

except in the case of hospital benefits, '^■-* handle appeals of disputes over
benefits under $100. TEFRA expressly gave PROs the responsibility of haiidling
beneficiary appeals of hospital benefit coverage determinations made according to
medical criteria. 246

Administrative review before an Administrative Law .Judge (AI.J) in the Social
Security Office of Hearings and Appeals is available for beneficiary appeals
under Fart A of $100 and above. ^'^'^ In VY 198v5, there were 3,927 requests for AL.l
hearings for both Part A coverage determinations and some Medicare eligibility
issues - a decline of 4% from ALJ hearing requests in FY 1984. 2**^ A beneficiary
may appeal the final decision of the PRO in a hospital medical coverage appeal to
an ALJ in SSA if the amount in controversy is $200 or more.^"*^ For all other
Part A coverage issues, the requisite amount in controversy for an ALJ hearing is
$100 or more."^^"

The ALJ proceeding is the first opportunity for an oral hearing at which a
beneficiary may personally appear and plead his case although an oral hearing may
be waived. 2^^ The role of the ALJ in Part A coverage appeals, as in other Social
Security program appeals, is that of a non-partisan examiner rather than a judge

2'*'^See notf> 24fi infra and accompanying text.

2'^^Tax Equity and Fiscal Responsibility Ar-r of 1982, §§ 142 and 143,
codified as amended in. Social Security Act §§ 1862(g) and 1154(a)(2); 42 U.S.C.
§§ 1395y and 1320f; 3 (1982 ed., Supp. IT). The only coverage appeals regarding
hospital services that fiscal intermediaries now handle arc those regarding
technical determinations of whether a service is a covered benefit under the
statute or regulations. 42 C.F.R. § 466.86(c)(2) (1986).

^'^'^Social Security Act §§ 1869(b) (1 ) (r) and (2), 42 U.S.C. § 1395f f (b) ( 1 ) (C)
and (2) (1982 ed . , Supp. 11); 42 C.F.R. §§ 405.720 and 422.203-.210 (1986).

2'^^Sor;ial Security Administration, Operational Report of the Office of
Hearings and Appeals 28 (1985).

^-^^Social Security Act § 1155, 42 U.S.C. § 1320c -4 (1982 ed., Supp. TI); 42
C.F.R. § 473.10 (1986) .

2-'5f'social Security Act § 1869(b)(2), 42 U.S.C. § 1395ff (b)(2) (1982 ed.,
Supp. II); 42 C.F.R. § 405.720.

^^''120 C.F.R. §§ 404.944 and .948 (1986).

392 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

in an ndvci5»dry hearing. ^^^ In these proceedings. HHS Is not represented by
counsel and the Individual claimant may be represented by counsel If desired. ^
The ALJ has primary responsibility for developing the record, In contrast to
conventional adiudicative proceedings in which counsel for the parties has this
responsibility.^'^ There is also an expedited appeals process for cases where
the beneficiary has claimed, and HHS agrees, that the only factor preventing a
favorable! decision for the beneficiary is a statutory or regulatory provision
that the beneficiary maintains is unconstitutional.^^^

A claimant dissatisfied with the ALJ ' s decision may request review by the
Appeals Council of the Social Security Administration in its Office of Hearings
and Appeals . ^'''^ The Appeals Council may also review and reverse an ALJ decision
on its own motion. ^^ The Appeals Council may review a case if it is alleged
that there is an abuse of discretion by the ALJ or an error of law, the record
indicates that the decision is not supported by substantial evidence, or there is
a broad policy or procedural issue that may affect the general public
interest."® HCFA also may review and refer to the Appeals Council under its
reopening provisions, any ALJ or Appeals Council decision that It believes is
contrary to the Medicare statute and regulations.

For skilled nursing and home health agency appeals, a beneficiary may seek
Judicial review of a final decision of the Secretary if the amount in controversy

252see Richardson v. Perales, 402 U.S. 389 (1971) in which the Supreme Court
upheld the investigatory model for ALJ conduct in Social Security disability
hearings. See also J. Mashaw, Social Security Hearings and Appeals (1978).

25342 C.F.R. §§ 404. 1700-. 1710 (1986).

254_id. at § 404.951.

^SS^d. at §§ 405.718-.718e (1986).

256j^. at § 405.724 and 20 C.F.R. § 405.967 (1986) (skilled nursing facility
and home health agency appeals); 42 C.F.R. §§ 473.40, .46(a) (1986) (hospital
appeals) .

25720 C.F.R. § 404.969 (1986).

^SS^d. at § 404.970 (1986).

259id. at 404. 987-. 988. 42 C.F.R. § 405.750 (1986).

MEDICARE APPEALS SYSTEM

393

is $1,000 or more.

260

For a coverage decision on hospital services decided by a

PRO, a beneficiary may seek judicial review of a final decision of the Secretary
If the amount in controversy is at least $2,000.^^^ To obtain judicial review
for all Part A beneficiary coverage appeals, suit must be brought within 60 days
In the federal district court for the judicial district in which the claimant
resides, where the individual, institution, or agency has a principle place of
business, or in United States District Court for the District of Columbia. ^^^

2. Provider Appeals Under Part A

Provider appeals under Part A are adjudicated by the PRRB if the amount in
controversy is $10,000 or above and by the provider's fiscal intermediary if the
amount in controversy is between $1,000 and $10, 000. ^^^ All institutional
providers paid under Part A, including skilled nursing facilities and home health
agencies, can appeal to the PRRB.^""* In 19B4, approximately 1,500 appeals were
made to the PRRB. 265

The Social Security Amendments of 1983 expressly provided that hospital
payment disputes would be handled under existing appeals procedures but limited

with respect to the Issues that could be appealed.

266

Congress specifically

260

Social Security Act § 1869(b)(2), 42 U.S.C. § 1395ff(b)(2) (1982 ed. ,
Supp. IT); 42 C.F.R. § 405.730 (1986).

261social Security Act § 1155, 42 U.S.C. § 1320c-4 (1982 ed.. Supp. II); 42
C.F.R. § 473.46(b) (1986).

262

Social Security Act § 205(g), 42 U.S.C. § 405(g) (1982 ed. , Supp. II).

263soclal Security Act § 1878(a), 42 U.S.C. § 1395oo(a) (1982 ed., Supp.
II); 42 C.F.R. § 405 . 1801- . 1890 (1986). In order for an Intermediary to provide
a hearing, the amount in controversy must be at least $1,000. ]_d. at § 405.1811.

^^^^Social Security Act § 1878(a). 42 U.S.C. § 1395oo(a) (1982 ed. , Supp.
II); 42 C.F.R. § 405.1801(b)(1) (1986).

2"^See table on PRRB performance statistics in Appendix C.

266social Security Amendments of 1983, § 602(h), codified as amended in.
Social Security Act §§ 1878(g)(2) and 1886(d)(7), 42 U.S.C. §§ 1395oo(g)(2) and
1395ww(d)(7) (1982 ed. , Supp. IT).

The Social Security Amendments of 1983 preclude administrative and judicial
review of: (1) the establishment of DRG's, the methodology for classifying
patient discharges Into DRG's and the appropriate weighting factors for PRG's;

394

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

intended that hospital appeals nver payment disputes be heard by the PRRB. as the
House Ways and Means Committee explained:

Your Committee's bill would provide for the same procedures
for administrative and judicial review of payments under the
prospective payment system as is currently provided for cost-
based payments. In general, the same conditions, which now
apply for review by the PRRB and the courts, would continue
to apply. 2^'^

Thus Congress amended § 1878 of the Social Security Act to accord the PRRB
Jurisdiction to hear challenges to the "final determination of the Secretary as

to the amount of payment" under the prospective payment system

268

The PRRB. The PRRB, comprised of five members appointed for three year
terms, knowledgeable in health care financing appointed by the Secretary, ^°^
adjudicates payment disputes between providers and fiscal intermediaries^ if
the amount in controversy is at least $10,000 and the provider files a request
for hearing within the prescribed time period. ^'^ A group of providers may bring
a joint appeal if the disputed issues involve a common question of fact or
Interpretation of law or regulation and the aggregate amount in controversy is

and (2) the factor used in a hospital's current payment formula to ensure
compliance with the so-called "budget neutrality" requirement that the
prospective payment system result in total Medicare payments to hospitals In FY
1984 and FY 1985 equal to what would have been payable under the previous
Medicare payment methodology in those fiscal years. See notes 544-554 infra and
accompanying text.

26''h.R. Rep. No. 25, 98th Cong.
23, 98th Cong., 1st Sess . 57 (1983).

1st Sess. 143 (1983). See also S. Rep. No.

2^®Soclal Security Amendments of 1983, § 602(h)(1), codified as amended In.
Social Security Act § 1878(a)(1), 42 U.S.C. § 1395oo(a)(l) (1982 ed. , Supp. II).

2^9social Security Act § 1878(h), 42 U.S.C. § 1395oo(h) (1982 ed . , Supp.
II); 42 C.F.R. § 405.1845. Two board members must be representative of
providers; and a quorum of three members, including at least one provider
representative, is required for a PRRB decision. Id.

P 7 0

^ The parties before a Board hearing are the provider and its fiscal
Intermediary. Social Security Act § 1878(a), 42 U.S.C. § 1395oo(a) (1982 ed.,
Supp. II).

271

MEDICARE APPEALS SYSTEM 395

$50,000 or more. ^^ The PRRB has jurisdiction to adjudioato the Intermediary's
determination of total reimbursement for services to Medicare beneficiaries and
the intermediary's final determination of payment under § 1886(b) and § 1886(d)
of the Social Security Act.2'73 ^^j, PRRB may also hear appeals regarding the
intermediary's failure to furnish a provider with a final determination of the
Medicare payment amount on a timely basis. The PRRB has no authority to
adjudicate coverage issues^''^ nor the validity of Medicare regulations or program
directives.^ In its decisions, the board must observe the statute and
regulations as well as HCFA rulings and must "afford great weight" to
interpretative rules and other HCFA direc:tives.

Hearings before the PRRB are formal adjutJicative hearings. A provider may

?7ft

be represented by counsel, conduct prehearing discovery and, at the hearing,

2'72social Security Act § 1878(b), 42 U.S.C. § 1395oo(b) (1982 ed., Supp.
II) ; 42 C.F.R. § 405.1837.

2'^^Socia] Security Act §§ 1886(b) and (d); 42 U.S.C. §§ ]395ww(b) and (d)
(1982 ed; Supp. II) .

2'74soclal Security Act § 1878(a)(1)(C); 42 U.S.C. § 1395oo(a) ( 1 ) (C) (1982
ed. , Supp. II) .

2'75social Security Act § 1878(g)(1), 42 U.S.C. § 1395oo(g)(l) (1982 ed . ,
Supp. II); 42 C.F.R. § 405.1873 (1986).

^'^^ 42 C.F.R. § 405.1873 (1986). See HCFA Admr . Dec, Fob 15, 1980, rev'g,
PRRB Dec. No. 79-D95, Dec. 17, 1979. This Deputy Administrator's decision was
affirmed in Indiana Hospital Association v. Schweiker 544 F. Supp. 1167 (S.D.
Ind. 1982), aff 'd sub, nom. , St. Francis Hospital Center v. Heckler, 714 F.2d 822
(7th Cir. 1983), cert, denied, 465 U.S. 1022 (1980).

Basically, the PRRB has authority to affirm, modify or reverse a final
determination by the fiscal intermediary with respect to a cost report and to
make any other revisions on matters covered by such cost report. Social Security
Act § 1878(d), 42 U.S.C. § 1395oo(d) (1982 ed., Supp. II); 42 C.F.R. § 405.1869
(1986) .

2'7'7jd. at § 405.1867.

2'^Sld. at § 405.1851.

396 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

cross -exam 1 np wl tnessps . ^ '^ The fU)Jir(l has subpoena pcmer to nf»mpj'l HttinnlaiK f

and testimony of witnesses as well as the production of documents and other

evidence. ^^^ If a party raises an issue of HHS policy which is interpretative of

the Medicare statute and regulations, the Board must promptly notify HCFA^^'

Expedited review is available for issues of law over which the board has

Jurisdiction but no authority to decifle. "^ A PRRH decision must be based on the

hearing record and be supported by substantial evidence when the record is viewed

as a whole. 2^^ The Board's decision is final.^^**

The Secretary has authority to reverse, affirm or modify the Board's

decision on his own motion and within 60 days after the provider is notified of

the Board's decision. ^^^ The crit«!ria for reversal are that the Board has made

an erroneous Interpretation of the law, regulations or HCFA ruling; the decision

is not supported by substantial evidence; the case presents a siKnifir:ant policy

issue that might lead to issuance of a HCFA ruling or other directive; the Board

has incorrectly assumed or denier! jurisdiction; or the decision needs

? ft fi
clarification, amplification or at) altei'native legal basis.^ As will be

discussed below, this review authority has been a source of serious provider

♦

^'^^Social Security Act § 1878(c), 4?. U.S.C. § 1395oo(c) (1982 ed . , Supp.
11); 42 C.F.R. §§ 405.1853 -.1855 (1986).

280

Id. at § 1857.

2^^2£l. at § 405.1863.

2S2j5opja2 Security Act § 1878(f), 42 U.S.C. § 1395oo(j) (1982 ed . , Supp.
ri); 42 C.F.R. § 405.1842 (1986). This procedure has been used 160 times since
its creation in 1981 and on .January 31, 1986. See table on PRRB performance
statistics in Appendix C.

2^3social Security Act § 1878(d), 42 U.S.C. § 1395oo(d) (1982 ed . , Supp.
II) ; 42 C.F.R. § 1871(a) (1986) .

284social Security Act § 1878(f)(1), 42 U.S.C. §1395oo(f ) ( 1 ) (1982 ed . ,
Supp. II); 42 C.F.R. § 1871(b) (1986).

285social Security Act § 1878(f)(1), 42 U.S.C. § 1395oo(f)(l) (1982 ed . ,
Supp. II). The Secretary has delegated this authority to the HCFA Deputy
Administrator. 42 Fed. Reg. 57,351 (1977).

29^42 C.F.R. § 405.1875(c) (1986).

MEDICARE APPEALS SYSTEM 397

concern because of the high rate of reversals of PRRB decisions by the
Secretary. 287

A provider has the right to judicial review of any final decision of the
Board or subsequent Secretarial action on that decision. 2^8 j^uit must be brought
within 60 days of receipt of the Secretary's final decision in the federal
district court of the judicial district in which the provider is located or in
the District Court for the District of Columbia.^ A group appeal of several
providers may be brought in the judicial district in which the greatest number of
providers are located or in the District Court for the District of Columbia. ^^

It has yet to be determined how extensive or influential the role of the
PRRB will be under the prospective payment system. The Board has not yet begun
to hear hospital appeals of issues arising under the prospective payment system
because of HCFA's requirement, discussed below, that the intermediary issue a
notice of program reimbursement before a hospital may initiate an appeal to the
PRRB.^^^ The PRRB still hears appeals of home health agencies and skilled
nursing facilities as well as psychiatric and rehabilitation hospitals that are
not paid under the prospective payment system. The PRRB also retains
jurisdiction over a wide variety of issues for hospitals under the prospective
payment system — including allowable hospital costs for the base year period;
capital and educational costs; the status of hospitals or their components
dispositive in determining whether or not the hospital or component is paid under
the prospective payment system; and the applicability of exemptions, exceptions
and adjustments such as those available for sole community hospitals and cancer

?R7

^ See notes 488-489 infra and accompanying text.

2S8social Security Act § 1878(f)(1), 42 U.S.C. § 1395oo(f)(l) (1982 ed.,
Supp . II).

It should be noted that there is no express authorization in the Social
Security Act or regulations thereunder authorizing judicial review provider
payment disputes under $10,000.

289ld.

290

Id,

29^See notes 465-472 infra and accompanying text.

292see Owens, The PRRB Lives On As an Appeal Mechanism for Healthcare
Providers, Health Care Fin. Management, Aug. 1986, at 36.

398 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

hospi tfi 1 s 2^K'< I, j^ fxp»H tr«d that thfsf latrr twf» issues will gnneratf a
rons i (lerabl e volume of appeals and litigation because of the signifirant
financial ramifications for hosi)itals of such status detfirminat ions . ^^"^

The PRRB also has a considerable backlog of hospital appeals on issues
arising undf^r the hospital r;ost reimbtirsj^merit system, i.e., allocations for labor
and delivery room and malpractice insurance costs ^'••'i However, the number of
appeals before the PRRB has increased considerably since 1981. As indicated in
the table on PRRB performanf e statistics in Appendix (' , PRRB appeals increased
00*. between 1981 and 1982, remair)ed constant the following year, and increased
40% between 198-1 and 1985. But, irrespective of what transpires under the
prospective payment system, the Boaid anticipates that it will continue to hear a
high volume of hospital appeals until well beyond 1987 as well as a rising volume
of home health agency appeals and skilled nursing facility appeals
indefinitely. ^^

PRO Appeals for Hospitals. For hospitals, PHOs aJso adjudicate certain
coverage issues related to payment arising under the pi'ospective payment system.
These include (1) disput«!s over outliers (cases which greatly exceed the length
of stay and/or the estimated costs of the DRG in which the outlier case is
assigned) , ^^^ and (2) errors in ORG coding for a particular case.^^^ HCFA
adopted this approach maintaining that the entity that makes the initial
determination should hear tlit^- ;ippea].^^^ HCFA has also decided that the "waiver
of liability" regulations will govern hearing and appeals if the PRO denies an

^^'^See Owens, supra note P92 at 36 40 ; Clinton, Provider Appeals Route
Evolving Under the Medicare Prospective Payment System, Health f, . Vigil, Nov. 29.
1985. at 19-24; Clinton, PRRB Appeals Evolving Under PPS . The Health Law.. Winter
1985, at 1. 14-1.5.

294

See general ly Owens , supra note 292

^^"^Owens, supra note 292.

^^f^ui. ; Clinton, supra note 29v3, at 19.

See note 159 supra and accompanying text

^^^Preamble to Interim Final Rule, 48 Fed. Reg. 39,740, 39,785-786 (1983)
299ld. at 39,785.

MEDICARE APPEALS SYSTEM 399

entire stay or a "day" or "cost" outlier under § 1862(a)(1) or § 1861(a)(9) of
the Social Security Act because services rendered were neither medically
necessary, reasonable or constituted custodial care.**^" If the provider is
dissatisfied with a PRO determination, it may seek a reconsideration by the PRO;
however, the provider is not entitled to further administrative or judicial
review of the PRO determination. "^

3. Appeals Under Part B

In the Social Security Amendments of 1965, Congress specifically precluded
administrative and judicial review for beneficiary and provider disputes arising
under Part B of the Medicare program on the assumption that the amounts involved
in Part B claims would be small and therefore elaborate appeals procedures would
be unnecessary .^^^ The only provision for appeals regarding Part B benefits that
Congress made was a requirement in each carrier contract that the carrier:

establish and maintain procedures pursuant to which an
Individual enrolled under this part [Part B] will be granted
an opportunity for a fair hearing by the carrier. In any case
where the amount in controversy is $100 or more, when
requests for payment under this part with respect to services
furnished him are denied or are not acted upon with
reasonable promptness or when the amount of such payment is
in controversy. "^

These fair hearing appeal procedures are available to any beneficiary and to any

^^'^id. at 39,784. See 42 C.F.R. §§ 405.330-.332 (1986).

30'Social Security Act § 1155. 42 U.S.C. §1320c-4 (1982 ed. , Supp. II).

^^^See notes 214-215 supra and accompanying text.

303soclal Security Act § 1842(b) (3) (C) ; 42 U.S.C. § 1395u(b) (3) (C) (1982
ed., Supp. II). See 42 C.F.R. § 405.801 et seq. (1986).

In Gray Panthers v. Schweiker, 652 F.2d 146 (D.C. Cir. 1980), the United
States Court of Appeals for the District of Columbia Circuit ruled that
procedural due process required more formal hearing procedures and additional
protections for beneficiaries in cases of disputed claims of less than $100 than
accorded under a carrier's paper review of its Initial determination on the
claim. See notes 504-509 infra and accompanying text.

400

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

provider who has accepted assignment of a beneficiary's rlala for Part B
benef Its.^^'*

Upon making an initial determination of the noverape and amount of Medicare
benefits, the carrier issues the "Explanation of Medicare Benefits" (EOMB) which
specifies that the beneficiary and his assignee, i.e., the provider who accepts
assignment, Is entitled to a review of the carrier's initial determination. ^^^
In this review determination, the carrier must make a separate determination
affirming or revising the initial determination.*'"^ The notice of this review
determination must expressly state the basis for the determination and advise the
beneficiary of the right to a fair hearing if the amount in controversy is $100
or more.^" In 1984, carriers received 3.2 million requests for Part B review
determinations and, of the 3 million processed to completion, 57% reversed the
initial determination at an average cost per claim of $118 and an aggregate cost
of $205 mi 11 ion. ^^^^

The fair hearing for claims of $100 or more is an oral hearing conducted by
a hearing officer selected by the carrier. ^"^ At a fair hearing, the hearing
officer may be disqualified if "prejudiced or partial with respect to any party"
or has "any interest in the matter before him." The regulations expressly
provide that the fact that a hearing officer is an employee of the carrier may
not serve as "prima facie cause for disqualification" ^ and, as a matter of
fact, many hearing officers are carrier employees. The regulations do allow a

3°'*Social Security Act § 1842(b)(3)(C), 42 U.S.C. § 1395u(b) (3) (C) (1982
Supp. II); 42 C.F.R. § 405.801 (1986).

305

Id. at § 405.807,

306

Id. at § 405.810

307

Id. at § 405.811

^"^Congressioni Research Service, Medicare Appeals: Background Paper (Oct.
1985) , reprinted in , Senate Finance Comm . Hearings on Medicare Appeals
Provisions.

309

42 C.F.R. § 405.830 (1986)

31°Id. at § 405.824

311

MEDICARE APPEALS SYSTEM 401

party to challenge the hearing officer on bias grounds. ^^^ In 1984, carriers
received about 30,000 requests for fair hearings and, of those processed to
completion, 63% were decided in favor of the beneficiary at an average cost per
claim of $439 and an aggregate of $5.8 mill ion. ^^^

At the fair hearing, the parties and anyone else the hearing officer deems
necessary may appear and parties may be represented by counsel. ''^^ Parties may
present evidence, examine all witnesses, make oral argument and submit brief s.^-^^
A record is made and is available upon request to the parties and HCFA.*^^ The
hearing officer's decision must be based on the record, be in writing and contain
findings of fact and statement of reasons for the decision. ^^' The decision Is
final unless reopened and modified as provided in the regulations. "^^° There is
no administrative or judicial review of the hearing officer's decision which, as
will be discussed below, has raised much controversy in recent years. ^^^ As will
also be discussed below, the Supreme Court, In Schweiker v. McClure^^" and

^^^^d. at § 405.824.

"^•^^Congressional Research Service, Medicare Appeals: Background Paper (Oct.
1985), reprinted in, Senate Finance Comm. Hearings in Medicare Appeals
Provisions, at 16.

^^^Id. at § 405.830.

315irt, at § 405.830.

^l^Jd. at § 405.833.

3^'^Id. at § 405.834.

'"^l^Id. at § 405.841.

^l^Social Security Act § 1869, 42 U.S.C. § 1395ff (1982 ed. , Supp. II). See
notes 519-523 infra and accompanying text.

^20456 U.S. 188 (1982).

402 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

United States v. Erlka,^^^ has upheld the statutory preclusion of judicial review
of claims under Part B.^^^

4 . Watver of LlabUlty Appeals

An Important but distinct part of the benefit coverage determination under
both Part A and Part B is the determination of whether the beneficiary or the
provider should be financially liable for services that are determined to be not
covered according to the medical criteria of being medically unnecessary or not
provided In the appropriate setting, or constituting custodial care. '■^
Waiver of liability determinations are generally made at the same time coverage
determinations based on medical criteria are made. Thus, the PRO makes the
waiver of liability determinations for hospital benefits; fiscal intermediaries
make the waiver of liability determinations for skilled nursing and home health
benefits; and carriers make these determinations for Part B services . ^^'*

A waiver of liability may apply where the beneficiary and/or the provider
had no reason to know that the services would not be covered. In these cases,
the Medicare program absorbs the cost of the uncovered services although the
provider and beneficiary are then on notice for the future that such services are
not covered. "^^^ As explained above, Congress adopted thi.. ....iver of liability

policy in the Social Security Amendments of 1972 to address provider and
beneficiary concerns about unpredictable and often inconsistent retroactive
denials of coverage by fiscal intermediaries and carriers. ^^"

With respect to beneficiaries, there Is a strong presumption that the
beneficiary did not know that the services in question were excluded from
coverage and thus entitled to a waiver of liability which can be overcome only by
demonstrating that the beneficiary knew or had reason to know that the .services

32I456 U.S. 201 (1982) .

^2^See notes 523-529 infra and accompanying text.

323social Security Act § 1879. 42 U.S.C. § 1395pp (1982 ed . , Supp. II); 42
C.F.R. §§ 405.330-.332 (1986).

^^'*42 C.F.R. § 405.710 (1986) (Part A coverage Issues for skilled nursing
and home health services); id. at § 473.16 (hospital services); id. at § 405.807
(Part B coverage Issues).

^^-''Social Security Act § 1879(a), 42 U.S.C. § 1395pp(a) (1982 ed., Supp. II).

^^^Social Security Amendments of 1972, § 213(a), codified as amended In,
Social Security Act § 1879, 42 U.S.C. § 1395pp (1982 ed . , Supp. II). See notes
227-231 supra and accompanying text.

MEDICARE APPEALS SYSTEM 403

in question were not covered. ^' These presumptions in favor of the beneficiary
are quite strong, and several courts have reiterated the great burden HHS has in
demonstrating that the beneficiary had knowledge that past and even future
services were not covered. ^^^

The criteria for whether the provider had knowledge that the services were
uncovered are less strict. If the intermediary or the institution's utilization
review committee told the provider that the services or similar services were not
covered, then the provider is deemed to have knowledge for purposes of denying a
waiver of liability . ^^^ As a practical matter, most waiver of liability issues
concern the provider's rather than the beneficiary's liability for uncovered
services. Until recently, HCFA had a procedure whereby providers under Part A
were deemed to be entitled to a waiver of liability if the rate of coverage
denials for the provider was below a certain percent. However, In March 1986,
HCFA promulgated new rules on waiver of liability which discontinued this
favorable presumption procedure and required that waiver of liability be
determined on a case-by-case basis for all providers under Part A and Part B.^^^

The right to challenge a waiver of liability decision rests chiefly with the
beneficiary and only secondarily with the provider. For Part A, a beneficiary
may appeal the final decision of the fiscal intermediary or PRO (in the case of
hospitals) on waiver of liability to an ALJ in the SSA Office of Hearings and
Appeals if the amount in controversy is $100 or more.*^^-^ The beneficiary is
entitled to reconsideration by the SSA Appeals Council'^^^ and may seek judicial
review of the final agency decision on waiver of liability, if the amount in

327social Security Act § 1879(c), 42 U.S.C. § 1395pp(c) (1982 ed. , Supp.
II); 42 C.F.R. § 405.332 (1986). In order to demonstrate that a beneficiary knew
or had reason to know that items or services furnished to him were excluded from
coverage, the beneficiary, or someone acting on his behalf, must have received
written notice stating that the items or services were excluded from coverage. Id.

^^^See, e.g., Himmler v. Califano, 611 F.2d 137 (6th Cir. 1979); Walsh v.
Secretary of U.S. Dept. of Health and Human Services, 636 F. Supp. 358 (E.D.N.Y.
1986) (held against beneficiary due to receipt of written notice); Malvasi v.
Harris, No. 79-CV-635 (N.D.N.Y. Jul. 30, 1980).

32942 C.F.R. § 405.341 (1986).

33O51 Fed. Reg. 6,222 (1986), codified in. 42 C.F.R. § 405.336 (1986).

331soclal Security Act § 1867(d). 42 U.S.C. § 1395pp(d) (1982 ed. , Supp. II).

33^42 C.F.R. §§ 405.727 and .967 (1986).

404 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

controversy is $1,000 or more.^"^^ Section 1879(d) permits the provider to appeal
a coverage issue to an ALJ and federal district court where a waiver of liability
Is not eranted for the provider but only If the beneficiary decides not to
appeal .^'^

The waiver of liability requirement for hospitals Is somewhat different. If
the PRO determines that the waiver should apply to uncovered services, the
hospital has no right to appeal even if It disagrees about the underlying
coverage determination.^^''' If the PRO determines that the care was unnecessary
and denies the waiver because the hospital knew or should have known so, the
hospital Is entitled to a hearing before an ALJ In SSA of whether it had
knowledge that care was not covered but cannot challenge the substantive coverage
decision upon which the denial of the waiver was predicated. ^^ Hospitals may
also seek Judicial review for such decisions involving claims of $2,000 or
more.^^'^

Under Part B, a beneficiary may appeal a review determination of the carrier
on waiver of liability to a hear Jng of fleer selected by the carrier if the amount
in controversy is $100 or more.^^° If the provider is found liable for the
service and the beneficiary does not exercise his appeal rights, the provider may

^^^soclal Security Act § lfi69(b)(2). 42 U.S.C. § 1395ff(b)(2) (1982 ed.
Supp. II); 42 C.F.R. § 405.730 (1986).

ri)

^^'^Social Security Act § 1879(d). 42 U.S.C. § 1395pp(d) (1982 ed . , Supp
Judicial Review Is available only for claims exceeding $1000. Id.

33^Social Security Act § 1155, 42 U.S.C.
§ 1320C-4 (1982 ed . , Supp. II).

336

337

Id.

338social Security Act § 1842(b)(3)(C), 42 U.S.C. § 1395u(b) (3) (C) (1982
ed., Supp. II); 42 C.F.R. § 405.820 and .823 (1986).

MEDICARE APPEALS SYSTEM 405

request a hearing before the carrier. ^^^ There is no judicial review of a
carrier decision on a waiver of liability determination for Part B benefits

340

C . Recent CongressionaJ Action on Medicare Appeals

With the implomentation of the prospective payment system, Congress and HHS
as well as beneficiary and provider interest groups have become quite concerned
about the Medicare appeals system. Three factors have precipitated this
concern. ^^-^ First, there had been ongoing congressional concern about appeals
under Part B as a result of reported underpayment by the Medicare program for
Part B benefits as documented In several reports of the General Accounting
Office'^'*^ and court challenges and decisions on the constitutionality of Part B
hearing procedures . "^^"^ Second, there were reports that hospitals were
discharging patients earlier and in a sicker condition as a direct result of
implementation of the prospective payment system and that many patients, wishing
to remain in the hospital, had inadequate information about their appeals rights
to protest such hospital actions.^'*'* Third, early in 1985, provider and consumer

339

Id,

^^^Social Security Act § 1879(d), 42 U.S.C. § 1395pp{d) (1982 ed., Supp. II).

^'^^See Congressional Research Service, Medicare Appeals Background Paper,
reprinted in. Senate Finance Comm. Hearings on Medicare Appeals Provision.

^'^^Government Accounting Office, Reasonable Charge Reductions under Part B
of Medicare (HRD-81-12, Oct. 22, 1980); Government Accounting Office, More Action
Needed to Reduce Beneficiary Underpayments (HRD-81-126, Sept. 3, 1981);
Government Accounting Office, Medicare Part B Beneficiary Appeals Process (HRD-
85-79, June 28, 1985).

^"^^See United States v. Erika, Inc. 456 U.S. 201 (1982); Schwelker v.
McClure, 456 U.S. 188 (1982); Gray Panthers v. Schwelker, 652 F.2d 146 (D.C. Cir.
1980) and 716 F.2d 23 (D.C. Cir. 1983). See notes 508-514 infra and accompanying
text.

^^'* See Senate Special Comm. on Aging, Hearings on Quality of Care Under
Medicare's Prospective Payment , Sustaining the Quality of Health Care Under Cost
Containment: Joint Hearing Before the House Select Comm. on Aging and the Task
Force on the Rural Elderly, 99th Cong., 1st. Sess. (1985); Medicare Beneficiary
Appeals Process Technical Appendixes to the ProPAC Report and Recommendations to
the Secretary, April 1, 1986, Appendix C, at 162. Government Accounting Office,
Information Requirements for Evaluating the Impacts of Medicare Prospective
Payment on Post-Hospital Long-Term-Care Services: Preliminary Report (PEMD 85-8,
Feb. 21, 1985) See notes 427-436 infra accompanying text.

406 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

organizations created a coalition specifically to pressure Congress for reforas
of the Medicare appeals system.

In 1985. several congressmen Introduced legislation to reform the Medicare
appeals system. ^'*^ The most Important of these bills was Congressman Wyden ' s
bill, H.R. 2864, The Pair Medicare Appeals Act,^'*'^ which Congress included in its
FY 1986 budget bill for COBRA in October 1985.^'*^ H.R. 2864, which was similar
to S. 1551, The Fair Medicare Appeals Act,^'*^ introduced by Senators Durenberger,
Heinz and Chafee and upon which hearings were held in November 1985,^^^ provided
for administrative appeal of Part B claims of $500 or more before an ALJ and
judicial review of claims of $1,000 or more. In addition, both H.R. 2864 and S.
1551 would have allowed providers to represent beneficiaries in appeals.

The COBRA conference committee, whose report was ultimately rejected by the
House, adopted these Medicare appeals provisions and also a requirement that a
national coverage determination made pursuant to § 1862(a) ( 1 ) (A)^^^ by HCPA after
consultation with the Public Health Service and published in the Medicare

^^^See Peterson, Legislative Changes Urged Regarding Medicare Appeals,
Health L. Vigil, May 3. 1985, at 12.

This coalition included representatives of the American Hospital
Association, the American Association of Homes for the Aging, the American
Association of Retired Persons, the Catholic Health Association, the Federation
of American Hospitals, the National Association for Home Care, and the National
Senior Citizens Law Center and developed recommendations for a variety of reforms.

^'*^0n January 22, 1985, Congressman Chappell introduced H.R. 579 to allow
administrative review of claims under Part B of the Medicare program of $50 or
more and judicial review of claims of $1,000 or more. H.R. 579, 99th Cong., 1st
Sess. (1985); 131 Cong. Rec. H129 (daily ed . , Jan. 22, 1985).

^'^'^H.R. 2864, 99th Cong., 1st Sess. (1985) 131 Cong. Rec. H4845 (dally ed.
June 25. 1985) .

348h.r. 3128. 99th Cong.. 1st Sess. (1985).

349s. 1551 99th Cong.. 1st Sess. (1985); 131 Cong. Rec. § 10790 (daily ed.
Aug. 1. 1985).

^'''"See Senate Finance Comm. Hearings on Medicare Appeals Provisions.

35^Social Security Act § 1862(a)(1)(A), 42 U.S.C. § 1395y(a)(l)(A) (1982
ed. , Supp. II ) .

MEDICARE APPEALS SYSTEM 407

Coverage Issues Manual^^^ cannot be reversed on appeal. The conferees also
stated their expectation as to how HHS would handle Medicare appeals with the
Increased workload imposed by the bill:

With the additional workload that would be established under
the bill, it is the conferee's expectation that HHS would
give serious consideration to establishing a separate office
of hearings and appeals for HCFA or otherwise creating a
group of hearing officers devoted exclusively or
predominately to Medicare appeals. ^^

Congress dropped these appeals provisions from COBRA prior to enactment at the
request of the Reagan administration.

Congress has also exhibited interest in Medicare appeals issues in this
session of Congress. On March 17, 1986, Congressman Archer introduced a bill to
improve the review procedure for all Social Security programs including
Medicare. "^^^ Specifically, the bill would establish a Social Security Court with
exclusive jurisdiction over various provisions of the Social Security Act,
abolish the Appeals Council, and accord judicial review in the Social Security
Court for any Individual who Is a party to any final decision of the Secretary or
for whom the Secretary has delayed his final decisions longer than 90 days after
an AL J ' s determination. Also, the House Budget Committee has Included a
provision In its budget bill in FY 1987 nearly identical to the provision dropped
from COBRA last year that would provide administrative review and judicial review
for Part B claims. ^^^ Those bills as well as the bills introduced in the last
session of Congress bear witness to Congress's continuing concern about the
Medicare appeals system.

"^^^See note 29 supra and accompanying text.

^^^Proposed H.R. Rep. No. 453, 99th Cong., 1st Sess. (1985) (the House never
adopted this conference report).

^^^H.R. 4419, Social Security Procedures Improvement Act of 1986, 99th
Cong., 2d Sess. (1986); 132 Cong. Rec. H1204 (daily ed. March 17, 1986).

355h.r. 5300, § 4532, 99th Cong., 2d Sess. (1986). See H.R. Rep. 727, 99th
Cong., 2d Sess. 95-96 (1986).

408 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

CHAPTER IV: PROGRAM ADMINISTRATION ISSUES

The Medicare progran nakes extraordinary and unprecedented use of private
organizations to perforn Important administrative, monitoring and adjudicative
functions for the Medicare program to the extent that most beneficiaries and
providers rarely have direct contact with HCFA regarding Medicare coverage and
payment determinations. Beneficiaries and providers have raised consistent
complaints about how HHS, HCFA and Its fiscal intermediaries, carriers and, more
recently, PROs , have administered the Medicare program with respect to coverage
and payment matters. There are three major concerns in this regard. First is
the way In which HCFA and Its fiscal intermediaries and carriers make coverage
and payment determinations in individual cases. Second is the process that HHS
and HCFA have followed in updating the hospital payment rates under the
prospective payment system. Finally, is HCFA's Implementation of the PRO program
almost completely through program instructions rather than Informed rulemaking.

A. Intermediary and Carrier Coverage and Payment Determinations

Inherent In the administrative Job of determining coverage of and payment
for the health care services reflected in the 366 million claims of 30 million
beneficiaries are multiple opportunities for discretionary action by the
thousands of employees of fiscal Intermediaries, carriers and PROs. The
decisions to be made are highly technical and individualistic and cannot always
be made exclusively with reference to a general regulation. Further, there is
great pressure on fiscal intermediaries, carriers and PROs to make these
determinations efficiently and as strictly as possible in order to control the
administrative costs of the Medicare program.

There are three specific concerns with respect to how fiscal Intermediaries
and carriers make coverage and payment determinations In Individual cases.
First, the standards and guidelines for making coverage and payment decisions are
contained in health Insurance manuals and program Instructions that are not
promulgated under § 553 of the Administrative Procedure Act^^'^ and are not

^^"The question of whether the delegation of adjudicative authority to
fiscal Intermediaries and carriers is constitutionally valid has been raised and
addressed In several Judicial decl.slons: Chelsea Community Hospital v. Michigan
Blue Cross Association, 630 F . 2d 1131 (6th Cir. 1980); St. Louis University v.
Blue Cross Hospital Services, 537 F. 2d 283 (8th Cir.) cert, denied, 429 U.S. 977
(1976); St. John's McNamara Hospital v. Associated Hospital Services, Inc., 410
F. Supp. (D.S.D. 1976); Langhorne Gardens, Inc. v. Weinberger, 371 F. Supp. 1216
(E.D. Pa. 1974); Temple University v. Associated Hospital Services of
Philadelphia, 361 F. Supp. 263 (E.D. Pa. 1973); Coral Gables Convalescent Home,
Inc. V. Richardson, 340 F. Supp. 646 (S.D. Fla. 1972). In these cases, the
courts have ruled that the delegation was appropriate provided that certain
safeguards (e.g., opportunity for fair hearing) were present. See Homer &
Platten, supra note 217, at 123-129.

357

5 U.S.C. § 553 (1982 ed.. Supp. II)

MEDICARE APPEALS SYSTEM 409

readily accessible to beneficiaries or even providers. "^^ Second, fiscal
intermediaries, carriers and now PROs , bound by restrictive HCFA program
directives and subject to cost containment pressures imposed by their contracts
with HCFA, are extremely strict in their coverage and payment determinations and,
unfortunately, often wrong. Third, the manner in which carriers, fiscal
intermediaries and also PROs advise beneficiaries and providers about coverage
and payment determinations is very complex and often unclear and, in the case of
beneficiaries, effectively precludes many beneficiaries from exercising their
appeal rights in an informed fashion.

1 . Use of Unpublished Standards and Guidelines

A major criticism of the coverage determination process is that HCFA has
defined criteria for coverage through agency manuals and other program
instructions that are not promulgated as rules under the Administrative Procedure
Act. These materials often further define coverage of Medicare benefits and
can be critical in determining coverage in questionable cases. Also, these
manuals are very complex and often inaccessible as well as incomprehensible to
the average beneficiary or his representative .^^^ But perhaps the most
disturbing problem is that fiscal intermediaries and carriers often make coverage
and payment decisions according to informal, unwritten policies that are used in
the organization's insurance business and are not even HCFA program instructions.

This later problem is exemplified in the recent case. Fox v. Bowen,^^^
involving the practice of one fiscal intermediary making coverage decisions about
physical therapy services for patients in skilled nursing facilities on the basis
of "rules of thumb" — i.e., no coverage for non-weightbearing limbs, termination
of benefits when patients can walk fifty feet, or no coverage for amputees who
are not being fitted for a prosthesis — that are not published in regulations,
HCFA manuals or other official Medicare program instructions, and are
inconsistent with existing regulations and manual provisions pertaining to
coverage of physical therapy services. *^°^ In Fox v . Bowen , the United States
District Court for Connecticut ruled:

It is contrary to such regulations for an Intermediary to
deny benefits on the basis of informal presumptions or "rules
of thumb," that are applied across the board without regard

^^°See notes 28-29 supra and accompanying text
■^^^See notes 28-29 supra and accompanying text

360

Id,

3^1 [1986-2 Transfer Binder] Medicare & Medicaid Guide (CCH) ![ 35,374 (D.
Conn. Apr. 2, 1986).

36242 C.F.R. §§ 409. 30-. 36 (1986); HHS , Skilled Nursing Manual (HIM-13) §
3101 .08 M98fi^ .

410 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

to the medical condition or therapeutic requirements of the
Individual patient. ^^^

2 . Restrictive Intprpretat inns of Coverage Rules

The Medicare program encourages fiscal intermediaries and carriers to
construe Medicare coverage rules strictly in order to minimize costs to the
Medicare program and has done so since the early 1970s. ^^'* Specifically, in its
health insurance manuals and other program directives, HCFA interprets statutory
definitions of benefits more restrictively . An early example of this practice
was the strict interpretation of "skilled nursing care" and expansive
interpretation of "custodial care" In 1972 in order to reduce utilization of
skilled nursing facility benefits by Medicare benef Iciar ies . ^^^ HCFA. fiscal
intermediaries and carriers currently engage in this practice throughout the
Medicare program.

For example, in determining the reasonableness of physician fees under Part
B, HCFA and carriers use an especially restrictive formula for calculating the
reasonable charge which results in a low level of payment for physicians'
services. In FY 1984. reasonable charge reductions -- i.e., the difference
between the physician's billed charge and what the carrier calculates as the
reasonable charge for purposes of Medicare payment -- were made on 83.1% of
unassigned claims for a total of $2.7 billion which was picked up by
beneficiaries and averaged $29.69 per approved claim. '^"'

Certain practices regarding coverage determinations for home health services
also deserve attention. The first is HCFA's "technical denials" policy pursuant
to which the fiscal intermediary must deny payment for home health visits on
ground.s that the visit did not meet statutory or regulatory coverage
requirements, i.e., the beneficiary was not "confined to home" or was not "in

363

[1986-2 Tranfer Binder] Medicare & Medicaid Guide (CCH) 1 35.374. at 10.938.

''^^See Butler, An Advocate's Guide, supra note 227; Wilson, Benefit Cutbacks
in the Medicare Program Through Administrative Agency Fiat Without Procedural
Protections: Litigation Approaches on Behalf of Beneficiaries, 16 Gonz. L. Rev.
533 (1981) .

^^^See notes 228-230 supra and accompanying text.

•^""See Government Accounting Office, Reasonable Charge Reductions Under Part
B of Medicare (HRD-81-12, Oct. 22. 1980); Government Accounting Office. More
Action Needed to Reduce Beneficiary Underpayments {HRD-81-126. Sept. 13. 1981).
See also Government Accounting Office, Medicare Part B Beneficiary Appeals
Process {HRD-85-79. June 28. 1985).

qc'7

**" 'Congressional Research Services. Physician Reimbursement Under Medicare:
Background Paper, reprinted in. Senate Finance Comm . Hearings on Reform of
Medicare Payments to Physicians, at 2. 26.

MEDICARE APPEALS SYSTEM 411

need of jntermittent skilled nursing care."'^^^ Since these denials are not made
on raedlnal grounds, they are not subject to the waiver of liability rules; and
thus the home health agency often has no way to appeal the determinations.
Providers argue that the coverage requirements of being "confined to home" and
"in need of skilled nursing care" involve medical determinations and should be
subject to the waiver of liability rules.^^^

Another concern of home health agencies is HCFA's recent practice of denying
coverage on essentially a statistical basis by using a sample of claims to
project the total amount of overpayment that should be assessed for a cost year.
HCFA effectively demands repayment for hypothetical claims that are not
identified with a real claim. In a beneficiary appeal before on ALJ, In re
Albuquerque Visiting Nursing Services, Inc.,^^'^^ HCFA justified this approach on
grounds of its "enormous logistical problems in enforcement."^'^ The ALJ ruled
that this practice was illegal, stating:

Difficulty in enforcement cannot in any case confer authority
for the government to act in contravention of law, or confer
authority for the government to take action against
individuals or private organizations where no such authority
has been granted by Congress. The procedures for processing
Medicare Part A claims, the remedies for recovery of
overpayment on improper claims, the rights of the parties
against each other, and the rights to appeal are all clearly
delineated in the statutes and the regulations fully
promulgated thereunder. Use of a sampling method contravenes
those procedures and abrogates those rights. See 42 U.S.C.
1395ff and 1395pp and 42 C.F.R. 701 et seq. Individual
review of each case is mandated. The liability of the
provider, the individual and HCFA may only be determined by a
fact review of each case. Id.

372

On February 20, 1986, HCFA issued HCFAR-86-1 specifically authorizing
Medicare carriers, fiscal intermediaries and PROs to use statistical sampling to
project overpayments to providers and suppliers "when claims are voluminous and

36^42 C.F.R. § 405.234 (1986).

^^^See Senate Finance Comm. Hearing on Medicare Appeals Provisions at 48-49
(statement of the Catholic Health Association on Medicare Appeals) and 129-132
(statement of the National Association for Home Care).

^"^^No. HIP-000-61-0022 (Office of Hearing and Appeals, Social Security
Administration, Jul. 1, 1985).

371

372

Id.

412 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

reflect a pattern of erroneous hilling or overuti 1 Izat Ion and when a case-by-case
review is not administratively feas i ble . "^ '-^ HCFA justified this approach on
grounds that the federal government has an inherent right to recoup federal funds
paid out illegally or erroneously and that this right has been extended to the
Medicare program in several court of appeals decisions . '^''^ HCFA stated that use
of sampling was necessary because the cost of determining overpayments for the
"vast number" of Medicare claims on a case-by case basis would be "prohibitively
high."^''''' Issuance of this ruling suggests that HCFA plans to continue using
sampling techniques to determine overpayments to home health agencies and other
providers and suppliers. This practice mayill inhibit providers from delivering
covered services to Medicare beneficiaries, although the HCFA ruling suggests
that this ruling will curtail ongoing abuse of the program by providers.

HCFA also encourages Intermediaries and carriers to reduce costs of claims
through the contracting process. For example, HCFA has allegedly awarded
contracts to companies competing to become fiscal intermediaries for home health
agencies on the basis of the company's past performance in denying coverage on
Medicare claims.^'" Blue Cross and Blue Shield Association of America, on behalf
of Its member plans that comprise the great majority of Medicare intermediaries
and carriers, argues that there are no such incentives and pressures to deny or
underpay Medicare claims. ^^^ However, Blue Cross does acknowledge that severe
budgetary pressures imposed by HCFA contracts have precluded improvements such as
computer system upgrading and better beneficiary education that would mitigate
the problem of underpaying or denying large volumes of beneficiary claims. ^''^
Some have also expressed concern that HCFA's contracts with PROs contain strong

^''^HCFAR-86- 1 , Use of Statistical Sampling to Project Overpayment to
Medicare Providers and Suppliers (Feb. 20, 1986).

^'^^JA- • citing, Mt. Sinai Hospital v. Weinberger. 517 F.2d 329 (5th Cir.
1975); Wilson Clinic and Hospital, Inc. v. Blue Cross, 494 F . 2d 50 (4th Cir.
1974). HCFA also pointed out that several courts had recognized sampling as a
"valid audit technique" in the Medicaid program, ci ting: Illinois Physicians
Union v. Miller, 675 F.2d 151 (7th Cir. 1982); Georgia v. Califano. 446 F. Supp.
404 (N.D. Ga. 1977); New Jersey Welfare Rights Organization v. Cahll, 349 F.
Supp. 501 (I). N.J. 1972); Rosado v. Wyman , 322 F. Supp. 1173 (E.D.N.Y. 1970).
aff 'd. 402 U.S. 911 (1971) .

^''^HCFAR-Sl 6 supra note 383.

^'"See Senate Finance Comm . Hearings on Medicare Appeals Provisions at 169-
178 (statement of the American Federation of Home Health Agencies).

^'^'^Id. at 294-297 (statement of Blue Cross and Blue Shield Association).

378

Id. at 297

MEDICARE APPEALS SYSTEM 413

incentives for PROs to stress cost containment rather than quality improvement In
their hospital reviews under the prospective payment system. '^

Because of severe budgetary pressures, HCFA has exhorted these
organizations to tighten up in their coverage determinations and often, as is the
case with PROs, made reductions of utilization of hospital and other services a
specific contract goal."^^^ In its FY 1987 budget request, HHS asked for $7
million for a "management initiative" that "systematically focuses on home health
utilization and the medical necessity of services, and anticipates that the
medical review and audit activities under this initiative will yield $989 million
in savings in FY 1987. ^^ While such initiatives are certainly laudatory as well
as essential, one might question whether they contain added incentives for
intermediaries and carriers to curtail beneficiaries' benefits unfairly.

3. Information on Coverage Determinations

The third concern with respect to beneficiary coverage determinations is the
nature of the information that fiscal intermediaries and carriers give
beneficiaries advising them of the disposition of their claims and the status of
their appeals. This has been a particularly controversial issue with respect to
Part B chiefly because beneficiaries are directly liable for any services for
which coverage is denied or for which payment does not cover the provider's full
charge .

The nature of the Part B initial notice to Medicare beneficiaries — the
Explanation of Medicare Benefits (EOMB) — was litigated in Gray Panthers v.
Heckler ■'^^^ The United States Court of Appeals for the District of Columbia
ruled that the EOMB violated procedural due process because it was not
comprehensible to an average elderly person and did not state the specific reason
why a claim was denied in sufficient detail to allow a beneficiary to decide
whether to appeal and on what basis. As a result of this litigation, HHS and
counsel for the Gray Panthers agreed to substantial modifications of the EOMB

^'^See Senate Finance Comm. Hearings on Peer Review Organizations; American
Medical Peer Review Association, PROs: The Future Agenda (1985); Staff of the
Senate Special Comm. on Aging, Impact of Medicare's Prospective Payment System on
the Quality of Care Received by Medicare Beneficiaries, 99th Cong., 1st Sess.
(1985); Senate Special Comm. on Aging, Hearings on Quality of Care Under
Medicare's Prospective Payment System.

'^""See generally notes 128-130 supra and accompanying text.

^^^HHS Fiscal Year 1987 Budget Request.

^^^Gray Panthers v. Califano, 466 F. Supp. 1317 (D.D.C. 1979), rev'd and
remanded sub, nom. , Gray Panthers v. Schweiker, 652 F.2d 146 (D.C. Cir. 1980),
reh'g on remand, [1982 Tranfer Binder] Medicare & Medicaid Guide (CCH) f 32,144
(D.D.C. Sept. 10, 1982), remanded sub nom. , Gray Panthers v. Schweiker, 716 F.2d
23 (D.C. Clr. 1983). See notes 504-509 infra and accompanying text.

414 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

forn.^^^ A copy of this revised ROMH form is attached In Appendix C. Most of
these changes required additional explanation for a denial of coverage or limit
on payment for services that describe the specific reason for the denial to the
beneficiary and which give the beneficiary the requisite Information to determine
whether an error had been made and an appeal is appropriate.'^"^ Other changes
Include modifications in the appearance of the notice and the language, i.e.,
discontinuing use of insurance Jargon used to explain actions on the claim. ^°^

Other communications of the Medicare program to its beneficiaries have come
under similar attack. In David v. Heckler,'^^^ the United States District Court
for the Eastern District of New York considered challenges to the information
received in the reconsideration procedure before the beneficiary requests a fair
hearing on a claim determination. The court, concerned about the carrier's
reasonable charge reductions and resulting financial liability of beneficiaries
as well as the high rate of reversals on reconsiderations by the particular
carrier involved in the case,^°° ruled In favor of the plaintiff beneficiaries.
The court reasoned that the plaintiffs had been denied due process because "the
notices do not detail reasons for adverse action""^" and thus beneficiaries were
"effectively denied an 'opportunity to meet' the case against them."^^^ It

^^^Gray Panthers v. Heckler [1986-1 Transfer Binder] Medicare & Medicaid
Guide (CCH) 1 34,981 (D.D.C. Nov. 4. 1985).

384

385

Id.

386

591 F. Supp. 1033 (E.D.N.Y. 1984).

'^° The court did not rule on the adequacy of the EOMB because this issue was
before the United States District Court for the District of Columbia in Gray
Panthers v. Schweiker, a nationwide class action suit. l(\. at 36.

^°°The court commented on evidence that this carrier's reversal rate was
often as high as 70% as well as the fact that only 3% of beneficiaries sought
review of claims and .04% request<;d a fair hearing. Jkl. at 1044.

^^^U\. at 1043, citing, Goldberg v. Kelly. 397 U.S. 254 (1970).

^^^591 F. Supp. at 1043 quoting. Anti-Fascist Refugee Committee v. McGrath,
341 U.S. 123 (1951) .

MEDICARE APPEALS SYSTEM 415

should be pointed out that the court's criticism of the notice, in the words of a
ProPAC report, ^^^ was "scathing:"

The fact is that the letters are written at a level well

beyond most in this segment of the population, with no

discernible added benefit from complexity in information

provided. The language used is bureaucratic gobbledegook,

jargon, double talk, a form of officialese, federalese and

insuranoese, and doublespeak. It does not qualify a.s
English. ^^2

The problem of how HCFA provides beneficiaries with information about their
benefits and the determinations about coverage and payment is intractable and one
to which HCFA is not insensitive. HCFA has oublished a booklet generally
describing the Medicare program for benef iciaries^^^ and, in July 1984, published
a pamphlet (reproduced in Appendix C) outlining appeal rights of beneficiaries
regarding hospital insurance claims. ^^'* However, concerns remain that HCFA's
communications with beneficiaries on a variety of matters is inadequate. In its
FY 1986 recommendations to the Secretary, ProPAC made a recommendation
specifically addressing this concern:

The Secretary should take immediate action to provide more
and better-written information about the Medicare prospective
payment system to beneficiaries and providers of care. The
Department should work with providers, beneficiaries and
associations of these groups to produce and disseminate this
information. Associations of providers and beneficiaries
should also increase their own efforts to better educate and
inform their members about the Medicare prospective payment
system. '^^^

^^^Medicare Beneficiary Appeals Process in. Technical Appendixes to the
PROPAC Report and Recommendations to the Secretary, April 1, 1986, Appendix C, at
174.

^9259j p supp. at 1043.

^^^See Health Care Financing Administration, Your Medicare Handbook (Pub.
No. HCFA-10050, 1986).

'^^'^Health Care Financing Administration, Your Right to Appeal Decisions on
Hospital Insurance Claims (Pub. No. HCFA-10085, 1984).

'^^^ProPac Report and Recommendations to the Secretary, April 1, 1986, at 7
(Recommendation 15: Beneficiary and Provider Information). The American
Association of Retired Persons has published an excellent pamphlet on beneficiary
rights under the prospective payment system. See American Association of Retired

416 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

In respoiuliag to this recommendation, HCFA reported that it had worked with
beneficiary groups on forms for certain types of information and was preparing
another pamphlet on beneficiary appeal rights. ^" Nevertheless, the problem of
comprehensible communication to beneficiaries remains a critical issue for the
Medicare program.

B . Setting the Price under the Prospective Payment System

Each year HHS is required to publish an informal rule updating the hospital
payment rates for the next fiscal year. In updating hospital payment rates
iMider the prospective payment system, HHS is required to consider recommendations
of ProPAC and comment on ProPAC's recommendations in the proposed rule on
updating the DRG payment rates. ^ Hospitals have charged that, while HHS
follows the requisite rulemaking procedures in form including responding
diligently to ProPAC recommendations, it does not indicate in the rule how it
actually derived the payment rates nor make public the details of the
calculations ff)r the payment rates. ^^^ Specifically, the hospital industry has
claimed that HCFA has no analytical basis for the factors it selects to update
the payment rates and that its predominant goal in selecting factors is to reduce
Medicare expenditures for hospital services rather than to set a fair price. ^^^
In its comments to the regulations updating the DRG prices for FY 1987, the
American Hospital Association stated:

In our response to the FFY 1986 [sic] proposed rule on PPS ,
AHA commented that "the Health Care Financing Administration
(HCFA) has an obligation to the public to do more in the
Notice than provide a statement of those beliefs that form
the basis for the rule; HCFA must provide evidence which
validates their beliefs." For a second year, the notice of
proposed rates fails to document the appropriateness and
validity of the update factor and other changes. Absent
detailed evidence, AHA mijst assume that the primary
motivating factor in the development of each component of the

Persons, Medicare's Prospective Payment System - Knowing Your Rights (1985).

39*^51 Fed. Reg. 19,970, at 19,998 (1986).

^^"^See notes 171-176 supra and accompanying text.

^^®See notes 177-187 supra accompanying text.

^^^Letter from .Jack Owen, Executive Vice President of the American Hospital
Association, to William Roper, M.D. Administrator of the Health Care Financing
Administration (July 3, 1986) (comments on Proposed PPS Rules for FY 1987).

400

Id. at Attachment A.

MEDICARE APPEALS SYSTEM 417

rate calculation is budget reduction. We can only conclude
that HCFA is not truly interested in the adequacy of the
rates that are promulgated, the equity of payments to
hospitals or the administration of the Medicare program in a
manner that reflects its responsibilities to Medicare
beneficiaries and providers. If these issues had been
considered in the development of the PPS rates for FV 1987,
the update factor and other modifications identified by HCFA
would be better documented by quantitative and qualitative
evidence of the adjustments and their appropriate levels. ^^

"^^-^I^. at 3. The actions of HHS in its handling of the statutory directive
that HCFA create an adjustment to reflect the higher costs of hospitals serving a
disproportionate share of Medicare and low income patients gives some support to
the concerns about HHS' motives in setting the rates under the prospective
payment system. See Social Security Act § 1886(d) (5) (C) (i ) , 42 U.S.C. §
1395ww(d) (5) (C) (i) (1982 ed . , Supp. II). HCFA has consistently maintained that
hospitals with a high volume of Medicare and low income patients do not
experience justifiably higher Medicare costs and thus a special adjustment in the
rate is not warranted for these hospitals. Preamble to Proposed Rule, 48 Fed.
Reg. at 39,783 (1983). HHS refused to develop such an adjustment despite ProPAC
recommendations to do so in its 1985 and 1986 reports to the Secretary (ProPAC
Report and Recommendations to the Secretary, April 1, 1985, at 37 (Recommendation
14); ProPAC Report and Recommendations to the Secretary, April 1, 1986, at 37
(Recommendation 9)) and the directives of several courts to do so. See, e.g. ,
Redbud Hospital District v. Heckler, [1984-2 Transfer Binder] Medicare & Medicaid
Guide (CCH) f 34,085 (CD. Cal . Jul. 30, 1984), application for stay of
preliminary injunction granted, 106 S. Ct. 1 (1985) (J. Rehnquist sitting as
Circuit Judge); Samaritan Health Center v. Heckler [1986-1 Transfer Binder]
Medicare & Medicaid Guide (CCH) f 34,862 (D.D.C. Aug. 28, 1985). In Samaritan
Health Center, the court ruled that HHS had discretion to implement the allowance
for disproportionate share hospitals but suggested that HHS may have abused its
discretion in this instance. In the Deficit Reduction Act of 1984, Congress
mandated HHS to establish an allowance and publish a definition of
disproportionate share hospitals by December 31, 1985. Deficit Reduction Act of
1984 § 2315(h)(1) (1984). HCFA developed the requisite definition but only 108
hospitals in the nation qualified and no adjustment was allowed even for those
hospitals. 50 Fed. Reg. 53,398 (1985). Questions have been raised whether HHS
has really cooperated with the statutory mandate with respect to this issue,
given that Congress has originally contemplated that this allowance be available
to large urban public or voluntary hospitals as well as poor rural hospitals
serving large proportions of aged and poor and the hospitals selected by HCFA
were not of this character. See H.R. Rep. No. 5, 98th Cong., 1st Sess. (1983);
S. Rep. No. 23, 98th Cong., 1st Sess. (1983); H.R. Rep. No. 47, 98th Cong., 1st
Sess. (1983). Congress finally rejected HHS's disposition of this issue in COBRA
in which it provided that disproportionate share hospitals, defined according to
the proportion of revenue from the Medicare and Medicaid programs, will receive
additional payments under the prospective payment system. Consolidated Omnibus
Budget Reconciliation Act of 1986 § 9105, amending Social Security Act §
1886(d)(5); 42 U.S.C. § 1395ww(d)(5) (1982 ed. . Supp. II).

418 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Finally, HHS has not. for the most part, adopted the recommendations of
ProPAC on the methodology to use for updating the hospital payment rate and
nearly always uses a methodology that results in a lower payment rate.'*^^ HHS ' s
refusal to follow ProPAC 's recommendations and to update the payment rates and
recalibrate DRGs in a manner that results in lower payments has led some in the
hospital industry to question ProPAC's effectiveness in influencing the Medicare
hospital rate setting process .'^^

In its comments on the HHS proposed rule on updating the FY 1987 payment
rates, ProPAC asserted that the approach of HHS and ProPAC on updating the
Medicare prospective payment system are "diverging in significant ways" and that
this divergence appeared to be based on a "difference in philosophy between the
Commission and the Department."'*^'* ProPAC explained this difference in
philosophy as ProPAC's believing that the prospective payment system "should be a
flexible and evolutionary system responsive to changing health technology and
practice patterns and to the distributional impacts of payments within the
system" and that adjustments in the system are "critical to maintaining an
environment which fosters innovation and scientific advancement "**^''^ HHS, in
relying on averaging methodologies and ignoring adjustments in the payment system
to reflect special circumstances, does not advance the aforementioned goals.
ProPAC commented further on HHS responses to ProPAC's recommendations:

ProPAC was established by the Congress to provide independent
advice and oversight on a new, untried prospective payment
system. From the beginning, we have strived to make our
decision -making analytically based, with careful
consideration to a wide range of options on every topic which
we review. We do not believe that the Secretary's response
to our recommendations always gives full consideration to the
detail and extent of the problems we have identified. We
also do not believe that the response exhibits the
flexibility which we believe is necessary to update and
maintain the system. In order to encourage the confidence of
beneficiaries, providers, suppliers, and taxpayers, we hope
that the Secretary will reconsider the details of our

■^^^See notes 188-191 supra and accompanying text.

^^^See Firshein, ProPAC Weakened by Concern Over Federal Deficit, Hospitals,
Apr. 5, 1986, at 24.

^"^Letter from Stuart H. Altman, Ph.D. , Chairman of the Prospective Payment
Assessment Commission, to William L. Roper, M.D., Administrator of the Health
Care Financing Administration (July 2, 1986) (comments of the Prospective Payment
Assessment Commission on the Notice of Proposed Rulemaking of June 3, 1986,
Concerning Fiscal Year 1987 Changes in the Inpatient Hospital Prospective Payment
System) .

405

Id.

MEDICARE APPEALS SYSTEM 419

analysis in developing the final fiscal year 1987 PPS
regulations .^^^

As noted above, Congress has overridden HHS's recommendations on the update
factors for hospital payment rates in FY 1986, and there is some indication that
it might do so again for FY 1987 and FY 1988.'*^'^ With respect to Congress'
perception of HHS's performance in updating hospital payment rates and the need
for remedial action, the House Budget Committee stated:

The Committee has given, in the past, a significant amount of
discretion to the Secretary of Health and Human Services in
developing the annual update factor for hospital payments
under the medicare [sic] program. The statutory language
requires that hospital payments reflect the amounts necessary
for the efficient delivery of medically appropriate and
necessary care of high quality.

The Committee has, however, for the Jast two years overridden the
Administration's recommended update factor. The Committee finds itself in the
same situation once again this year as it finds the Secretary's recommended FY
1987 update factor unacceptable. The Committee concludes that the
Administration, In developing the update factor for fiscal year 1987 used factors
other than those originally anticipated in the legislation.'*^^

HHS's unresponsiveness to ProPAC recommendations and its failure to explain
the basis on which it updates the prospective payment rates Is quite serious,
particularly given the fact that hospitals are expressly precluded from
challenging the DRG ' s or the methodology for their recalibration through
administrative or judicial review. ^^^ Congress intended that ProPAC would serve
as a check to HHS in setting DRG's payment rates and recalibrating DRG's and
would protect the legitimate interest of hospitals in a fair payment rate.
ProPAC has provided Congress with sophisticated analysis of hospital payment
rates on which Congress has based its legislative action overriding HHS's
recommendations on updating hospital p.iyment rates.

D. Implementation of the PRO Program

Another, quite different, problem is the manner in which HCFA has
implemented the PRO program. This major new program, as discussed above, was

406

Id.

^""See notes 190-191 supra and accompanying text.
'^O^H.R. Rep. No. 727, 99th Cong., 2d Sess. 427 (1986)

'*"^See notes 544-549 infra and accompanying text

420 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

authorized by the Peer Review Improvement Act of 1982.^^" Congress had required
all hospitals to have contracts with PROs by October 1984 to permit conduct of
the requisite medical reviews required for monitoring the prospective payment
system. ''^^ Although the President signed the Peer Review Improvement Act in
September 1982. HCFA did not publlsl) a notice of the preliminary version of th6
request for proposals for the contracts from organizations seeking to become PROs
until August 29. 1983, "^^^ and did not promulgate final regulations for the
program until April 1985. '*^"^ HCFA has relied almost exclusively on program
directives and provisions of the PRO contracts to implement the PRO program.'*^'*
The PRO regulations did not address all implementation procedures and issues*^"^
and. indeed, as the United States District Court for the District of Columbia
observed, the regulations "haphazardly touch on an incomplete and disparate
selection of PRO procedures.'"*^"

The hospital industry has been quite concerned about the procedures HCFA has
followed for the implementation of the PRO program since the inception of the
program in 1982. particularly when HCFA began the contracting process without
having promulgated any regulations to implement the program. In October 1984.
the American Hospital Association filed a petition for rulemaking with HCFA under

^^^See notes 120-137 supra and accompanying text.

^^^ee notes 192-197 supra and accompanying text.

'*^248 Fed. Reg. 39,160 83 (1983). The final RFP was not issued until
February 29, 1984. No final version of the scope of work of the RFP was
published in the Federal Register.

'^^•^50 Fed. Reg. 15,312 et seq. (1986) (codified_in scattered sections of
Title 42, Code of Federal Regulations).

'*^'*See PRO Manual IM 85-2 replacing PSRO transmittal No. 107; PRO Manual IM
85-3 replacing PSRO Transmittal No. 108; Medicare Hospital Transmittal No. 367, §
287.4a; and Medicare Intermediary Manual Transmittal No. 1079, § 3789c & No.
1102; PRO Directive No. 2. Health Care Financing Administration, Request for
Proposals for PRO Contracts, (RFP No. HCFA-84-015 Feb. 29, 1984).

"^^^See 42 C.F.R. 412.42 et seq. (1986).

'^^"American Hospital Asssociation v. Bowen,
No. 85-0311, Slip op. at 4 (D.D.C. May 30, 1986).

MEDICARE APPEALS SYSTEM 421

§ 553(e) of the Administrative Procedure Act. ^' When the Secretary did not act
on the petition, the American Hospital Association brought suit in the United
States District Court for the District of Columbia alleging that HCFA had
violated certain procedural and substantive rights of hospitals by implementing
provisions of the PRO program without adhering to the rulemaking procedures of
the Administrative Procedure Act and in refusing the petition for rulemaking. ^"

On May 30, 1986, the United States District Court for the District of
Columbia, in American Hospital Association v. Bowen, ruled that most of the
program directives through which HCFA had implemented the PRO program were
actually substantive rules and thus invalid because not promulgated pursuant to
the informal rulemaking procedures of the Administrative Procedure Act. The
court also ruled that HCFA's denial of the American Hospital Association's
petition for rulemaking was arbitrary and capricious. This decision has wrought
considerable confusion in the PRO program and jeopardizes the PRO's important
function of monitoring hospital performance in delivering high quality services
to Medicare beneficiaries in a cost-effective manner. Also, as noted above,
Congress has exhibited considerable dissatisfaction with the implementation of
the PRO program generally and has made several substantive changes in past
legislation and is now considering proposals for additional changes. '*-^^

"^^'Petition before the Department of Health and Human Services for
Rulemaking of the American Hospital Association for Promulgation of Regulations
Implementing the Peer Review Improvement Act of 1982 (Oct. 10, 1984).

"^^^See American Hospital Association v. Bowen, No. 85-0311 (D.D.C. May 30, 1986).

^^^See notes 135-137 supra and accompanying text.

422 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES
CHAPTER V: ADMINISTRATIVE HEARING ISSUES

This chapter discusses concerns about administrative hearing procedures for
disputes over coverage and payment determinations under the Medicare program.
These problems are diverse but all Involve whether the various hearing processes
In the Medicare appeals system protect the right of beneficiaries and providers
to procedural due process of law. The Supreme Court has interpreted the due
process clause of the fifth amendment to require that when a government action
affects the entitlement interest of beneficiaries in a federal program, then the
agency must follow appropriate procedures to ensure that the beneficiary is
properly notified of the proposed government action and has an opportunity to
contest the action in a meaningful fashion. '*^^ The Supreme Court has established
that beneficiaries clearly have an entitlement interest in the Medicare program
subject to protection under the due process clause tn its 1980 derision, O'Bannon
V. Town Court Nursing Center. '^^^ This case also established that providers do
not have a comparable entitlement Interest in the Medicare program. '*^^

A. Beneficiary Coverage Appeals Under Part A

Since the inception of the Medicare program, beneficiaries have brought
numerous appeals of which the great majority have involved coverage
determinations based on medical criteria. In addition to a few cases challenging
whether certain services or procedures are covered benefits under Part A or Part
B of the Medicare program, as in Heckler v. Ringer, ^^^ most beneficiary appeals
have involved questions of whether specific services are covered benefits
according to medical criteria of whether services were medically necessary or
constituted custodial care.^^^

"^^^See, e.g., Mathews v. Eldridge, 424 U.S. 319 (1976); Goldberg v. Kelly,
397 U.S. 254 (1970). See generally Friendly, Some Kind of Hearing, 123 U. Pa. L.
Rev. 1267 (1975).

'*2l447 U.S. 773 (1980); Gray Panthers v. Schweiker, 652 F . 2d 146 (D.C. Cir.
1980) .

^^^16. See also St. Francis Hospital Center v. Heckler, 714 F.2d 872 (7th
Cir.) cert, denied, 465 U.S. 1022 (1984); Geriatrics, Inc. v. Harris, 640 F.2d
262 (10th Cir.), cert, denied, 454 U.S. 832 (1981).

'*23466 U.S. 602 (1984)

'^^'^See, e.g. , Hultzman v. Weinberger, 495 F.2d 1276 (3d Cir. 1974); Weir v.
Richardson, 343 F. Supp. 353 (S.D. Iowa 1972); Reading v. Richardson, 339 F,
Supp. 295 (E.D. Mo 1972); Johnson v. Richardson, 336 F. Supp. 390 (E.D. Pa 1971);

MEDICARE APPEALS SYSTEM 423

Beneficiaries have some complaints about administrative review by
Administrative Law Judges (ALJ's) and the Appeals Council of the Social Security
Administration and there have been some suggestions, including from Congress,
that the administrative appeals system for Medicare appeals as well as the
appeals system for all appeals arising under the Social Security Act be
restructured .'^^''^ However, since many of the complaints of Medicare beneficiaries
are similar to those of beneficiaries of other Social Security programs and since
the American Bar Association with input from the Administrative Conference of the
United States has developed recommendations for modifications of these procedures
in another context, '^^^ they will not be addressed in this report.
Nevertheless, there are currently some reported problems with beneficiary appeals

Sowell V. Richardson, :^19 F. Supp. 689 (D.S.C. 1970). See Butler, Advocate's
Guide, supra note 227, at 337-842.

'^^^See note 1 supra and accompanying text

^^^See Case Western Reserve School of Law, Symposium on Federal Disability

Programs: Report and Recommendations (Oct. 1985) (cosponsors of the conference

that developed this report include the Administrative Conference of the United
States and the American Bar Association)

Of special concern to Medicare beneficiaries, shared by other Social
Security program beneficiaries, is the conduct of the Appeals Council in the
SSA's Office of Hearings and Appeals. Under HHS regulations, the SSA Appeals
Council is authorized to reopen cases after their disposition by the ALJ. The
Appeals Council had been reopening cases despite another regulatory provision
specifically governing when the Appeals Council may initiate review, i.e., any
time within 60 days of the hearing decision or dismissal. 20 C.F.R. § 404.969
(1986). This has caused considerable unpredictability in the beneficiary appeals
system since the Appeals Council has often initiated review several months after
an ALJ decision.

Medicare and Social Security beneficiaries have challenged this practice on
numerous occasions, and several federal district court decisions have ruled that
the Appeals Council practice is contrary to the regulations, in spite of the
deference customarily given the Secretary in interpreting his own regulations.
See, e.g. , Munsinger v. Schweiker, 709 F.2d 1212 (8th Cir. 1983); McCuin v.
Bowen, [1986-2 Transfer Binder] Medicare & Medicaid Guide (CCH) K 35,443 (D.N.H.
Apr. 23, 1986); Dion v. Secretary of Health and Human Services, No. 83-442-D
(D.N.H. Apr. 25, 1985): Silvis v. Heckler, 578 F. Supp. 1401 (W.D. Pa. 1984).
These cases concluded that the Appeals Council's right to reopen cases is
governed by 20 C.F.R. § 404.969 (1986) which authorizes reopening within 60 days
of the ALJ's decision and that the regulations authorizing reopening thereafter
apply only to beneficiaries' requests to reopen. 20 C.F.R. § 404. 988-. 989
(1986). One circuit court of appeals decision, Munsinger v. Schweiker, has
upheld the Appeals Council interpretation of this regulation.

424 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

under Part A that warrant attention here: (i) probJems with beneficiary appeals
of hospital benefits under the prospective payment system; (2) complaints about
the HCFA policy prohibiting providers from representing beneficiaries in appeals
under Part A because of a conflict of interest; and (3) deficiencies in appeal
procedures for claims under $100.

1 . Beneficiary Appeals Under the Prospective Payment

System

As might be expected with the Implementation of any major nationwide program
affecting millions of people and thousands of institutions, there have been
unanticipated ramifications causing problems for individuals and institutions
involved. But in the case of the prospective payment system, these probleMS have
been remarkably few given the si/e and complexity of this program.

Informing Beneficiaries About Appeal Rights. Soon after the implementation
of the prospective payment system, reports surfaced, generating congressional and
other investigations, that hospitals were discharging Medicare patients early and
inappropriately, i.e., "sicker and quicker," and often against their will with
the explanation that the beneficiary's covered Medicare days had "run out."^^
Further, reports indicated that beneficiaries often did not appeal such decisions
because they were unaware of their right to appeal what appeared to be decisions
of hospital management or attending physicians and they also would be liable for
the continued stay once they had been notified that continued hospitalization was
no longer necessary . '^^°

Congress and HCFA took immediate steps to address this problem. Working
with consumer groups, HCFA developed a notice for hospitals to give all Medicare
patients upon admission that would clearly explain the patient's appeal rights
with rirspect to any decision by the hospital, the patient's physician or the PRO

'^^^Senate Special Comm. on Aging, Hearings on Quality of Care under
Medicare's Prospective Payment System; Technical Appendixes to the ProPAC Report
and Recommendations to the Secretary, April 1, 1986, Appendix C, at 149-50;
Government Accounting Office, Information Requirements for Evaluating the Impacts
of Medicare Prospective Payment on Post-Hospital Long-Term-Care Services:
Preliminary Report , (PEMD-85-8, Feb. 21, 1985).

"^^Ssocial Security Act § 1879, 42 U.S.C. § 1395pp (1982 ed . . Supp . II); 42
C.F.R. § 405.330-.332 (1986). This is not really a new problem but, rather,
hospitals have always been able to make implicit decisions about the Medicare
coverage of continued hospitalization through the utilization review process
without input from the affected patient and with an after-the-fact appeal to the
PSRO to challenge the decision that continued stay was no longer necessary. The
major difference under the prospective payment system Is that now hospitals have
a very strong financial incentive to make these implicit coverage decisions. See
Price, Katz, Provence, An Advocate's Guide to Utilization Review, 9 Clearinghouse
Rev. 307 (1977); Neel y-Kvarme , Administrative and .Judicial Review of Medicare
Issues: A Guide Through the Maze, 57 Notre Dame Law. 1 (1981), 9-16.

MEDICARE APPEALS SYSTEM 425

about the patient's continued stay."*^^ (A copy of this notice is in Appendix C.)
Further, in its 1986 recommendations to the Secretary, ProPAC urged the Secretary
to require hospitals to give beneficiaries immediate notice of appeal rights upon
admission and also to improve the information available to beneficiaries about
appeals and their rights under the prospective payment system. "^^^

ProPAC also conducted a brief study which suggested that this was not a
widespread problem. '^^^ However, despite this reassuring ProPAC study, there is
convincing evidence reported in surveys conducted by the American Society of
Internal Medicine'*'^* and the American Medical Association "^ that premature
discharge of Medicare patients is widespread and that the quality of hospital
care provided Medicare patients is declining.'*^'* Congress continues to be
concerned about this issue as evidenced by the bill Senator Durenberger
introduced in this session of Congress, the Medicare Quality Protection Act,

^^2^51 Fed. Reg. 19,970. 19,998 (1986) (proposed rule)

'^'^^Technical Appendixes to the ProPAC Report and Recommendations to the
Secretary, April 1, 1986, Appendix C, at 162.

HCFA agreed with ProPAC about the need to address beneficiaries' concerns
regarding getting better information about the prospective payment system and,
specifically, about appeal rights. v51 Fed. Reg. at 19,998 (1986). HCFA noted
that it had released a notice for Medicare beneficiaries to be given to them upon
admission to the hospital which would explain beneficiaries' rights to appeal and
reconsideration more specifically. jM. HCFA also stated that it was publishing
a pamphlet on beneficiary appeal rights. Id.

"^^^Benef iciary and Professional Perception of PPS Quality of Care in
Technical Appendixes to the ProPAC Report and Recommendations to the Secretary,
April 1, 1986, Appendix C, at 147.

'*^^American Society of Internal Medicine, The Impact of DRG ' s on Patient
Care: A survey by the American Society of Internal Medicine March 1984-October
1985 (undated).

^^^American Medical Association, Report of the American Medical Association
Board of Trustees: AMA's DRfl Monitoring Project and the Prospective Payment
System (Dec. 1985) .

^^^See also. Senate Special Comm. on Aging, Hearings on Quality of Care
under Medicare's Prospective Payment System, at 1-2.

426 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

which would require Improved appeals procedures in this area.'*'^*^ The House and
Senate budget hi lis contain provisions to improve PRO appeals procedures in this
area which would give a beneficiary a statutory right t(» appeal a hospital
discharge notice to a PRO and ensure that the beneficiary is not financially
lialile for a continued stay until aftfr receiving notir;e of the PRO's
dec is ion. "^^^

PRO Appeal Procedures. PROs have the major responsibility for handling the
first stage of the appeals of their coverage determinations under the prospective
payment system - thtr reconsideration of any initial coverage flenial.**^ HCFA
has published no standards for PRO reconsideration procedures, and there are
reports that many PROs have refused to implc;ment such standards or fully
understand their adjudicative responsibilities.^"'*^ HCFA has no sjiecific
information on the volume of PRO appeals for either hospitals or beneficiaries to
dat(?.'*^ There is concern about the ability of PROs to handle these appeals in a
fair and expeditious manner.'''* This is an especially troubling situation for

'^'^^S. 2331 . Medierare Quality Protection Act of 1986, 99th Cong., 2d.Sess. (1986)

^3^H.R. 5300, § 10241(a), 99th Cong., 2d. Sess. (1986), S. 2706, 3604. 99th
Cong., 2d. Sess. (1986). See also H. Rep. No. 727, 99th Cong., 2d Sess. 457
(1986); S. Rep. No. 348, 99th Cong., 2(1 Sess. 146 (1986).

^" 'See notes 237-243 supra and accompanying text

A op

Senatt! Finance Comm . Hearings on Medicare Appeals Provisions, at 151
(statement of the American Hospital Association). See also Wilson, How to Appeal
Medicare Hospital Coverage Denials under the DRG Syst(;m, 20 Clearirighous(! Rev.
434 (1986).

'*^^I.etter from Joseph J. Hladky, Director, Office of Medical Review. Health
Standard and Quality Bureau, Health Care Financing Administration, to Eleanor D.
Kinney, Assistant Professor of Law, Indiana University (Oct. 6, 1986).

^^"Wilson, How to Appeal Medicare Hospital Coverage Denials Under the DRG
System, supra note 438.

MEDICARE APPEALS SYSTEM

427

hospitals in view of the fact that, as discussed below, reconsideration decisions
in provider appeals are not subject to administrative or judicial review. ^'

2. Provider Representation of Beneficiaries in Appeals Under Part A

In the past, hospitals, home health agencies and skilled nursing facilities
have often represented beneficiaries in their appeals of coverage issues arising
under Part A. In January 1984, HCFA issued instructions^^^ prohibiting providers
from representing beneficiaries in coverage appeals, despite an explicit
regulation authorizing beneficiaries to be represented by any person not
prohibited by law. '^^ HCFA argues that providers have a conflict of interest in
these appeals and past experience demonstrates that providers have gotten
reluctant beneficiaries to file appeals because of the provider's financial
liability for the services in question.'*'*'* HCFA is also concerned, as stated In
manual transmittals, that allowing providers to represent beneficiaries creates
an alternative appeals avenue for providers not permitted by statute. '*^^

This policy raised considerable objections among providers who are generally
financially responsible for the services for which coverage is denied. '*^^ Last
year's House budget reconciliation bill included a provision overruling this

■14 1

'*^^See notes 555-559 infra and accompanying text

'*^2]^efjicare Intermediary Manual Transmittal No. 1079, codified in, Medicine
Intermediary Manual (HIM-11) § 3789(c); Hospital Manual Transmittal No. 367,
codified in. Hospital Manual (HIM-10) § 287. 4A; Home Health Agency Manual
Transmittal No. 150, codified in, Home Health Agency Manual (HIM-11) § 257.A.1.

^^^20 C.F.R. § 404.1705(b) (1986)

'*'*^Senate Finance Comm. Hearings on Medicare Appeals Provisions at 51
(statement of Henry R. Desmarais, M.D., Acting Deputy Administrator, Health Care
Financing Administration).

'*'*'^Intermediary Manual Transmittal
Manual Transmittal No. 367, at 4861.

1079, at 3-262; Medicare Hospital

446

See Senate Finance Comm. Hearings on Medicare Appeals Provisions at 147

428 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

poliry Hi\i\ allowing pr(»v1der representation of beneficiaries in appeals.'*'*'^
although the budget bills for FY 1987 do not contain comparable provisions

The United States District Court for the District of rolumbia, in American
Hospital Association v. Bowen . ruled more recently that these policies pertaining
to hospital benefits were valid interpretative rules and need not be promulgated
as regulations under the Administrative Procedure Act. However, the United
States District Court in Home Health Care. Inc. v. Bowen"*^^ ruled that a similar
proscription against home health agencies representing beneficiaries In coverage
disputes constituted a substantive rule that should have been promulgated
pursuant to the informal rulemai<ing procedures of the Administrative Procedure
Act and was therefore invalid. Regarding HCFA's arguments raising the potential
conflict of interest between provider and beneficiary, the court stated:

It may wfill i)e that prohibiting providers of Medicare
services from represerj t ing Medicare beneficiaries is
warranted. Such a provision, however, should only be adopted
after interested parties have had the opportunity to consider
the proposed change and comment on it. There are two
Medicare beneficiaries in the present case ably represented
by knowledgeable counsel who do not believe a conflict exists
between them and their providers and who persuasively argue
that potential conflicts would not be pervasive generally.
Perhaps they and others similarly situated can articulate to
the Secretary the bases for their views and may Indeed
persuade the Secretary to eliminate entirely or. at least,
narrow the broad disqualification.'*^^'

The court distinguised its earlier decision in American Hospital Association v.

^^'See not(;s 347-348 supra and accompanying text

'*'^^No. 85-0311, slip op. at 21-23

'^'^^No. 84 0957 (D.D.C. Jul. 15, 1986)

^^^Home Health Agency Manual Transmittal No. 150, codified in. Home Health
Agency Manual (HIM 11) § 257.A.1.

451

No. 84 0957, slip op. at 7 8

MEDICARE APPEALS SYSTEM 429

Bowen on grounds that individual beneficiaries appeared In this case and not in
the American Hospital Association case. ^^

3. Deficiencies In Appeal Procedures for Claims Under $100

As noted above, there is no administrative or judicial review of claims
under $100. In Gray Panthers v. Schweiker, beneficiary groups alleged that the
intermediary hearing procedures for Part A as well as Part B claims under $100
were inadequate and violated beneficiaries' rights to procedural due process. ^^^
The United States Court of Appeals for the District of Columbia Circuit agreed,
ruling that more than a "papor" hearing on small Part A claims was required
although an oraJ hearing was necessary only in the few cases where factual Issues
involving the credibility or veracity of the claimant are at stake.

In reviewing the district court's action, the Court of Appeals in Gray
Panthers II**^"* ruled that "adoption of procedures allowing for oral hearings Is
not warranted" if the total number of cases requiring an oral hearing is smalJ^^^
Taking this cue along with testimony of HCFA officials that there are annually
only about 100 Part A reconsideration claims under $100, the district court ruled
that oral hearings were not required for small claims under Part A.^^^
Concluding further that the Part A notices of coverage determination were "not
perfect, but more than adequate," the court ordered no changes in these
notices. ^^'

B. Provider Payment Disputes Under Part A

Since the inception of the Medicare program, providers have often appealed
intermediary payment determinations. Early in the program, skilled nursing
facilities brought a large volume of appeals which tapered off as HHS imposed
stricter interpretations of the skilled nursing benefit and Medicare utilization

^^^No. 84-0957, slip op. at 8 n. 8.

^"^•^See notes 504-509 infra and accompanying text

454^^3 p 2d 23 (D.C. Cir. 1983;

455

Id. at 36.

'*^^[1986-1 Transfer Binder] Medicare & Medicaid Guide (CCH) f 35,140 (D.D.C,
Feb. 14, 1986).

457

Id.

430 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

of skilled nursing facilities dropped accordingly."*^^ Hospital challenges to
Medicare payment policies have been extensive since the 1970s, particularly with
the advent of orchestraterl group appeals by state hospital associations and the
American Hospital Association.'*'' These challenges have chiefly concerned
specific methodologies HCFA has used to calculate cost reimbursement. The two
outstanding cost reimbursement policies of current inteirest are (1) how to
account for labor and delivery room patient days in determining Medicare
reimbursement , ^^^ and (2) HCFA ' s methodology for calculating Medicare's portion
of the cost of a hospital's malpractice Insurance. "^

■*'^^See note 229-230 supra and accompanying text.

See -Special Issue, Medicare Reimbursement Is Examined by AHA's Group
Appeals Health L. Vigil. Feb. 4, 1983.

'^"^HCFA requires that patients in the labor and delivery room area be
Included in the inpatient census for purposes of determining the number of
Medicare patient flays but excludes the costs of labor and delivery room services
from the total costs Medicare recognizes for reimbursement purposes. See 42
C.F.R. § 405.452(b) (1986); Provider Reimbursement Manual (HIM-15) § 2345.
Hospitals claim that this policy understates the number of Medicare patient days
and results In lower Medicare reimbursement. Several courts have agreed with
hospital challenges to this policy. See Community Hospital of Roanoke Valley v.
Health and Human Services, 770 F.2d 1257 (4th Cir. 1985); Central DuPage Hospital
V. Heckler, 761 F.2d 354 (7th Cir. 1985); St. Mary of Nazareth Hospital Center v.
Heckler, 760 F . 2d 1311 (D.C. Cir. 1985), aff 'g 587 F. Supp. 937 (D.D.C. 1984),
after remand sub nom. in, St. Mary of Nazareth Hospital Center v. Schweiker, 718
F.2d 459 (D.C. Cir. 1983); Mt . Zion Hospital and Medical Center v. Heckler, 758
F.2d 1346 (9th Cir. 1985); Beth Israel Hospital v. Heckler, 734 F.2d 90 (Jst Cir.
1984); Baylor University Medical Center v. Heckler, 730 F.2d 391 (5th Cir. 1984).

461pj.|pj, ^Q 1979, Medicare treated a hospital's medical malpractice
insurance costs like most other costs and reimbursed the hospital according to
the proportionate share of Medicare utilization. In 1979, HCFA adopted another
method for calculating Medicare's portion of malpractice insurance costs which
resulted in marked reductions in reimbursement for this cost item. 42 C.F.R. §
405.452(b) (1 )( ii ) (1986). Several courts of appeal have invalidated this rule.
See, e.g. , Cumberland Medical Center v. Secretary of HHS , 781 F.2d 536 (6th Cir.
1986); DeSoto General Hospital v. Heckler, 766 F.2d 182, as amended at, 776 F.2d
115 (5th cir. 1985); Bedford County Memorial Hospital v. Heckler, 769 F.2d 1017
(4th Cir. 1985); Menorah Medical Center v. Heckler 768 F.2d 292 (8th Cir. 1985);
Lloyd Noland Hospital and Clinic v. Heckler, 762 F.2d 1561 (11th Cir. 1985); St.

James Hospital v. Heckler, 760 F.2d 1460 (7th Cir. 1985), cert, denied. U.S.

, 106 S. Ct. 229 (1985); Humana of Aurora, Inc. v. Heckler, 753 F.2d 1579

(10th Cir. 1985), cert, denied, U.S. , 106 S. Ct. 180 (1985); Abington

MEDICARE APPEALS SYSTEM 431

The implementation of the cost per rase and target rate of increase limits
under the Tax Equity and Fiscal Responsibility Act and then the prospective
payment system have generated more litigation. The substantive issues for these
hospital appeals fall into three categories: (1) challenges to HCFA's calculation
of the hospital's base year costs used to calculate the hospital-specific portion
of the standardized amount during the transition period;"*^^ (2) challenges to
specific factors used to calculate the federal portion of the standardized amount
that pertain directly to hospitals, e.g., the methodology for classifying urban
and rural hospitals;** and (3) exemptions and adjustments for hospitals with
special needs and characteristics.'*^

There are currently five important issues regarding provider appeals of
current concern: (1) what constitutes a final intermediary decision for purposes
of triggering PRRB jurisdiction to hear hospital appeals under the prospective
payment system; (2) whether HCFA can correct an error in the determination of a
hospital's base year costs and resulting errors in payment under the prospective
payment rate on a prospective basis only; (3) HCFA's policy of not abiding by
decisions of federal courts of appeals that rule in favor of providers even with
respect to cases in the same circuit; (4) concerns about procedures before the
PRRB; and (5) hospital waiver of liability appeals.

1 . Jurisdiction of the PRRB for Hospital Appeals Under the Prospective Payment

System

Since the implementation of the prospective payment system, many hospitals
have challenged the intermediary's calculation of their base year costs for
purposes of determining the hospital-specific portion of the prospective payment

Memorial Hospital v. Heckler, 750 F.2d 242 (3d Cir. 1984), cert, denied,

U.S. , 106 S. Ct. 180 (1985). See also Walter 0. Boswell Memorial Hospital

V. Heckler, 749 F.2d 788 (D.C. Cir. 1984), on remand, 628 F. Supp. 1211 (D. Colo.
1985). On April 1, 1986, the Secretary issued an interim final rule modifying
its procedures for calculating malpractice insurance costs which still treats
these costs differently than other costs for Medicare reimbursement purposes. 51
Fed. Reg. 11142 (1986).

'*"^See notes 465-478 infra and accompanying text,

'^^'^See, e.g. , Good Samaritan Medical Center v. Heckler, 605 F. Supp. 19
(S.D. Ohio 1984) .

^"'*See, e.g. , Community Hospital of Indianapolis, Inc. v. Schweiker, 717
F.2d 372 (7th Cir. 1983); Redbud Hospital District v. Heckler [1984-2 Transfer
Binder] Medicare & Medicaid Guide (CCH) f 34,085 (N.D. Cal . July 30, 1984).

432 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

pate 465 IntJTprel ing the phrase In § 1878(a)(1)(A), "a final determination of
rhe Serretary as to the amount of payment,'"* the PRHB initially acknowledged
Jurisdiction over appeals of base year cost issues where the hospital had
received a "Final Notice of Base Period Cost and Target Amount per Discharge"
from the intermediary.'*^'' In May 1984, tfie Secretary issuetl HrFAR-84-1 reversing
the PRRB's position that it had Jurisdiction in these cases and ruling that the
PRRB cannot assume Jurisdiction over such determinations until the end of the
cost reporting peiJod and the intermediary has issued a final Notice of Program
Reimbursement (NPR) for that year'*'^^ - an event that generally occurs more than
a year after the end of the cost reporting year. Thus, this policy significantly
postpones the time when errors in the calculation of the hr)spi tal -speci f ic
portion of the prospective payment rate can be appealed.

Many hospitals have challenged this HCFA ruling judicially. The United
States District Court for the District of Columbia consolidated its cases on this
issue in Tucson Medical Center v. Heckler, granted summary judg^nent for the

cKier, gi

hospitals and ordered the requested relief.^ On July 8, 1986, in Washington
Hospital Center v. Bowen,**"" the United States Court of Appeals for the District
of Columbia Circuit affirmed the district court's decision in Tucson Medical
Center . In an extensive analysis of the statutory provisions in § 1878 and §
1886 as well as the legislative history, Judge Wald concluded that:

^^^"^See note 160 supra,

466soclal Security Act § 1878(a)(1)(A), 42 U.S.C. § 1395oo(a) ( 1 ) (A) (1982
ed. , Supp. JI) .

^"'HCFA interprets the phrase "final determination of the Secretary" in §
1878(a) of the Social Security Act to mean the intermediary's final determination
of the total amount of payment due the hospital for the cost reporting period at
issue. 42 C.F.R. § 405 . 1801 (a ) ( 1 ) ( j i ) and (iii) (1986). By regulation, the
intermediary must provide a hospital with a notice of program reimbursement (NPR)
reporting final payment for each annual cost reporting period. 16. at § 405.1803.

^^^HCFAR-84-1, 49 Fed. Reg. 2241 (1984).

^^^611 F. Supp. 823 (D.D.C. 1985). aff 'd. Washington Hospital Center v.
Bowen, No. 85-5907 (D.C. Cir. July 8, 1986).

^''^No. 85-5907 (DC. Cir. Jul. 8, 1986).

MEDICARE APPEALS SYSTEM 433

The effect of the new language in the opening paragraph of
§ 1395oo(a), contrary to the Secretary's interpretation, is
to eliminate the requirement that PPS recipients file a cost
report prior to appeal.

The court was persuaded that Congress recognized that the prospective payment
system established a final price per case before payment rather than paying
hospitals retrospectively and thus had modified its jurisdictional requirements
in § 1878(a)(1) for appeals of the hospital-specific portion of the prospective
payment rate. Washington Hospital Center v. Bowen is a definitive decision on
this issue that will be difficult for HHS to get a reviewing court to overturn.
This decision is in accord with the decisions of twelve other cases ruling
against the HCFA's position on this issue. '^'^^

2 . Retrospective Correction of Errors in Prospective Payment Rates

HCFA regulations provide that the intermediary's determination of the base
year costs for calculating payment under the prospective payment system is "final
and may not be changed after the first day" of the hospital's first year under
the system except if the provider wins a final judicial or administrative
decision for its base year.'*'^ In such event, the regulations provide that the
intermediary may recalculate the base year costs and the Medicare payments for
years after the administrative or judicial decision but not for prior years. '^''*

^'^^No. 85-5907, slip op. at 13

'^'^^See, e.g. , Greenville Hospital System v. Heckler, No. 85-1860 (4th Cir.
Dec. 18, 1985) [1986 1 Transfer Binder] Medicare & Medicaid Guide (CCH) K 34,832
(D.S.C. .July 19, 1985); City of Lincoln v. Heckler, No. CV85 I, -338 (D. Neb. Dec.
26, 1985); Southeastern Palm Beach County Hospital District v. Heckler, [1986-1
Transfer Binder] Medicare & Medicaid Guide (CCH) f 35,047 (S.D. Fla. Nov. 26,
1985); North Broward Hospital District v. Heckler, No. 85-6185-CIV-KING (S.D.
Fla. Nov. 8, 1985); Good Samaritan Hospital v. Heckler, No. 84-L-459 (U. Neb.
Nov. 1, 1985); St. Francis Hospital v. Heckler, [1986-1 Transfer Binder] Medicare
& Medicaid Guide (CCH) f 34,918 (S.D. W. Va. Sept. 30, 1985); Mpdical Center
Hospital V. Heckler, [1986-1 Transfer Binder] Medicare & Medicaid Guide (CCH), f
34,920 (M.D. Fla. Sept. 23, 1985); Doctors General Hospital, Inc. v. Heckler. 613
F. Supp. 1036 (S.D. Fla. 1985); Sunshine Health Systems. Inc. v. Heckler, [1986-1
Transfer Binder] Medicare & Medicaid Guide (CCH) f 34,858 (CD. Cal . April 10,
1985); Charter Medical Corp. v. Heckler, No. C84-116 A (N.D. Ga. March 20, 1985);
Redbud Hospital District v. Heckler, [1984-2 Transfer Binder] Medicare & Medicaid
Guide (CCH) f 34, '085 (N.D. Cal. .July 10, 1984).

'^'^^42 C.F.R. § 412.72 (1986)

434 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Changes in the base year costs mandated by an admlnistrat iue or Judicial rule in
favor of the fis(;al intermediary are made retrospectively."^ HCPA has justified
this policy on grounds that, by statute and legislative history, the fiscal
Intermediary must make the determination of the Initial base year costs on the
best available data and. having done so. retrospective recalculation of the base
year and payment accordingly is not required. '"

Hospitals have been quite concerned about this policy because, when combined
with the requirement in HCFAR-84-1 that hospitals can only initiate an appeal
after receiving an NPR . this policy effectively precludes a hospital from
obtaining any financial relief for an intermediary's error in calculating its
base year costs. ^'^'^ There have been several cases challenging this all of which

47ft

have ruled in favor of the hospitals.

3. HHS Non-Acquiescence with Judicial Decisions

As iTi other Social Security Act programs , HHS has refused to follow

'^''^Id. at § 412.72(a)(4)(li).

'^'^^Preamble to Proposed Rule. 49 Fed. Reg. 27422. 27428 (1984). See H. Rep.
No. 47. 98th Cong.. 1st Sess . 182 (1983) (Congress stated its intent that fiscal
int(!rmediari(;s make this determination using the best available data).

■^^^See Senate Finance Comm. Hearings on Medicare Appeals Provisions at 79
(statement of the Catholic Health Association of America). This statement
illustrates the schedule for the intermediary's action on a hospital's cost
report and indicates that the notice of program reimbursement is generally issued
one year after the hospital files its cost report. It takes another year after
issuance of the NPR for the PRRB to decide the case -- nearly four years after
the beginning of the cost reporting year at issue.

'^'^^See, e.g. . St. Francis Hospital v. Heckler. [1986-1 Transfer Binder]
Medicare & Medicaid Guide (CCH) f 34,918 (S.D.W. Va. Sept. 30. 1985); Charter
Medical Corp. v. Heckler, 604 F. Supp. 638 (M.D. Ga. 1985).

^''^HHS's non-aquiescence in circuit court of appeals decisions has been a
controversial practice, particularly with the Social Security Disability
Insurance Program, and has commanded the attention of Congress as well as
scliolarly commentary. See Judicial Review of Agency Action: HHS Policy of
Nonacquiescence: Oversight Hearing Before the Subcomm. on Administrative Law and
Governmental Relations of the House Comm. on the Judiciary, 99th Cong., 1st Sess.
(1985); National Senior Citizens Law Center. Steiberger v. Heckler: A Careful
Analysis of HHS's Policy of Nonacquiescence. 19 Clearinghouse Rev. 1165 (1986);
Note, Agency Nonacquiescence: Implementation, Justification, and Acceptability,

MEDICARE APPEALS SYSTEM 435

United States Circuit Courts of Appeals decisions favorable to providers in any
other case, even those arising in the same circuit. Consequently, hospitals are
required to bring separate appeals on issues that have been dispositively decided
in favor of providers by a number of courts of appeals. HCFA's actions with
respect to court decisions in favor of hospitals on the labor and delivery room
day policy is an example of HHS's non-acquiescence policy with respect to the
Medicare program.

The American Hospital Association coordinated a group appeal to the PRRB on
the labor and delivery room day issue. The PRRB ruled in favor of the hospitals
on this issue on August 19, 1980; but, in a decision dated October 17, 1980, the
Deputy Administrator reversed the PRRB's decision.'*^" The hospitals appealed
this decision to the United States District Court for the District of Columbia in
order to get a quick and final resolution of this issue in the court to which all
hospitals had a right to appeal. '*°-^ In St. Mary of Naxareth Hospital v.
Schweiker ,^^ the district court affirmed the Deputy Administrator. However, the
United States Court of Appeals for the District of Columbia reversed this
decision and ruled that the labor and delivery room day policy was arbitrary,
capricious and in violation of the Medicare statute. "^^^ Since that decision, the
five other courts of apoeals that have heard cases on this issue have rejected
the Secretary's policy.'^^'*

42 Wash. & Lee L. Rev. 1233 (198v5); Kuhl , The Social Security Administration's
Nonacqulescence Policy, 4 Det. C.L. Rev. 913 (1984).

^^^PRRB Decision No. 80-D67 (Aug. 19, 1980), rev'd, HCFA Dep. Admin. Dec.
(Oct. 17, 1980).

4ft 1

^"^ Senate Finance Comm. Hearings on Medicare Appeals Provisions at 88
(statement of the Catholic Health Association of America).

'*®2[j98]-2 Transfer Binder] Medicare & Medicaid Guide (CCH) f 31.594 (D.D.C.
Nov. 9, 1981).

483-7^3 F.2d 459 (D.C. Cir. 1983).

^""^See, e.g. , Community Hospital of Roanoke Valley v. Health and Human
Services, 770 F,2d 1257 (4th Cir. 1985); Central DuPage Hospital v. Heckler, 761
F.2d 354 (7th Cir. 1985); Mt . Zion Hospital and Medical Center v. Heckler, 758
F.2d 1346 (9th Cir. 1985); Beth Israel Hospital v. Heckler, 734 F.2d 90 (1st Cir.
1984); Baylor University Medical Center v. Heckler, 730 F.2d 391 (5th Cir. 1984).

436 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Despite these unlforn court of appeals decisions continually rejecting
various HCFA rationales for this policy, HCFA has refused to abandon this policy
even in thosr circuits where the court of appeals has Invalidated the policy.
Rather. HCFA requires each individual hospital to challenge the policy and will
provide relief only when so ordered by the court of appeals. Further, as in the
case of St. Mary of Nazareth Hospital v. Heckler, HCFA accorded relief only for
the cost reporting year appealed in the case and not for years before or
after. ^®^ Finally, it should be emphasized that this Is not the only Medicare
issue where HHS has not acquiesced in a court of appeals decision even with
respect to providers in the same circuit. Rather, HHS has followed this non-
acquiescence policy in other situations where there has been a favorable court of
appeals decision in favor of providers.**^

4 . PRRB Role and Procedures

Over the years, both HCFA and provider groups have raised concerns in three
areas about the PRRB and its effectiveness in serving as a credible adjudicator
of provider payment disputes: (1) the nature of the PRRB's role in the payment
appeals process; (2) the administrative exhaustion requirement when the PRRB has
no authority to decide the disputed issue; and (3) specific problems with PRRB
hearing procedures. The first area -- the authority and role of the PRRB -- has
generated the greatest concern and is the most important, particularly if the
PRRB is assigned new adjudicative responsibilities in the future. This concern
Is also shared by providers, HCFA and the PRRB although for quite different
reasons.

The PRRB is an independent tribunal separate from the Medicare program.
However, it was never intended to be the final decision-maker on program policy
as evidenced by the authority Congress accorded the Secretary to reverse or
modify PRRB decisions . '*^'^ Specifically, providers argue that the PRRB is not
really independent due to this Secretarial authority. This concern has been
aggravated by the HCFA Deputy Administrator's practice of reversing a large

48*)

^°^See Senate Finance Comm. Hearings on Medicare Appeals Provisions, at 89
(statement of the Catholic Health Association of America).

^°" For example HCFA refused to follow the decision of the United States
Court of Appeals for the Fifth Circuit in Presbyterian Hospital of Dallas v.
Schweiker, 638 F.2d 1381 (5th Cir. 1981), cert, denied, 454 U.S. 940 (1981),
which ruled that the cost of providing free care pursuant to the Hill-Burton
hospital construction and survey program constituted an allowable cost for
reimbursement purposes under the Medicare program, in the case of other hospitals
located In the Fifth Circuit.

'^^'^Soclal Security Act § 1878(f). 42 U.S.C. § 1395oo(f) (1982 ed . . Supp. II).

MEDICARE APPEALS SYSTEM 437

proportion of Board decisions in favor of providers. "° In 1983, HCFA end(?avorc(l
to address many of these concerns of providers in promulgating regulations
stating criteria for when the Deputy Administrator would review and change a PRRB
decision and also proscribed ex parte contacts outside of the record by HCFA
staff and the Deputy Administrator regardinjr a PRKM decision. ^^

HCFA has also indicated dissatisfaction with the PRRB chiefly because it
makes decisions beyond the scope of its statutory authority. In its decisions
reversing the PRRB, HCFA has stated emphatically that the PRRB has no power to
decide the validity of the Medicare statute or regulations.'*^^ The opinions in
these decisions reflect HCFA's perception that the PRRB is generally too
sympathetic to providers and does not fully appreciate the statutory and
regulatory parameters in which it operates. In many of these PRRB decisions, the
PRRB definitely based its decision on an interpretation of the statute and, in
one case, the Constitution that differed from the position of HHS.^^^

The PRRB also shares this concern about its independence but from a
radically different perspective than providers or HCFA. The PRRB has a strained
relatonship with HCFA and feels that HCFA has denied it the requisite resources
to do its job effectively. Members of the PRRB have publicly expressed these
concerns about the PRRB's relationship with HCFA and its ability to act

488rpj^j, American Bar Association reports that, from 1975 to 1979, the
Secretary reversed 41.7?© of all issues the board decided in favor of providers.
American Bar Association, Report and Recommendations from the American Bar
Association House of Delegates (Aug. 6, 1980). HCFA reports that between January
1976 and October 1983, the HCFA Deputy Administrator declined to review the
Board's decision in about 54% of issues decided by the Board and has affirmed
about 25% and reversed or modified about 21%. Preamble to Final Rule, 48 Fed.
Reg. 45,766 (1983).

■^^^48 Fed. Reg. 45,774 (1983), codified in, 42 C.F.R. § 1875 (1986). See
notes 285-287 supra and accompanying text.

"^^^See, e.g., HCFA Dep. Admin. Dec. (Feb. 15, 1980), rev'g, PRRB Dec. No.
79-D95 (Dec. 15, 1979) (return on equity for nonprofit hospitals issue); HCFA
Dep. Admin. Dec. (Oct. 17, 1980), rev'g, PRRB Dec. No. 80-D67 (Aug. 19, 1980);
HCFA Dep. Admin. Dec. (Sept. 12, 1977), modifying, PRRB Dec. No 77-D50 (July 14,
1977) (labor and delivery room issue). See St. Mary of Nazareth Hospital Center
V. Schweiker, 718 F.2d 459, 465 n.ll (D.C. Cir. 1983).

"^^^See, e.g., PRRB Dec. No 79-D95 (Dec. 15, 1979), rev'd, HCFA Dep. Admin.
Dec, (Feb. 15, 1980). The reviewing courts ruled that HHS did not have to give
deference to the PRRB's decision in this case. See , Indiana Hospital
Association, Inc. v. Schweiker. 544 F. Supp. 1167 (S.D. Ind. 1982), aff'd sub
nom. , St. Francis Hospital Center v. Heckler, 714 F.2d 872 (7th Cir. 1983), cert.
denied. 465 U.S. 1022 (1984).

438 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Independently of HCFA as it believes Congress contemplated. In a 1983 letter to
congressional staff, three PRRB members stated:

Clearly, resources (personnel, equipment and material) is the
most critical problem. The history of the Board supports our
conclusion that tlie only way the Board will be able to
fulfill its purpose is to be an agency Independent of the
Department of Flealth and Human Services as well as the Health
Care Financing Administration (HCFA). From its inception,
the Boai'd has opeiated as an orphan within HCFA. with a
history of unresponsiveness and inadequate support. Clearly,
the Board must be independent, in fact.

Such independent status would also result in the elimination
of the Secretary's own motion review. The delegation of this
review process to HCFA has effectively impaired the
providers' right to due process. This situation is
exacerbated by the ex parte communication between the Deputy
Administrator Attorney Advisory [the HCFA officer that
handles PRRB decisions for the Deputy Administrator] and
others within HCFA, such as those who promulgate policy, when
reviewing individual cases after the Board has concluded the
hearing and completed the evidentiary record. "^^^

To enhance its independence as well as its effectiveness, some board members have
suggestejd longer terms for Board members, i.e., twelve years rather than the
present three year terms, be instituted . '*^^

The second area of concern, discussed in greater detail below, is the
requirement that providers appeal all payment issues to the PRRB before
proceeding to federal court, including challenges to the validity of Medicare
statutory or regulatory provisions which the PRRB has no authority to decide.
This exhaustion requirement delays the judicial consideration of the validity of
new Medicare regulations many of which have an immediate and substantial impact
on providers. Congress endeavored to address this situation with the expedited
review procedures in § 1878(f ) , '^^'^ but providers have argued that this procedure

^Letter from Betty Adaniya Kraus , Paul Morton Ganeles and Richard A.
Dudgeon, members of the PRRB, to Sandra Casber and Kevin Yow. staff of the House
Comm. on Ways and Means (undated. 1983).

493

Id.

^^^Soclal Security Act § 1878(f) 42 U.S.C. § 1395oo(f) (1982 ed . . Supp. II)

MEDICARE APPEALS SYSTEM 439

has not significantly expedited Medicare appeals because; of delays in the PRRB's
determining whether or not it has jurisdiction in the case. ^''

The third area of concern is relatively minor, but nevertheless important,
problems with PRRB procedures . ^^" Many of these are shared by providers and
HCFA. One problem of concern to both providers and HCFA is the timeliness of
PRRB hearings and decisions. As indicated in the Table on PRRB Performance
Statistics in Appendix C, the PRRB now has a bacl<log of about 2,750 cases; and it
takes about a year after the NPR for the PRRB to make its decision.'*^''' The PRRB
reports that the problem of delay may be abating since many cases are now being
settled before hearings and thus providers who want hearings can have them
virtually upon request.

One problem of concern to both providers and HCFA is who represents the
Medicare program's position at various steps of the appeals process. The fiscal
int(;rmediary represents the Medicare program before the PRRB. The HHS Office of
General Counsel represents HCFA if the case is appealed to federal court. This
division in representation for HCFA's position before the board in in federal
court has sometimes resulted in an insufficient record on HCFA policies on
appeal. In one important case on the labor and delivery room day issue, St. Mary

■^^^See Alexandria Hospital v. Bowen, No. 85-676-R (W.D. Va. Mar. 17, 1986).
In this case, the federal district court ruled that the 30 day period after which
an expedited appeal can go directly to court if the PRRB fails to act does not
commence until the PRRB decides whether or not it has jurisdiction.

■^^^These include: the PRRB's use of internal manuals and guidelines not
promulgated as rules under the Administrative Procedures Act in making its
decisions, not sufficiently stating facts on which a decision is based, and
concerns that the PRRB has exercised its rulemaking authority with respect to its
procedures in 1878(g) unfairly and in a fashion intended to discourage appeals.
See Peterson, Legislative Changes Urged Regarding Medicare Appeals, Health L.
Vigil, May 3, 1985.

Another concern is the lack of a modern docketing system at the PRRB. The
PRRB chairman maintains that the PRRB docketing and notification systems could be
computerized at a cost of $200,000 which, in his judgment, would enhance the
PRRB's productivity enormously.

^^'See note 477 supra.

^^^See Owens, supra note 292

440 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

of Nazatetli Hospital v. Heckler. '*^^ thi; court had to remand the case to the PRRB
for further development of the record on the rationale for the HCFA position.

5 . Hospital Waiver of Liability Appeals

In appeals of PRO decisions on waiver of liability, hospitals cannot
challenge the substantive coverage Issue of medical necessity but can challenge
only whether the PRO was correct in its decision that the hospital knew or should
have known that the service was not a covered Medicare benefit in the
administrative and judicial review ^^^ If the PRO erroneously determines that
the care is not covered but that the hospital was without fault in providing the
care, there is no forum in which the hospital can appeal and resolve the coverage
issue. ' Hospitals claim that this can be a serious problem if the hospital is
not provided with clear notice as to why its care was inappropriate and is still
held to that standard in the future.

502

C. Hearing Procedures Under Part B

Since the inception of the Medicare program, beneficiaries and providers
have challenged the fairness of hearing procedures for coverage and payment
determinations under Part B.^^^ The chief concern is the preclusion of
administrative and judicial review of the carrier's decision made in the fair
hearing discussed in Chaptf;r VI, but beneficiaries have challenged several other
aspects of the hearing procedures under Part B as well.

''^^See notes 480-483 supra and accompanying text

500

Social Security Act § 1879(d) 42 U.S.C. § 1395pp(d) (1982 ed . , Supp. II)

'"^^^Senate Finance Comm. Hearing on Medicare Appeals Provisions, 106 112
(statement of the Catholic Health Association of the United States) and 151
(statement of the American Hospital Association).

502

Id,

^Q^See, e.g. , Armstrong v. Aetna Life Insurance Co., [1982 Transfer Binder]
Medicare & Medicaid Guide { 32,082 (D. Ore. June 25, 1982); Davis v. HEW, 416 F.
Supp. 448 (S.D.N.Y. 1976); United States v. Lapin, 518 F. Supp. 735 (D. Md. 1979).

MEDICARE APPEALS SYSTEM 441

In Gray Panthers I^^*^ the United States Court of Appeals for the District of
Columbia Circuit ruled that the due process clause of the Fifth Amendment, as
interpreted in Mathews v. Eldridge,^"^ required more formal hearing procedures
and additional protections for beneficiaries in appeals of disputed Part B claims
under $100. Although the court rejected the plaintiff's argument that procedural
due process required a formal oral hearing, the court ruled that the extant
procedures for appeals under Part B — namely a paper review by the carrier —
did not comport with due process requirements because these hearings did not
permit an oral interview or consultation with an official who would inform the
beneficiary about the basis of the denial. With respect to what elements are
required for an adequate hearing for small Part B claims, the court stated:^^"

We believe, at a minimum, the claimant should be informed of
or have access to the evidence on which the carrier relied in
reaching its initial decision to deny the claim and, within a
reasonable time thereafter, an opportunity to present
evidence (in oral or written form) in support of his or her
position. Where factual issues involving the credibility or
veracity of the claimant are at stake, particular
consideration of a policy granting on request an oral
interview before the final denial on reconsideration should
be given. At some point after the hearing, the claimant
should receive a meaningful explanation of the reasons for
whatever action is taken on the claim. ^^'

^^'*652 F.2d 146 (I).C. Cir. 1980), rev'g and remanding sub nom. Gray Panthers
V. Califano, 466 F. Supp. 1317 (D.D.C. 1979), reh'g. on remand sub nom., [1982
Transfer Binder] Medicare & Medicaid Guide (CCH) f 32,144 (D.D.C. Sept. 10,
1982); Gray Panthers v. Schweiker, 716 F.2d 23 (D.C. Cir. 1983), remanding sub
nom. , Gray Panthers v. Heckler, [1986-1 Transfer Binder] Medicare & Medicaid
Guide (CCH) K 34,981 (D.D.C. Nov. 4, 1985) (approved parties' stipulation
regarding Part B claims of less than $100), [1986-1 Transfer Binder] Medicare &
Medicaid Guide (CCH) f 35,140 (D.D.C. Feb. 14, 1986) (ruled that oral hearings
not required for Part A claims of less than $100).

505424 U.S. 319 (1976)

^^^652 F.2d at 167-172. deficiencies were compounded by the lack of
information about the basis of the denial contained in the EOMB. See note 382-
385 supra and accompanying text.

507(552 F. 2d at 172.

442 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

After considerable litigation on the question of what due process requires
for small Part B c 1 a i ms , ''^^ the Secretary agreed that carriers wnuld be required
to Improve procedures for giving benef Iriar les specific information about the
disposition of their claim and an opportunity to talk with a knowledgeable and
responsible official about the claim as well as their appeals rights through a
toll-free telephone system. ^^^

In tht! 1982 derision. Schwelker v. McClure,^^^ the Supreme Court considered
another challenge to Part B appeal procedures for claims of $100 or more. In
this case, plaintiffs claimed that the practice of having carrier employees or
appointees make final, unappealable decisions on Part B claims in fair hearings
ron.^t ituterl a violation of beneficiaries' rights to due process of law under the
fifth amendment and that beneficiaries were entitled to a hearing before an ALJ.
A unanimous Supreme Court, in an opinion written by Mr. Justice Powell, concluded
that carrier Part B hearing officers who were employed or appointed by the
carrier were not biased absent a showing of some disqualifying Interest. ^^^ The
fact of employment or appointment by the carrier did not. without "proof of
financial interest on the part of the carri(!rs," rise to the level of a
disqualifying Interest. ^^ The court disagreed with plaintiff's argument that
beneficiaries were entitled to a hearing before an ALJ or judicial review as a
natter of due process. concJuding:

Appellees simply have not shown that the procedures
prescribed by Congress or the Secretary are not fair or that

•■^^^Gray Panthers v. Schweiker. 652 F.2d 146 (D.C. Clr. 1980). reh ' g on
remand , [1982 Transfer Binder] Medicare & Medicaid Guide (CCH) t 32.144 (D.D.C.
Sept. 10, 1982); remanding sub, nom. Gray Panthers v. Schwelker, 716 F.2d 23
(DC. Clr. 1983), reh'g on remand sub, nom., Gray Panthers v. Heckler. [1986-
Transfer Binder] Medicare & Medicaid Guide (CCH) 1 34,981 (D.D.C. Nov. 4. 1985)
(approved parties' stipulation regarding Part B claims of less than $100). [1986-
1 Transfer Binder] Medicare & Medicaid Guide (CCH) K 35.140 (D.D.C. Feb. 14.
1986) (ruled that oral hearings not required for Part A claims of less than
$100) .

^^^Gray Panthers v. Heckler. [1986-1 Transfer Binder] Medicare & Medicaid
Guide (CCH) 1 34.981 (D.D.C. Nov. 4, 1985).

^'^^^'456 U.S. 188 (1982)

^l^Id. at 196.

512

Id. at 197

MEDICARE APPEALS SYSTEM 443

different or additional procedures would reduce the risk of
erroneous deprivation of Part B benefits. -^"^

In David v. Heckler, ^'^ beneficiaries alleged that many of the fair hearing
procedures did not meet due process requirements, including the lack of subpoena
power to give beneficiaries leverage in getting the treating physicians to supply
more detailed information about the medical services provided, ex parte
communications between the hearing officer and employees and the lack of adequate
qualifications as well as independence of the hearing officers. The district
court, however, rejected all of these arguments except to agree, as did HHS , that
ex parte contacts were improper but were already proscribed by HHS regulations
and did not arise frequently enough to warrant additional relief in this case.^^^
Despite these court decisions, there remains continued concern about Part B
hearing procedures and, as discussed below, the statutory preclusion of
administrative and judicial review of coverage and payment determinations under
Part B.

^^'^Id. at 200.

^1^595 p supp. 1033 (E.D.N.Y. 1984).

^'^^^'^42 C.F.R. § 405.830 (1986); Medicare Carriers Manual (HIM-14) § 12020A.

444 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

CHAPTER VI: AVAII.ABII.ITY OF ADMINISTRATIVE
AND JUDICIAL REVIEW

Congress has rarffiilly presc r itx-d the circumstances when administrative and
Judicial r(?view for Medicare coverage and payment disputes of beneficiaries and
providers are available and. in several instances, has expressly precluded
administrative as well as judicial review of coverage and payment disputes
altogether. Congress has done so in two kev areas: (1) benefiriary and provider
coverage and payment disputes under Part B;^^" and (2) certain payment issues for
hospitals under the prospective payment system. ^' In addition, Congress has
expressly barred federal question Jurisdiction for claims arising under the
Social Security Act. thus shutting off judicial review for any claim except by
means expressly provided for in the Social Security Act."*^^ From the beginning,
beneficiaries and providers have maintained that preclusions of administrative
and judicial review under the Medicare program is unfair. Nevertheless, Congress
has consistently retained these preclusions and the Supreme Court and other
federal courts have generally upheld them.

A. Administrative and Judicial Review of Part B Coverage and Payment Disputes

The most controversial statutory preclusion of administrative and Judicial
review under the Medicare program has been that of coverage and payment disputes
under Part B. As noted above. § 1869 only accorded administrative and judicial
review to beneficiaries under Part A. and § 1842 required carriers to provide a

K 1 Q

fair hearing to beneficiaries in coverage and payment disputes. Since the
early years of the Medicare program, beneficiaries and providers have challenged
these preclusions judicially and, for the most part, unsuccessfully . ^^^
Nevertheless, Congress has retained this statutory preclusion of administrative
and judicial review concluding that Part B claims are small and courts would be

^^^See notes 302, 319-322 supra and accompanying text.

^^"^See notes 266 & 301 supra and 544-555 infra and accompanying text.

^^^Social Security Act § 205(h); 42 U.S.C. § 405(h) (1982 ed., Supp. II).
See note 210-212 supra and accompanying text.

^^^See notes 209-216 supra and accompanying text.

^^^See, e.g., Herzog v. Secretary of HEW, 686 F.2d 1154 (6th Cir. 1982);
Drennan v. Harris, 606 F.2d 846 (9th Cir. 1979); Pushkin v. Califano, 600 F.2d
486 (5th Cir. 1979); Prett v. Nationwide Insurance Co.. 548 F.2d 1129 (4th Cir.
1977); St. Louis University v. Blue Cross Hospital Service, 537 F.2d 283 (8th
Cir. 1976), cert, denied, 429 U.S. 977 (1976).

MEDICARE APPEALS SYSTEM 445

flooded with these claims with little actual benefit to beneficiaries if
administrative and judicial review were allowed. '^^

The Supreme Court has recently decided several cases raising issues of
whether and when administrative and judicial review is available for anneals
under Part B. On the same day as its decision in Schweiker v. McClure,'^^ the
Supreme Court decided United States v. Erika, Inc.^^'^^ fn this case, a major
distributor of kidney dialysis supplies brought suit in the United States court
of claims seeking reimbursement for Part B servif;es after its carrier had ruled
in a fair hearing under § 1842(b) (3) (C)^'^'* to affirm the carrier's initial
calculation of the payment due the plaintiff. The court of claims had ruled that
suit was within the jurisdictional grant of the Tucker Act"^*^' and remanded the
case to the carrier for a redetermination of payment on the basis of its opinion.
The sole issue before the Supreme Court in Erika was whether the court of claims
had jurisdiction in this type of case. ^" The Supreme Court concluded that the
court of claims did not have jurisdiction as Congress had specifically precluded
judicial review of an adverse hearing officer's decision on the amount of Part B
payments in § 1842(b)(3)(C). The Court did not reach the question of whether the
bar to federal question jurisdiction in § 205(h) applied in this instance.

The Supreme Court carefully reviewed the legislative history of §
1842(b)(3)(C) and was persuaded that Congress clearly intended to preclude
administrative and judicial review of Part B claims when it enacted the Medicare
appeals provisions in 1965. Congress reaffirmed this intention, according to the
Court, when it amended § 1869 in the Social Security Amendments of 1972^^^ to
distinguish more clearly between appeals over entitlement to benefits and appeals

'^^^See notes 214-216 supra and accompanying text.

^22456 U.S. 188 (1982). See notes 510-513 supra and accompanying text.

523456 U.S. 201 (1982) .

524social Security Act § 1842(b)(3)(c), 42 U.S.C. § 1395u(b) (3) (C) (1982
ed. , Supp. II) .

52^28 U.S.C. § 1491 (1982 ed . , Supp. II).
526456 U.S. at 206.

'456 U.S. at 206 n.6.

528social Security Amendments of 1972 § 2990, codified as amended in, Social
Security Act § 1869, 42 U.S.C. § 1395ff (1982 ed . , Supp. II).

446 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

nvev the iimoimt of l)eneflts so as, in the words of the spoiisoi ing Senator, "to
avoid overloading the courts with quite minor matters."

Despite these Supreme Court decisions, beneficiaries and providers have
continued to press for administrative anfl Judicial review of Part R cJaims
chiefly because of the concern that carrier coverage and payment decisions are
consistently inaccurate and result in substantial underpayment of Part B
claims. ^^^ In the November 1985 Senate Finance Committee hearings on Medicare
appeals, deficlenries in the Part B hearing procedures and, specifically, the
statutory preclusion of administrative and judicial review of carrier decisions
on coverage and payment dominated the discussion and were the main focus of S.
1551. the Fair Medicare Appeals Act, which was being considered at those
hearings. Several witnesses testified that recent developments in the
Medicare program justified a reformed appeals procedure for Part B claims. ^"^^
Specifically, the Part B program now includes highly sophisticated and expensive
services provided on an outpatient basis, and thus the claims under Part B
involved substantially greater sums than originally anticipated at the inception
of the Medicare program. Further, witnesses expect that the size and volume of
Part B claims will increase further as Medicare beneficiaries receive more of
their medical care on an outpatient basis. ^^^

The American Bar Association was particularly strong in its endorsement of
the need for administrative and judicial review of Part B coverage and payment
determinations, stating that the judicial decisions upholding the statutory
preclusion of judicial review, coupled with the regulatory requirement that
carrier-appointed hearing officers must comply with HHS regulations,
interpretative rules and policy statements,"*''* "result in Medicare beneficiaries
being conclusively bound by actions of HHS, no matter how arbitrary and illegal

^29456 U.S. at 209, quoting. 118 Cong. Rec. 33992 (1972) (statement of Sen.
Bennett) .

e o rj

'^•^"See General Accounting Offitre. Medicare Part B Beneficiary Appeals
Procedure (HRD-85-79. June 28, 1985); Senate Finance Comm . Hearings on Medicare
Appeals Provisions. See notes 366-367 supra and accompanying text.

^^^ee Senate Finance Comm. Hearings on Medicare Appeals Provisions.
532^.

BOO

Id. See notes 206-207 supra and accompanying text.

53442 C.F.R. § 405.860 (1986)

MEDICARE APPEALS SYSTEM 447

those actions might be."^^^"^* This position rt.'affirms a long standing ABA position
in favor of administrative and judicial review of Part B claims. "'■

HHS has consistently opposed providing administrative and judicial review of
Part B claims chiefly because of the associated expense. In the 1985 Senate
Finance Committee hearings on Medicare appeals provisions, HCFA reported that an
estimated 16,000 Part B appeals would mo(^t the jurisdi f;tional requirements for
ALJ review under S. 1551 at a cost of between $11 million and $17 million to the
Medif-are program. These appeals would significantly increase the workload of
the Social Security ALJ corps faced with a large volume of appeals of disability
program claimants as a result of the Social Security Disability Benefits Reform
Act of 1984.^^^ Similarly, HHS has opposed judicial review for Part B claims on
grounds that this would result in increased costs for the Medicare program as
well as a firm conviction that extant hearing procedures a)'e fair and
adequate.^'^"^^

In 1985, several congressmen introduced legislation to provide
administrative and judicial review of Part B claims. "'"^^ One of these bills, H.R.
2864, included in the House version of COBRA, would have authorized
administrative review of claims of $500 and above and judicial review of claims
of $1,000 and above. '*^ Despite strong support in both the House and Senat(! for

'' "^ ^Senate Finance Comm. Hearings on Medicare Appeals Provisions at 193
(statement of the American Bar Association). See also, ABA Report and
Recommendat ions , supra note 488.

536

Id.

^'^^ 'Senate Finance Comm. on Medicare Appeal Provisions at 50 (statement of
Henry R. Desmarais, M.D., Acting Deputy Administrator, Health Care Financing
Administration). Further, the HHS Office of General Counsel reports that it
costs approximately $550 to conduct an ALJ hearing.

538pyjj L. No. 98-469, 97 Stat. 134 (1984).

^^Senate Finance Comm. Hearings on Medicare Appeals Provisions at 40-52
(statement of Henry R. Desmarais, Acting Deputy Administrator of the Health Care
Financing Administration).

^''^H.R. 579, •99th Cong., 1st Sess. (1985); H.R. 2864, The Fair Medicare
Appeals Act, 99th Cong., 1st Sess. (1985); S. 1551, The Fair Medicare Appeals
Act, 99th Cong., 1st Sess. (1985).

^■^^See notes 347-357 supra and accompanying text.

^•^^H.R. 2864, The Fair Medicare Appeals Act, 99th Cong., 1st Sess. (1985).

448 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

rf'forms of Part B appeals, the provisions allowing for administrative and
Jiuliri.j] review of Part B fair hearing decisions were dropped from COBRA Just
before enactment. Thus, Congress has again decided to retain the statutory
preclusion of administial i ve and judicial review of Part B claims probably on
grounds of controlling the administrative costs of the Medicare program in this
lime of budget constraints, but has also put tlie issue on the table again in this
year's budget legislation.^'*^

B. Preclusion of Payment Issues for Hospitals Under the Prospective Payment

System

In the Social Security Amendments of 1983, Congress enacted rather
extraordinary preclusions of administrative and judicial review of certain
elements of the [jayment rates unfler the prospective payment system. ^^"^ In its
original proposal for a prospective payment system. HHS maintained that there
should be no judicial review of any payment issue under the prospective payment
system out of concern that allowing hospitals to appeal elements of hospital
payment rates would leacl to a judicial dismantling of the rate structure of the
prospective payment system. HHS stated its proposal for an expansive preclusion
of judicial review and the rationale for this approach in its 1982 Report to
Congress :

Payment amounts, exceptions, adjustments, and rules to
implement the prospective payment system would not be subject
to any form of judicial review. Retroactive adjustment of
the payment rates, as might result from judicial review, is
inimicril to the basic purpose of a prospective system.
Moreover, the delays inherent in the judicial process, when
coupled with the likelihood of annual revisions in the rates
of payment, could lead to chaotic results, in which rates for
a previous period may be overturned by a court, or remanded
to the Department for further consideration, even though
different rates had superseded the contested rates. The
prospect of continuous litigation and re-opened
administrative proceedings related to supposedly prospective
rates for past periods can be prevented by a complete
preclusion of judicial review. The omission of judicial
review follows the current statutory provisions related to
determinations under Medicare Part B. where judicial review
is also prohibited. As with any service sold to the
Government, the remedy for providers dissatisfied with the
rate offered is to convince the purchasing agency that a

^^^See note 355 supra and accompanying text.

^^'^Social Security Amendments of 1983, § 602(h), codified as amended in,
Social Security Act §§ 1878(g)(2) and 1886(d)(7). 42 U.S.C. §§ 1395oo(g)(2) and
1395ww(d)(7) (1982 ed . , Supp. II).

MEDICARE APPEALS SYSTEM 449

higher rate is appropriate or, failing that, to refrain from
offering services to the Government . '^■^^^

Congress shared the same concerns as HHS about the integrity of the rate
structure if hospitals could appeal any issue with respect to payment rates under
the prospective paym(?nt syst(!m. However, Congress drf?w the line more narrowly
tlian HHS had proposed. Also, as a check on the Administration's authority to
recalibrate PRO ' s and set hospital payment rates, Congress created ProPAC to
monitor and evaluate HHS ' s performance in setting payment rates and mandated that
ProPAC analyze the hospital payment rates and DRG's independently of HHS and
advise HHS of its findings.'"''*^

Specifically, the Social Security Amendments of 1983 preclude administrative
and judicial review of the establishment of DRG's, the methodology for
classifying patient discharges into DRG's and the appropriate weighting factors
for DRG's."*^^ The House Ways and Means Committee stated the rationale for
preclusion of administrative and judicial review of these issues:

Since the prospective payment system will no longer have any
relationship to a hospital's actual costs, a hospital should
not be permitted to argue that the level of payment is
inadequate to cover its cost. '*

The House Ways and Means Committee also stated, in a comment reflecting
congressional concern about the integrity of the rate structure, that the
statutory preclusion was necessary "because of the compl^exity of such action and
the necessity of maintaining a workable payment systt>m. ""^"'^

Congress has also expressly excluded from administrative or judicial review
the factor used in a hospital's current payment formula to ensure compliance with
the so-called "budget neutrality" requirement that the prospective payment system
result in aggregate Medicare payments equal to "what would have been payable"

^ ^ '^HHS Report to Congress at 41.

^^^See note 266 supra.

•'^'^'^Social Security Amendments of 1983 § 602(h)(3) codified as amended in.
Social Security Act § 1878(g). 42 U.S.C. §§ 1395oo(g) (1982 ed . . Supp. II); 42
C.F.R. § 405.1804 (1986).

^■^"^^H. Rep. No. 25, Pt . I, 98th Cong., 2d Sess. 143 (1983).

^-^^Id. at Pt. I. 143.

450 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

iindei- the previous reimbursement methodology for FY 1984 and FY 1985,''^^ This
budget neutrality adjustment Is a factor created to ensure that the amount of
outlier costs would not result in overall Medicare hospital expenditures in
excess of the estimates of budgetary outlays for FY 1984 and FY 1985 in the Tax
Kquity and Fiscal Responsibility Act of 1982.^^' While this "budget neutrality"
requirement expired on September 30, 1985. the close of FY 1985, Its legality has
yet to be judicially tested due to the time lag between the hospitals' closing of
these fiscal years for accounting purposes and Medicare's notice of prograa
reimbursement for that year -- an event which, according to HCFAR-84-1 , must

c c p

transpire before an appeal can be made. ^'

As yet, no case has challenged the statutory preclusion of administrative
and judicial review of the DRG prices or the budget neutrality factor, despite
the fact that the hospital industry has alleged repeatedly that HHS has been
unfair in updating the DRG prices and has ignored ProPAC's recommendations. ^^
One very plausible reason for the dearth of hospital challenges to this
preclusion is that hospitals, for the most part, are doing quite well under the
prospective payment system and are showing record profits. Another probable
reason is the difficulty a hospital would have in bringing a successful challenge
to the mf?thodology for establishing DRG weights and classification criteria
absent egregious and obvious arbitrariness on the part of HHS in setting the DRG
prices.

Perhaps more important for hospitals is HCFA's delegation of certain issues
for adjudication to PROs, i.e., disputes over "outliers" and errors in DRG coding
for particular cases and the lack of administrative or judicial review of these
determinations .""^'^^ The decision of a PRO with respect to a DRG classification
can have important financial implications for hospitals, and yet a hospital has
no recourse other than PRO reconsideration for an adverse determination.

Hospitals have complained about this lack of review, but as yet no suits

''^•'*^Social Security Amendments of 1983 § 601(e), codified as amended in.
Social Security Act § 1886(e)(1)(A), 42 U.S.C. § 1395ww(e) ( 1 ) (A) (1982 ed . , Supp.
II): 42 C.F.R. § 405.1804 (1986).

^^^oclal Security Amendments of 1983, § 601(e), codified as amended in,
Social Security Act § 1886(d)(1)(F), 42 U.S.C. § 1395ww(d) ( 1 ) ( F) (1982 ed . , Supp.
II).

"^'^See note 468 supra and accompanying text.

^'^^See notes 399-401 supra and accompanying text.

554

"'"'^See notes 198-199 supra and accompanying text.

555

^ ^See notes 297-301 supra and accompanying text.

MEDICARE APPEALS SYSTEM

451

have been filed challenging this arrangement/''^^ Tn an earlier challenge to the
PSRO program. Association of American Physicians and Surgeons v. Weinberger, ^'
plaintiff physicians, relying on Tumey v. Ohio,^^^ argued that the statutory
delegation of adjudicative authority over physicians to private organizations,
that were inherently biased against physicians because of their contractual
relationsliip with HHS and their economic self-interest, was unconstitutional.
The court rejected the arguments that PSRO's were biased and that there had been
an unconstitutional delegation of judicial power, stating:

[I]t has been held permissible for agencies of the federal
government to contract with private organizations in order to
have such organizations perform governmental functions as
long as the particular administrative scheme provides for a
hearing on the determinations made by those private
organizations. See State of Texas v. National Bank of
Commerce of San Antonio, 290 F.2d 229 (5th Cir.), cert,
denied, 368 U.S. 832 [Parallel cites omitted] (1961), and
Coral Gables Convalescent Home, Inc. v. Richardson, 340 F.
Supp. 646 (S.D. Fla. 1972).^^^

In light of the extraordinary nature of this administrative arrangement and,
particularly, the extensive adjudicative responsibilities of PROs with respect to
certain hospital payment issues, and the preclusion of administrative and
judicial review to serve as a check to private action, it is appropriate to raise
the question of whether the various delegations of adjudicative power to PROs is
appropriate or even constitutional.

C . Jurisdictional Bar to Judicial Review Under the Social Security Act

A persistent complaint of both beneficiaries and providers is the strict
requirement that claimants exhaust all administrative remedies in challenges to
the validity of a regulation, program directive or HHS policy because of the bar
to federal question jurisdiction in § 205(h) for any issue associated with a
claim. Beneficiaries and providers alike have argued that this jurisdictional
bar as interpreted in Weinberger v. Salfi,^^*^ which ruled that this bar applies
even with respect to an associated con-stitutional claim, imposes unreasonable

^^^See Senate Finance Comm. Hearings on Medicare Appeals Provisions at
112-115 (statement of the Catholic Health Association of America).

^^"^395 F. Supp. 125 (N.D. 111. 1975) aff'd. sub nom. without opinion,
Association of American Physicians and Surgeons v. Mathews, 423 U.S. 975 (1975).

558273 U.S. 510 (1927).

559395 F. Supp. at 140.

560

422 U.S. 749 (1975)

452 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

administral ivf pxhausti(»n requi remrnt s on chHlIenges to the validity of statutory
and regulatory provisions that administrative tribunals have no authority to
adjndiratc.5('>l

Both benef irlarios and providers have sought to obtain judicial review of
coverage and payment determinations under the Medicare program through means
other than the statutory grants of judicial review in the Social Security Act
and, specifically, to circumvent the bar to federal question jurisdiction in §
205(h). Claimants have used two approaches to establish federal jurisdiction for
judicial review. These include an implied grant of jurisdiction under § 10 nf
the Administrative Procedure Act^^""^ and bringing suit in the United States Court
of Claims under the jurisdictional grant of the Tucker Act.^""^ The Supreme Court
has handily rejected both of these. In its 1977 decision. Califano v
Sanders, ^"^ the Supreme Court ruled that the APA provided no Independent grant of
federal jurisdiction . ^^^ In United States v. Erika, Inc..^^^ the Supreme Court
rejected the court of claims' position that it had Independent jurisdiction over
Medicare claims under the Tucker Act.^^*^

Claimants have also sought to mitigate the harsh consequences of the
jurisdictional bar in § 205(h) by invoking the All Writs Act in 28 U.S.C. §
]gc^^568 ypj establishing limited federal jurisdiction in Medicare cases. ^*^^ In

^^^See Goldstein, The Procedural Impact of Weinberger v. Salfi Revisited. 31
DePaul L. Rev. 721 (1982); Comment, Federal Question Jurisdiction over Medicare
Provider Appeals After Weinberger v. Salfi : Toward a Principled Construction of
the Statutory Bar. 65 Va. L. Rev. 1383 (1979).

^^^5 U.S.C. §§ 701 706 (1982 ed . , Supp. II).

563

28 U.S.C. § 1491 (1982 ed . , Supp. II)

^^^^430 U.S. 99 (1977) .

"'""'See Schwartz, Califano v. Sanders and the Administrative Procedures Act
Interpretation: Has the Supreme Court's "Hospitable" Attitude Given Way to a
More Restrictive Approach, 55 Tex. L. Rev. 1323 (1977).

^°°See notes 523-529 supra and accompanying text.

5^'^See Whitecliff, Inc. v. U.S., 536 F.2d 347 (2d Cir. 1976), cert, denied.
430 U.S. 969 (1977), relying on, 28 U.S.C. § 1491 (1982 ed.. Supp. II).

56842 U.S.C. § 1651 (1982 ed., Supp. TI). The all Writs Act provides in
pertinant part:

The Supreme Court and all Courts established by Act of

MEDICARE APPEALS SYSTEM 453

V.N. A. of Greater Tjft County, Inc. v. Heckler , '^'^^ the Eleventh Circuit, relying
on Federal Trade Commission v. Deans Foods Co.,''^ recognized federal
jurisdiction under the All Writs Act despite the jurisdictional bar in § 205(h)
in order to stay the agency's enforcement of its decision and preserve the status
quo pending the court's review through prescribed statutory channels. In
addition, claimants have sought to use mandamus as a means of compelling agency
action in Medicare cases, irrespective of the jurisdictional bar in § 205(h),
with limited success. ^'^

In Heckler v. Ringer^^^ the Supreme Court considered the application of the
jurisdictional bar in § 205(h) in a suit brought by four beneficiaries
challenging HCFA's policy that narodid body resection as a means of relieving
pulmonary distress was not a covered benefit under the Medicare program which

Congress may issue all writs necessary or appropriate in aid
of their respective jurisdiction and agreeable to the usages
and principles of law. Jd. at § 1651(a).

^^^See , e.g., Redbud Community Hospital District v. Heckler, [1984-2
Transfer Binder] Medicare & Medicaid Guide (CCH). f 34,085 (N.D. Cal. July 30,
1984); Alabama Home Health Care, Inc. v. Schweiker, 527 F. Supp. 849 (N.D. Ala.
1981), dismissed and vacated sub nom. , Alabama Health Care, Inc. v. Hedder, 711
F.2d 988 (11th Cir. 1983). But see Florida Medical Association v. Department of
Health, Education and Welfare, 601 F.2d 199 (5th Cir. 1979) vacating injunction
Issued in, 454 F. Supp. 326 (M.D. Fla. 1978).

^'^"711 F. 2d. 1020 (11th Cir. 1983), cert, denied, 466 U.S. 936 (1984).

^'^'^^384 U.S. 597 (1966).

^'^'^^See, e.g. , Dietsch v. Schweiker, 700 F.2d 865 (2d Cir. 1983) (allowing
mandamus); Samaritan Health Center v. Heckler, Medicare & Medicaid Guide (CCH) f
34,862 (D.D.C. Aug. 29, 1985); McCuin v. Heckler, Medicare & Medicaid Guide (CCH)
f 34,528 (D.N.H. Feb. 27, 1985); Jameson v. Heckler, Medicare & Medicaid Guide
(CCH) f 34,534 (E.D. Ca . Feb. 15, 1985); David v. Heckler 591 F.2d 1033 (S.D.
N.Y. 1984). But see Good Samaritan Medical Center v. Secretary of HHS, 776 F.2d
594 (6th Cir. 1985); Hatcher v. Heckler, 772 F . 2d 427 (8th Cir. 1985); American
Federation of Home Health Agencies, Inc. v. Heckler, 754 F.2d 896 (11th Cir.

1985); Starnes v. Schweiker, 748 F.2d 217 (4th Cir. 1984), cert, denied U.S.

, 105 set. 2022 (1985) (denying mandamus). In Heckler v. Ringer, the Supreme

Court declined to decide the effect of § 205(h) on the availability of mandamus
jurisdiction in Social Security cases. 466 U.S. at 616.

^'^^466 U.S. 602 (1984).

454 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

MCFA ptomulgated in HCFAR 80 T''^'* aft«T AI.I' s hH(l consistently ruled in favor of
il.j lfn/«iit s In covptagp disputes ovpr this procedure. Plaintiffs alleged that
sin<r thry were cha 1 I eng i ng HCFA's coverage [lolicy rather than just a
determination on a claim, they were entitled to proceed directly to federal court
without having an administrative hearing. The Supr«?me Court rejectcjd this
argument and. reaffirming its position In Weinberger v Salfi,'^"'* ruled that the
bar to federal question Jurisdiction in § 205(h) included beneficiaries' disputes
over f:()verage and, thus, benef ic iar i<'s had to exhaust their administrative
remedies under § 205(b) before proceeding to federal court.

However, tiie Supreme Court's most rertMif def;ision. Dowen v. Michigan Academy
of Family Physicians . ^'^^ wrought a significant erosion of the jurisdictional bar
of § 205(h). In this case, an association of family physicians and several
individual physicians challenged Medicare regulations permitting diff(;r(?nt levels
of payment to general practitioners and specialists for the same services. A
unanimous Court In a decision writt(?n by Mr. Justice Stevens^'' recogni/.ed a
rii^lit <»f judicial review for challenges to the regulations setting the
methodology used to set payment rates under Part B despite the statutory
preclusion of judicial review of Part B claims in § 1869"^ and the
jurisdictional bar in § 205(h).

Reviewing its earlier decisions enunciating the strong presumption in favor
of judicial review of administrative action, ^^ the court concluded that
§ 1842(b) (3) (C)*"^^^ which the Court had earlier construed as a valid statutory
preclusion of judicial review of the amount of Part B benefits in United States

"'^'^'^HCFAR-RO-1 . Exclusion of Bilateral Carodid Body Resection to Relieve
Pulmonary Distress, 45 Fed. Reg. 71,431 (1980).

•'^'^•''422 U.S. 749 (1975). See notes 222 223 supra and accompanying text.

576r,4 U.S.L.W. 4594 (U.S. .June 9, 1986) (No. 85-225).

■' 'Mr . .Justice RehnquJst, wiio wrote the majority opinion in Heckl(?r v.
Ringer , did not participate in thi.s decision.

^''^Social Security Act § 1869, 42 U.S.C. § 1395ii (1982 ed . . Supp. IT).

^'^^See, e.g. . Starl< v. Wicl<ard, 321 U.S. 288 (1944); Abbott Laboratories v.
Gardner, 387 U.S. 136 (1967); Barlow v. Collins. 397 U.S. 159 (1970). Dunlop v.
Bachowski, 421 U.S. 560 (1975).

^'^Osocial Security Act § 1842(b)(3)(C); 42 U.S.C. § 1395u(b) (3) (C) and §
1869. Social Security Act § 1869. 42 U.S.C. § 1395ff (1982 ed . . Supp. II).

MEDICARE APPEALS SYSTEM 455

V. Erika, Inc. , ^^-' "simply does not speak to challenges mounted against the
method by which such amounts are to be determined rather than the determinations
themselves [Emphasis the Court ' s] . "^'^^^ The court then concluded:

We conclude, therefore, that those matters which Congress did
not leave to be determined in a "fair hearing" conducted by
the carrier — including challenges to the validity of the
Secretary's Instructions and regulations — are not impliedly
insulated from judicial review by 42 U.S.C. § 1385ff
[Emphasis the Court 's].^^^

Clarifying its position in its earlier decisions of Salf i , Ringer, and
Erika, the Supreme Court emphasized that the statutory preclusions of federal
jurisdiction and judicial review in these cases pertained to disputes over the
amount of benefits, stating that:

matters which Congress did not delegate to private carriers,
such as challenges to the validity of the Secretary's
instructions and regulations are cognizable in courts of law.
[Emphasis the Court's]^^'*

This is an extraordinarily important decision for the entire Medicare
appeals system. It addresses one of the most widespread and strongest concerns
among beneficiaries and providers under both Part A and Part B — the inability
to challenge HHS regulations, rulings and program directives governing a coverage
or payment claim except where expressly permitted under the Social Security Act
because of the jurisdictional bar in § 205(h). The implications of this case for
the Medicare appeals system have yet to unfold although it is fair to say that
this decision will open the gates for future court challenges to HHS regulations,
policies and directives governing all aspects of the Medicare program and
possibly without the necessity of exhausting administrative remedies for the
adjudication of coverage and payment disputes under the Social Security Act.

^^^456 U.S. 201 (1982) .
582

54 U.S.L.W. at 4597

SQ^Id. 4597,

584

Id. at 4598.

456 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

CHAPTER VII: PROPOSED RECOMMENDATIONS
AND SUGGESTIONS FOR FURTHEH STUDY

Below are outlined some proposed recommendat ions for improveinents in the
Medicare appeals system. In addition, this chapttrr also indicates where more
information and further study is necessary before definitive recommendations for
chanK«'.s are appropr i ;i t e . In making these proposed recommendations and
suggestions for further study, it is important never to forget the financial
constraints on FUIS and HCFA in administering the Medicare program. Thus, in
proposing changes in the Medicate appt^als system, it is necessary to assess the
cost of the proposj'd change against the benefit to be derived. While some
changes in the Medicare appeals system would clearly make for a more fair appeals
syst»'m, they may lie unduly costly, may benefit only a few individuals or way
berjefit many iri a minimal way and thus not be justifiable.

A . Program Admirij strat ion Issues

This study identified three problfim areas in the administration of the
Medicare program: (1) intermediary and carrier coverage and payment
determinations, (2) setting the prict? under the prospective payment
system, arid (3) implementation of the PRO program. With respect to these areas,
recommendations for changes are appropriate and further stnrly clearly indicated.

1 . Intermediary and Carrier Coverage and Payment Determinations

The performance of fiscal intermediaries and carriers iri making coverage and
t)ayment determinations has been controversial. Specifically, carriers and fiscal
intermediaries, often at HCFA's direct icui, have engaged in disturbing practices
in making coverage and payment determinations under the Medicare program - a
matter of some concern since these practices often result in unwarranted
financial liability for beneficiaries. These practices include use of
unpublished guide] ines and standards in making coverage determinations,
systematically interpreting statutory language defining benefits to effectively
reduce benefits under the Medicare program, and communicating with beneficiaries
about coverage and payment determinations and appeal rights in an
incomprehensible fashion that inhibits beneficiaries from seeking corrections of
errors in these determinations or exercising their appeal rights in a meaningful
fashion .

The problems raised in this study were reported in congressionaJ hearings or
cliallenged in litigation. Their existence suggests that problems with other
proce(Uir«.'S used to make coverage and payment determinations may exist and may
also compromise the interests of Medicare benef iciar-ies . The performance of
fiscal int(rrmediari(?s and carriers in making coverage and payment determinations
iind the specter of problems in this area pose critical issues for the Medicare
program, given the extraordinary role of these private organizations in the
administration of this program. One key element of this issue is the
appropriateness of delegating these major- program functions to private
organizations and the adequacy of cur-rent procedures to protect beneficiaries'
entitlement int(>rest in Medicare benefits under this administrative arrangement.

Clearly more information is needed about how fiscal intermediaries and
carriers make coverage and payment determinations and handle beneficiary
complaints regarding these determinations. Several identified problems with
making coverage and paym(>nt determinations need particular study as well. These
include: the process for determining the reasonable charge for physicians'

MEDICARE APPEALS SYSTEM 457

services under Pari B, HCFA's technical denials policy with respect to home
health benefits and its implementation by fiscal Intermediaries,^®^ and whether
the problems in the communications of fiscal intermediaries and carriers with
beneficiaries about coverage and payment decisions have been adequately addressed
as a result of reforms mandated in the Gray Panthers litigation. ^^^ In view of
these problems and their importance to the overall integrity of the Medicare
program, a comprehensive, empirical study to obtain information about the
procedures of fiscal Intermediaries and carriers in making coverage and payment
determinations should be conducted.

Another issue deserving additional analysis Is the use of statistical
sampling to project overpayments to providers pursuant to HCFAR-86-1 .^°' This
approach to calculating overpayments to providers may well be justified although
it probably should be done pursuant to explicit statutory authority which
carefully delineates the circumstances in which It may be used. Further, there
is question as to why current Medicare fraud and abuse authorities such as the
Civil Monetary Penalties Act^^® are not sufficient to address the type of
systematic overbilllng that HCFAR-86-1 attempts to correct.

Suggestions for Further Study:

o A comprehensive, empirical study should
be conducted of the role, performance
and procedures of fiscal intermediaries
and carriers in making coverage and
payment determinations under Part A and
Part B.

o A study of procedures for making
coverage and payment determinations for
home health benefits should be conducted
with specific examination of HCFA's use
of statistical sampling to project
overpayments to providers pursuant to
HCFAR 86-1 and also HCFA's technical
denials policy.

^^^See notes 368-369 supra and accompanying text.

^^^See notes 382-392 supra and accompanying text.

^^'^See notes .373-375 supra and accompanying text.

^^^Civi] Monetary Penalties Act of the Omnibus Budget Reconciliation Act of
1981 § 2105, codified as amended in. Social Security Act § 1128A, 42 U.S.C.
§ ]320a-7a (1982 ed. , Supp. II); 45 C.F.R. §§ 100.100-.129 (1986).

458 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Recommend*! t ions

n HCFA should publish and make available
upon re«iuest to beneficiaries and pro-
viders all standards and ^''^'^'Pllnos used
in making coverage and payment determi-
nations unrler Part A and Part H.

o HHS, by regulation, or Congress, by
legislation if necessary, should
prohibit fiscal intermediaries and
carriers from using practices of the
insurance Industry, i.e., "rules of
thumb" or screens that are not published
in regulations or program instructions.
In making coverage and payment
determinations under Part A and Part B.

o HCFA should ensure that program
instructions containing important
interpretations of Medicare benefits are
promulgated according to informal
rulemaking procedures. This approach
would ensure that tiie medical
profession, beneficiaries and other
interested parties have an opportunity
to comment on the medical and other
significant implications of HCFA's
interpretalif)n of benefits.

2 . Setting the Price under the Prospective Payment System

Congress, ProPAC and hospitals have expressed concern that HHS is primarily
motivated by reducing the Medicare budget in setting and updating hospital pay-
ment rates under the prospective payment system. A key question is whether the
current administrative arrangement adequately protects hospitals from arbitrary
HHS action in setting hospital payment rates. Under the current administrative
arrangement, hospitals are expressly precluded from challenging DRG ' s or their
derivation through administrative or judicial review. This begs the question of
whether the informal rulemaking process which HHS must follow in updating
hospital payment rates and ProPAC ' s role in independently analyzing and
commenting on HHS's performance in updating payment rates under congressional
auspices is sufficient to protect individual hospitals' interests in fair and
adequate payment rates and mitiga:e the need for administrative and judicial
review?

This issue requires additional analysis before definitive recommendations
are appropriate. On the one hand, hospitals are doing well financially under the
prospective payment system — a fact that must be considered in assessing
hospitals' concerns about deficiencies in appeals procedures for hospital
payment. On the other hand, ProPAC and Congress have criticized HHS' method of
updating hospital payment rates under the prospective payment system. The
resolution of this issue may require more experience with the prospective payment
system to determine if the administrative arrangement works in the manner

MEDICARE APPEALS SYSTEM 459

Congress originally contemplated and protects the legitimate interests of
hospitals in fair Medicare payment rates.

Suggestion for Further Study :

o An analysis should be conducted of
whether the current administrative
arrangement for updating hospital
payment rates under the prospective
payment system is adequate to protect
individual hospitals' interest in fair
payment rates while giving HHS
sufficient flexibility to achieve
necessary budget savings.

3 . Implementation of the Peer Review Program

In American Hospital Association v. Bowen , ^^ hospitals successfully
challenged HCFA's implementation of the PRO program through program instructions
and contract provisions that had not been promulgateri as rules under the
Administrative Procedure Act. The PRO program is a major program with the
critical function of mf)nitoring hospital conduct toward individual beneficiaries
and the quality of hospital care under the prospective payment system.
Consequently, the confusion generated by this decision should be resolved as soon
as possible.

Recommendation:

o HHS should promulgate an interim final
rule to implement the PRO program in the
manner indicated in American Hospital
Association v. Bowen. This rule should
address matters now covered in program
instructions and PRO contract
provisions.

B. Administrative Hearing Issues

This study identified a number of problem areas regarding administrative
hearing procedures for coverage and payment determinations under Part A and Part
B of the Medicare program. These include: (1) beneficiary coverage appeals under
Part A, (2) provider disputes under Part A, and (3) hearing procedures for
beneficiaries and providers under Part B.

"'"''See notes 417-419 supra and accompanying text

460 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

1 . Beneficiary Appenls under Part A

There are three areas (if partlrnlar concern reKarding beneficiary coverage
appeals under Part A:'"^^ appeals under the prospective payment system, provider
representation of beneficiaries in Part A appeals, and deficiencies in appeal

C Q 1

procedures for claims under $K)0. ■ With respect to benefif:iary appeal
procedures under the prospective payment system, the most serious problem has
been adequately informing beneficiaries of their appeal rights particularly with
respect to hospital and/or PRO decisions that continued stay of a beneficiary in
the hospital is no longer necessary. HCFA, Congress and ProPAC are aware of this
problem and have adopted or are now considering measures to address it. ^^
Recommendations should thus be deferred and further monitoring undertaken to
ascertain if these measures have resolved this problem

The role and responsibilities of PROs Jn adjudicating appeals over coverage
and payment determinations under the prospective payment system for both
beneficiaries and hospitals have generated concern. There is question whether
PROs fully appreciate and understand their adjudicative responsibilities for
beneficiary coverage determinations and certain payment issues for hospitals
under the prospective payment systtim.^^^ An empirical study should be conducted
to obtain more information about PRO performance in discharging these
responsibilities. Specifically, such a study should ascertain whether PROs fully
understand their adjudicative . ..^pons i bi 1 i t ies and whether they have adopted
standards and guidelines to conduct the adjudications assigned tr) them.

Suggestions for Further Study:

o A comprehensive, empirif;al study should
be conducted of the performance by PROs
of their adjudicative responsibilities
with respect to appeals of beneficiaries

"'''"With regard to administrative hearings before ALJ ' s and the SSA Appeals
Council, no recommendations or suggestions for further study are made since the
concerns of Medicare beneficiaries are similar to those of other Social Security
programs and the American Bar Association with the involvement of the
Administrative Conference of the United States has addressed these hearing
procedures and made recommendations in another context. See notes 425-426 supra
and accompanying text.

^^^As for hearing procedures for claims under $100, the United States District
Court for the District of Columbia in the Gray Panthers litigation ruled that
expanded hearing procedures for these claims is not required since there are less
than 100 such claims annually. This conclusion is eminently reasonable given the
current financial constraints of the Medicare program. See notes 453-457 supra
and accompanying text.

^^^See notes 427-436 supra and accompanying text.

''^''^See notes 437-441 supra and accompanying text.

MEDICARE APPEALS SYSTEM 461

and h()spita]s und(?r the prospective
payment system.

The question of whether providers should be able to represent beneficiaries

in appeals over coverage determinations raises the larger questions of what is

the interest of providers in coverage determinations and the extent of the rights

of beneficiaries to select their own representatives in disputes over coverage

determinations. HCFA's policy of not permitting providers to represent

beneficiaries is predicated on HCFA's perception that providers often coerce

beneficiaries to bring appeals they would not otherwise bring. ^^ Yet, as a

practical matter, providers under Part A are usually financially liable for the

care provided if there is an adverse coverage determination and thus have some

interest in the coverage issue. But more importantly, HHS regulations permit

"15

eguiat.ions p
e appeal s'^^"

beneficiaries to solfict their own representatives in f;overage appeals and
FICFA's rationale for its policy on provider representation of beneficiaries
simply does not justify carving out an exception to this regulatory policy.

Recommendat i o n

o HCFA should withdraw its program
instructions prohibiting providers from
repr(?sent ing beneficiaries in coverage!
disputes under Part A as this
prohibition undermines HHS' regulations
authorizing beneficiaries to select
attorneys or other persons not otherwise
disqualified to represent them in
appeals of disputf?s arising under the
Medicare program.

2 • Provider Payment Disputes Unfier Part A

There are five problem areas with respect to provider disputes under Part A:
jurisdiction of the PRRB for hospital appeals under the prospective payment
system; retrospective correction of errors in payment rates; HHS non-acquiescence
with judicial decisions; the PRRB ' s role and procedures; and hospital waiver of
liability appeals . ^'^^^ Since the inception of the Medicare program, HHS has taken
a very tough stand in provider challenges to payment levels under Part A. As
guardian of the Medicare trust funds and given current budget pressures, this
position is clearly appropriate.

At some point, however, a question of fairness is raised. This point may
have been reached with respect to some Medicare payment issues in view of the

^^'*See note 444 supra and accompanying text.

^''9'''20 C.F.R. § 404.1705(b) (198fi).

'""The question of hospital appeals on waiver of liability issues raises the
more central question of what rights a provider ought to have to contest an
adverse coverage determination.

462 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

fact that federiil district and appellate courts have almost uniformly rejected
these policies. HHS mi^lit reevaluate thcrsf; payment policies In light of these
Judicial decisions. But HHS has not adopted this approach and has often refused
to follow adverse court decisions on Medicare payment policies.^ Such
nonacquiescenc:e in Judicial decisions is also troubliiiK. In light of recent
Judicial decisions, some recommendations are appropriate and further study
warranted .

Recommendations :

o HCFA should repeal HCFAR-84 1^^^ and
interpret the language in 1878(a),
"final determination of the Secretary as
to the amount of payment"^^^ to mean the
fiscal intermediary's final
determination of the prospective payment
rate for the upcoming fiscal year as
construed ^n Washington Hospital Center
V. Bowen .

600

HCFA should revise its regulations"^^ to
allow retroactive correction of errors
in the calculation of a hospital's l)ase
year for purposes of calculating
hospital payment rates under the
prospective payment system during the
transition period. ^*^^

HHS should develop a prinr;ipled policy
on when it will acquiesce to Judicial
decisions affecting the Medicare program
and all other programs under the Social
Security Act.

^'""See notes 479-486 supra and accompanying text

"^^°See note 468 supra and accompanying text

^^^Social Security Act § 1878(a), 42 U.S.C
§ 139500(a) (1982 ed . , Supp. II).

"^See notes 470-472 supra and accompanying text.

601

42 C.F.R. § 412.72 (1986)

°"^See notes 473-478 supra and accompanying text.

MEDICARE APPEALS SYSTEM 463

Suggestions for Further Study :

o An analysis should be conducted of the
future role of the PRRB as well as
whether the PRRH should be an
independent tribunal and what specific
responsibilities it should assume.

3 . Hearing Procedures Under Part B

The specific character of the procedures for Part 0 hearings for all
coverage and payment determinations has been addressed in the Gray Panthers and
other recent litigation, and HCFA has adopted changes to implement some of the
concerns about Part B hearing procedures raised in those cases ."^
Nevertheless, dissatisfaction among beneficiaries and providers with these
hearing procedures and continued changes in the amount and nature of benefits
provided under Part B as well as substantial evidence that there are often errors
and underpayments with respect to Part B benefits that have grave financial
implications for beneficiaries are sufficient evidence to suggest that
elimination of this statutory preclusion is apprfipriate.

Recommendation:

o Congress should authorize administrative
review of major Part B coverage and
payment determinatirms.

C . Availability of Administrative and Judicial Review

Of all legal issues regarding the Medicare appeals system, the statutory
preclusion of administrative and judicial review of certain coverage and payment
determinations under the Medicare program has given rise to the greatest concern
of beneficiaries and providers. Congress has explicitly precluded administrative
and judicial review for coverage and payment determinations under Part B and for
certain payment issues under Part A's prospective payment system for hospitals.
Also of concern to beneficiaries and providers has been the operation of § 205(h)
of the Social Security Act"^^ to preclude federal question jurisdiction for cases
involving claims for payment except when the Social Security Act explicitly
authorizes judicial review.

1 . Preclusion of Administrative and Judicial Review of Part B Claims

With respect to the appropriateness of changing the current statutory
preclusion of administrative and judicial review of coverage and payment
determinations under Part B, it is important to appreciate that the Supreme Court
has resoundly upheld this statutory preclusion and Congress has declined to
change this arran^jement after actively considering such changes just last year.

"^ '^See notes 500 515 supra and accompanying text.

604

Social Security Act § 205(h), 42 U.S.C. § 402(h) (1982 ed . , Supp. IT)

464 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Nevertheless, for reasons stated ahove, Congress should authorize judicial a;
well as administiat 1 ve review of major Part B coverage and payment disputes.

Kecommendat ion :

o Cr)ngress should authorize judicial
review of major Part B coverage and
payment determinations.

2 . Preclusion of Administrative and Judicial Review of Certain Hospital Payment
Issues

The preclusion of administrative and judif;ial review with respect to certain
payment issues, i.e., matters related to determining the DRG's or the budget
neutrality factor, under the prospective payment system is unusual. However,
these statutory preclusions may well be desirable because of the clear need to
preserve the integrity of the prospective payment system's rate structure. The
central question, identified above, is whether Congress has designed the rate
setting process in such a way that will ensure that hospitals are fairly
compensated for the services they provide to Medicare beneficiaries. As
suggested above, this is a question warranting furthei examination.

3 . Jurisdictional Bar to .Judicial Review Under the Social Security Act

One of the most intractablfr problems for beneficiaries and providers under
the Medicare program has been the bar to federal question jurisdiction in
§ 20.'S(h) of the Social Security Act and its application, in light of Weinberger
V . Salfi and Heckler v. Ringer, to prevent beneficiaries and providers from
challenging statutory and regulatory provisions as well as HHS policies related
to coverage and payment determinations without first exhausting all
administrative remedies."^" However, this concern may well be mitigated by the
Supreme Court's recent decision in Bowen v. Michigan Academy of Family Practice
which allowed federal question jurisdiction without exhaustion of administrative
remedies where plaintiffs challenged a policy on the methodology for setting a
payment rate rather than the amount of payment in a claim. This case may well
change the entire complexion of the jurisdictional issues under the Social
Security Act. Consequently, recommendations and even further study should be
deferred until courts have interpreted this decision in other contexts and
reconciled it with the Supreme Court's earlier decision in Heckler v. Ringer.

D. Proposal for a Conference on the Medicare Appeals System

Because of the complexity of the Medicare program, the prospect of
additional and ongoing changes in the program, and the volume of concerns and
complaints about all aspects of the Medicare app(?als system from beneficiaries
and providers, it is recommended that the Administrative Conference of the United

""^See note 604 supra and accompanying text.

ROGcjj.f. fiotes 560 575 supra and accompanying text

"^'See notes 570-584 supra and accompanying text

MEDICARE APPEALS SYSTEM 465

StHtes sponsor a conference on the Medicare appeals system to obtain more
information about and analysis of problems with the Medicare appeals system as
well as ideas for future recommendations for reforms. This conference should
convene experts from HHS, HCFA, ProPAC, congressional staff and beneficiary and
provider groups as well as leading practitioners and scholars to analyze the
problems with the Medicare appeals system and make more recommendations for
specific reforms or consider even a major restructui ing of the Medicare appeals
system Issues that should be addressed at the conference include:

1 . Program Administration Issues

o What is the appropriate role of fiscal
intermediaries, carriers and PROs in
making coverage and payment
determinations and in performing other
administrative functions under the
Medicare program?

o Are tlie procedures used by fiscal

i nternu'di ar i es , carriers and PROs in
making coverage and payment decisions in
individual cases fair and adequate?

o Is the current administrative

arrangement for updating hospital
payment rates under the prospective
payment system adequate to protect
individual hospitals' interests in fair
payment rates while giving HHS
sufficient flexibility to achieve
necessary budget savings?

o Is the process that HCFA uses to make

decisions under Part A and Part B as to
whether new procedures and technologies
are covered Medicare benefits fair to
beneficiaries, providers and other
affected groups?

2. Administrative Heai'ing Issues

o Are the procedures for adjudicating

coverage and payment disputes under Part
B adequatf! to protect the interests of
beneficiaries and providers in view of
continuing changes in the nature and
amount of benefits under Part B?

o What is the legitimate interest of

providers in coverage determinations and
what rights of appeal should be

466

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

HVHilable for providers Ici protcrri thnt
Interest?

Should tlifip hf ■r^ Modicnrf appeals
division j II H C F A with A r, J ' s to
ad jiidi f:Hl f covfMaKe and payment disputes
or beneficiaries under Part A and
possibly Part B, and, if so, how shionld
siirh a division he strnrtnred?

o Wiial sfiould be the future role of the

PRRB? Should it be an independent
tiitiunal, and what si)ecifir adjudicative
responsibilities should it assume?

Availability of Administrative and Judicial
Review

Ts it still appropriate; to preclude
administrative and judicial review of
f:overage and payment determinations
under Part B and, if not, how should
administrative and judicial review of
such claims be structured''

Does the current administrative
a r r a n g e m iMi t for u ji d a ting h o s i) i t a I
payment rates under (he prospective
payment system provide enough protection
to the jnt(;rest of individual hospitals
in a fair payment rate to justify the
l)re(lusion of administrative and
judicial review of major payment issues?

E . Cone 1 us ion

The Medicare appeals system is complex and one that has been (ailed upon to
deal with the challenges posed by great changes in the Medicare program and the
American health care systr-m in recent years. But, despite these changes, there
has not been a comprehensive study of how the Medicare appeals system should be
structured to meet these challenges and ensure that beneficiaries served by the
Medicare program and providers that furnish covered benefits are treated fairly.
In view of the restructuring of the hospital payment system in 1983 and the
contemplated changes in Part B of the Medicare program, it is now especially
appropriate to reexamine whether the appeals system designed and implemented in
the late 1960's and early 1970' s can meet the challenges posed by a significantly
different health care system and Medicare program. This study is a first step in
such an endeavor.

APPENDIX A

List of Diagnosis-Related Groupings (DRGs)

468

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

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APPENDIX B

Diagram of Appeals Processes for Coverage and
Payment Disputes Under Part A and Part B

478

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

DIAGRAM FOR APPEALS PROCEDURES
FOR COVERAGE AND PAYMENT DISPUTES
UNDER PART A AND PART B OF THE MEDICARE PROGRAM

PART A

ACTION

Coverage Determinations
BENEFICIARIES PROVIDERS

Initial
Determination

Reconsideration

Fiscal Intermediary

Reconsideration for
skilled nursing and
home health benefits.

Not applicable

Waiver of
Liabil ity

PRO Reconsideration
for hospital benefits

Fiscal Intermediary
Determination for
skilled nursing and
home health benefits

Fiscal Intermediary
Determination for
skilled nursing and
home health benefits.

Administrative
Review:

PRO determination
for hospital benefits

ALJ review for coverage
and waiver of liability
disputes of claims re-
garding skilled nursing
and home health bene-
fits of $100 or more.

ALJ review for coverage
and waiver of liability
in disputes of claims
regarding hospital
benefits of $200 or
more.

PRO determination
for hospital benefits

ALJ review of waiver of
liability decisions only
of disputes regarding
skilled nursing and liome
health benefits if bene-
ficiary waives appeal
rights .

ALJ review of decision in
waiver of liability that
hospital knew or should
have known that benefit
not covered for claims of
$200 or more.

Judicial Review;

Judicial review of
coverage and waiver
of liability disputes
regarding skilled nurs
Ing and home health
benefits of $2,000 or
more.

Judicial review of
coverage and waiver
of liability dispute
regarding skilled nurs-
ing and home health
benefits of $2,000 or
more .

MEDICARE APPEALS SYSTEM
PART A
Payment Determinations

479

ACTION

BENEFICIARIES

PROVIDERS

InitJal
Determination:

Reconsideration:

Fiscal Intermediary

Fiscal Intermediary
for skilled nursing
home health and
hospital benefits.

Fiscal Intermediary

Fiscal Intermediary
for skilled nursing
home health and
hospital benefits.

PROS hear disputes over
payments for outlier cases
and errors in DRG coding.
There is no administrative
or judicial review of
final PRO decisions on
these issues.

Administrative
Review:

Judicial Review:

ALJ review for payment
disputes of claims re-
garding skilled nurs-
ing and home health
benefits of $100 or
more.

Judicial review of
payment disputes over
$1,000 or more.

For claims of $1,000
to $10,000, appeal to
fiscal intermediary only.

For claims of payment
Issues of $10,000 or more,
appeal to the PRRB.

Judicial review of
payment disputes de-
cided by PRRB.

480 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

PART B

ACTION BENEFICIARIES AND PROVIDERS*

Coverage

Determination: Carrier makes initial determination

Payment

Determination: Carrier makes initial payment determination

Reconsideration: Carrier conducts reconsideration of coverage
and payment determinations

Administrative

Review: At present there is no administrative review

within HHS. Parties are entitled to a fair
hearing conducted by the carrier if claims
exceed $100.

Judicial Review: There is no judicial review.

Waiver of

Liabi 1 Ity : Carrier makes initial determination,

reconsideration. Issue can be appealed to a

fair hearing before carrier if $100 or more.

There is no further administrative or judicial

review.

*Only providers who accept assignment are entitled to exercise
these appeal rights.

APPENDIX C

Miscellaneous Exhibits

482

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

EXHIBIT 1

YOUR EXPLANATION OF MEDICARE BENEFITS

HEAD THIS NDUCE CAREFULLY AND KEE^fTFO^YDUR RECORDS — THIS ISNOT AEJLL

SIS Webb Street, Apt. MB
Swaner, «.J. %*My

Aup 20,19B4

»»H btlp? Cer.tt rt i

Colisbia Htdicia tcrviet
2D00 lUls tt., ft»oe 1200
y.O. >n S003, »9utl) Aancx
CelotHk, V^. 12MS

Tall tr»t 1-40O-U3— <M7

AsBlgnrnvnt m«» tak»n on your cl*i«> ior S1030.O0 4roit Dr. Johnson. (S*« lt»* 4
on the back. )

1 CM^lce service
Approved ABOunt lieiited by itvm Sb on back

1 Surgery

Approved amount limited by Item Sb on° back

nay 10,1984

nay IS, 1984

Billed

Approved

60.00

* SO. 00

700.00

9 400. 00

150.00

9 120.00

3 Inpatient vislta May 16-hay 20,19B<

Approved amount limited by Item 5c on back. Charges
reouced ior the same reason ano by the sami amount.

J medical service May 22,1984 s 20.00 •

medicare usually does not pay 4or this shot. H you did
not know that medicare MOuld not pay 4 or this, you »ay
request a review. See item 1 on back.

1 CH<fice service nay 29,1984 * 100.00 s

nedicarc usually does not pay 4or this many services MitMn
this period o^ time. H you did not know that nedicare
would not pay for this, you may request a revivw. See item
1 on back.

Total Approved Amount s

nedicare .Payment <eO'X of the approved amount).... (

0.00

r7C.OO
616.00

We mrm paying a total of * 616.00 to Dr. Johnson. You mrw responsible for the
difference of * 154.00 between the Approved Amount and tne ncsicare Payment.
If you have other insurance, _i\ may help with the part medicare did not pay.

NeKt time you request payment, use your medicare Claim Number as it is shown on
this notice.

(You have met the deductible for 1984)

lifPOSZAKT If TVS 4d »e: a^m« vlcb tLt MK>t=ti e^roTwd yov mmj sji for a rerlev. I» Ae
•bl« J9U muac yrlte te oa before ftt 2D.19B5. (See Ites 1 cm the back..)

DO TOC BAVI A QUtmOK ASDCT THIS ROnCT? If you believe Medicare ^ald for a aervlee yew
4S6 net receive, or there !■ as error, ceotacc ue iaaedlately. Alvt^f (Ive lu the:

Medicare a*l» Ke. U>-45-€7t» B

Clals CoBCrol Me. 123-A5fr-7B»-3210

Rev.

7-13

MEDICARE APPEALS SYSTEM

483

ALWAYS tm TOUH HtALTM WSUHANCE CLAIH NUI«C« *»» CUIH COKTWl. HUmM
t(HEJ« Wl«m».« A»OUT TOUH CUAI«. •«»« ™IS (WTICE WITX TOU IF YOU IHQUIUE IH PCHSOH

ET TOO HAVE AKT QUtSTJOHB ABOT3T THH

CLAIM

CaS \M If you h>va quMtiona •teat Ibtt rUlm.

C*n t* toIWr^ ( ) U ywi JlT« outiUto th«

(dty) lockl etiiis^ w**. if 7«> Bt« ia Mty),

•V irirf*^ >« ( V- W« will un you ia

dvun vbkt Cmh *• uaad tA dadda *tet to

tf roo daeid* ts tara Uda eialo rrrtwwtO, wm
win tail 701 how tt do IL And *a11 B^Xat
otlMT fmcB and proofi that you tboaU nod to
t*. W« will aiao uawar »ny otbar qnaationa.
S*« ittm 2 balcm for • lUUDWt abMit yaw
miaal riftits.

Tocra BJGHT TO A KrvTrw or thb claim

Tou mrr a* to hava thJa rlaim rrriawad.
This would ba dooa by p«o9la »t« did not
mrnkm tha flirt daeuaoD tteut how Dueft to
■pprova. Tou tiao hava tha rifttt to a*
aomaoM aJaa to act for you in halpiof yoi fat
XtdM "i'im raviawvd. W« eaa tix> h«ip y«u
raquot a rrtiaw— call ta at tha phorm numb«
in Item 1 atera. A raquaat for rrrirw nn«t b«
ia wntlnj. You muft writ* foe it within S
menthi of tha data of this ootica. Our adcft-aaa
is( ).

FOE OTtTEK WTOBMATIOH ABOXTT

MEDICARE

If you hava othar qusrtlons about Medicsra,

r«ad Tour Medlcara HandbooJc*. You may

4l»o writa or phon« us. Our addrt* is in item

2 aboT«. S«a itam 1 abora fer o** phona

munbars.

HOW MUCH MTDICAEE PAT3
You must taJca cara of th« flr»t part of yw»
mtiUcil bills each year. This yaarly ihara U
called tha DEDUCTIBLE. Tha amount of this
ye*r*i deductible is printed oo tha othar side
of this notiea. Each year, tftw you meat tha
deductible, we pey 10 ^jccent of the Amount
Approved for moft of your remainifH biHs.
(The Aracunti Approved are shown 00 tha
other side.) Senrieea that we pay at othar
rates arc deseibad below.

For trwatment of mental Q1d«« as an
outpatient Medicare pays SO percent of tha
Amount Approved above your deduedbla
amount. Tha bills for this cara are addwl to
your bills for oth« »«rr1ce* to maJta «« tha
daductlbla. Tha moat wa csj> pay for
outpatient treatment of mental ill«>asa ia a
year is t2S0.

Medicare pays 10 percent of tha Amount
Apprtrred for physical therapy sarrteat
Howaw, thara is a Hmlt of »S00 par T*ar that
«a can pay for Mnrioa* by ihartpira wt»
work for thamaaivaa.

Medicare can pay the fuH Amount Approved
for soma Idpdi of jurjery In outpatient
surtical centers. For >ome used medical
equipment fuch as wheelchairs and hospital
bwls. tha full Amount Approved is payable
After the de^ctibla hu bean met.

WHT THE AMODKT APPKOVED MAT BE

LESS THAM THE AMOt3NT BOXED

Tha Amoust Approved la them oa tha othar

rida of this ooUoa. It is tha lowaM of tha

ttro* aiDouDta deaerlheil b*iowi

a. Tha first U what you ware eharf»d fw tha
sarrlea. (This Is shown ladar 'BUlad*, ea
ttaa otfav i<da if this DOtl««.)

bu Tba MooDd la tha ml^olst of tha eharraa
yeir doctor or si^ipllar of madleal sarmees
made durinc the year prior to last July.
This is tha customary eharfa.

0. Tha tttrd is baaad on tha customary
eharcaa of doctor* or rv^litn In your ar%a
who f«TUsh 75 percent of tha jervicaa.
This is the prarvaillflC eharta for this
SM-riea ia your araa. This chart* Umit eaa
laeraasa each year only by a percentage
datarminad by tha Covwumant to reflect
overall ehaj^aa ia tha aeoeomy.
Medicare's apprcrrwd amount does not
rial eairilT reflect tha current actual
eharfaa ia your local area.

If you think tha payment 00 this claim is
wronc, plcaaa call us toll-free at tha nurab«
ia item I oa this side of this notice.

ASSIGNMEXT

Assignment is whan your doctor er luppliw of
medical »arvic«s a^reaa to accept the Amount
Approved as the full amount ha/ihe expwrn to
b« paid. With asaignment, aft» tha deductible
has bean met, we pay 80 percent and you pay
JO p«cent of the Amoimt Approved for moat
of your remaininj bills.. T^e Medicare check
is sent directly to your doctor.

HOW TOO CAN DSE THB NOTICE
Tou eaa use Ihs notice to ahow your doctcr or
supplier of medical jerviees how much of your
deductible you have met.

Tou can «l»o »end a copy of this notice to your
private health insurance company if they need
it to »ee how much Medicare paid. They will
want to keep tha copy you send to them. So
you may want to make a copy to keep for
youraelf.

TIME LIMIT? FOR FILING A REQUEST FOE
MEDICARE PAYMENTS

To receive Medicare benefits you must send In
a claim within tha following time limitsi

For Senrieea Received

[bJiJii-i/ib/ii

lO/l/SJ-9/30/13
IO/L/IS-4/30/14

Sand Claims By

— ij;ji;j5

12/31/14
12/31/aS

T^aaa Uma limits may be extended If we. the
Social Security AdroinistraUon, or tha Health
Car* Financing Administration made a
mistake which caused you to delay sending in
your claim. Whan this happens, you must send
ia your claim within t months after the month
ia which the minaka was corrected.

7-28

484

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

EXHIBIT 2

\bur Right to Appeal
Decisions on Hospital
Insurance Claims

July 1984

MEDICARE APPEALS SYSTEM

485

^ T'OUR RIGHT TO .APPEAL
Y DECISIONS ON HOSPITAL

_JL INSURANCE CLAIMS -

wnenever you recene services from a

hospital, skilled nursing facility, or home
health agency that takes pan in Medicare,
the institution will make the claim for
Medicare payment. Medicare then pays
the institution for covered services.

A Medicare intermediary' determines
whether the seaices you received are
covered by Medicare hospital insurance.
Medicare intermediaries are insurance
companies or organizations under con-
traa with Medicare to process and pay
hospital insurance claims.

Many hospitals and skilled nursing facili-
ties are sen-iced by peer review organiza-
tions. Tliese organizations make Medicare
payment decisions concerning medical
necessity, quality of care, and whether
services could ha\'e been provided in a
less expensive t>pe of facility.

If an intermediary' or peer review organi-
zation decides that pan or all of a claim
cannot be paid because some or all of the
serN'ices you recei\'ed are not co\'ered by
hospital insurance, a notice is sent to you.
The notice will show the services that are
not covered and will gi\e the reasons for
denying payment.

If you disagree with the decision to deny
payment, please call a Social Security office
or the intermediary to ask someone for
an explanation. Have your Medicare card
handy so you can give the person your
Medicare claim number Tell the person
about the services you recei\ed and why
you think the decision on your claim is
incorrea. He or she will explain the provi-
sions of the Medicare law on which the
decision was based.

If you still disagree with the decision after
you ha\'e recei\'ed an explanation, you can
appeal the decision. Tliis leaflet describes
the four appeal steps you may take. These
steps apply only to hospital insurance
claims. Different rules apply to Medicare
medical insurance claims. You can get a
copy of the leaflet. Your right to appeal
your medicalijtsuraiice payment, by
calling any Social Security' office.

Step 1: Reconsideration

If you are notified that all of your claim
is denied, you ha\'e 60 days from the date
you receive the denial notice to ask for a
reconsideration of the decision.

486

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

\f only pan of your claim is denied, you
will receixe an initial notice explaining
x\+»ai services could not be co\ ered. Later,
you will receixe a second notice shoxving
the benefits that were paid as well as the
services that were denied, if you x\ish,
you can ask for reconsideration after you
receixe the first notice. But your request
for reconsideration must be submined
no later than 60 days from the date you
receix'e the second notice.

A request for reconsideration must be
made in xxTiting. You can get a form to
make your request from any Social Secur-
ity office or your Medicare intermediary.
The people there will be glad to help you
prepare your request. Or, you may vvTite
direaly to the intermediary or peer rex'iew
organization.

Your reconsideration request should show:

I Your name and health insurance claim
number (shoxvn on your ^Medicare card),

>X/liere and when you receixed the services,

The name of the intermediary or peer
review organization that made the initial
decision, and

The reasons you are not satisfied with the
decision.

You also should include any additional
exidence you xxant to submit — for exam-
ple, a statement from your doctor.

Medicare claims reviewers who did not
lake pan in the original decision on your
claim will make the reconsideration. You
^ill get a completely independent deci-
sion. The rexiewers examine all peninent
medical exidence, including any addi-
tional exidence you submit, and then
make a new decision on your claim.

You ^ill be sent a notice of ihe reconsid-
eration decision.

A special rule — Under a special rule,
if a hospital insuraj claim is denied
because the sen ices were not medically
necessary or were custodial care, payment
can still be made if you had no way of
knowing the sen ices were not coxered.
Both the decision that sen ices xxere not
coxered and the decision as to whether
you knew the sen ices ^ere not coxered
can be reconsidered. If this special rule
applies to your case, the denial notice
you receix-e will include insu"uctions on
the reconsideration procedure.

Step 2: A hearing

If you do not agree with the reconsidera-
tion decision andifihe amount in ques-
tion is $100 or more, you may request a
hearing. You must request the hearing
within 60 days from the date you receixe
the notice of the reconsideration decision.

MEDICARE APPEALS SYSTEM 487

Your request for a hearing must be in
NSTJting. Special forms are available at any
Social Security office or your Medicare
intermediary. The people there will be glad
to help you submit your request. If you
have any new evidence, you should sub-
mit it with your hearing request.

Tlie hearing is an informal proceeding
conducted by the Office of Hearings and
Appeals of the Social Security Administra-
tion. It is usually held in a place near
where you li\'e. You will be notified "^"hen
and where the hearing will be held at
least 10 days in adx'ance. If you v^nsh, you
may haN'e someone represent you at the
hearing and have witnesses testify' on
your behalf

The administrative law judge who con-
ducts the hearing has not taken any pan in
the earlier decisions made on your claim.
The judge will re\'iew what has already
happened in your case, tell exactly what
must be decided, and ask questions of
you and any representati\e and witnesses
you may ha\'e. You or your representati\e
may present additional e\idence to the
administrative law judge. .AJl testimony
presented at the hearing is taken under
oath.

488

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

You do not ha\e lo anend ihe hearing
unless N'ou ^vish to personally explain
the facts in your case. If you do not anend,
the judges decision ^ill be based on the
information already in the file and any
other eM'dence or statements you have
submined.

The administrative law judge will send
you a full explanation of his or her d4.%;i-
sion after the hearing.

Step 3: Rexiew by Appeals Council

If you disagree with the decision made
by the adminisu-ative law judge, you may
request a re\'iew by the Appeals Council
of the Office of Hearings and Appeals.
You must file a wrinen request for review
within 60 days from the date you receive
the notice of the adminisLrati\e law
judge's decision. Special forms for request-
ing a re\'iew are available from any Social
Security' office or iMedicare intermediary'.

It is up to the council to decide whether
it will review your case. If the council
decides to review it, you may submit addi-
tional evidence for the council's consider-
ation, or you or \our representative may
appear in person and present new
evidence.

The AjDpeals Council will notify you of its
decision in uriting.

Step 4: Court action

If you are still not satisfied with the deci-
sion on your claim after taking the preced-
ing steps, you may bring suit in a Federal
disu-ia coun //the amount in question is
11,000 or more.

You may file suit whether or not the
Appeals Council reviews your case. If the
council does not review your case, you
must file suit within 60 days of ilie date
you receive the notice telling you the
council would not review your claim. If
the council does review your case, you
must file suit within 60 days of the date
you receiv e the notice of the Apj^eals
Council's decision on your claim.

THE liMPORTANCE OF
TIME LIMITS
It is important that you carefully
observ'e the time limit for requesting each
appeal step. A time limit can be e.xrended
only if you can show that )-ou had good
cause for not meeting the deadline. Tlie
official notices you receive after each step
will al^vays show the time period you have
for requesting funher review.

MEDICARE APPEALS SYSTEM 489

YOUR RIGHT TO BE
REPRESEiNTED
You may choose to have someone
represent you when you deal with the
Social Security Adminisu^tion. The repre-
seniati\e may be an attorney, relative, or
friend. If you choose to have someone
represent >'0u, both you and your repre-
sentati\e will get a notice of the decision
made at each step in the appeals process.

FOR MORE L\FOR-M.\TION
If you ha\'e any questions about
your rights to appeal a decision made
on your hospital insurance claim, call any
Social Security office or your Medicare
intermediary'. The people there will be
glad to help you.

DEPARTMENT OF HEALTH AND HUMAN SEPMCES
Health Care Financing Administration

Publication No. I iCF.^ 10083

:^=^=^====^=:l ^ U.S. COVERSMEKT PFIKTING OFFICE J9e«: <J1-1"3/«S0S

490 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

EXHIBIT 3
DEPARTMEN'TOF HEALTH t HUMAN SERVICES Ht.ith Care F.ninc.ng Adrriniftrnion

AN IMPORTANT TJESSAGETHOM-MEDICAaZ

YOUR SIGHTS WBILE A MEDICARE HOSPITAL J ATIENT

• .jyouiiave_fl right-to. receive -all of -the hospital care that is necessary -for "the

proper diegriosis and treatment of your illness or injury. Your discharge date
^should be determined solely by your medical "needs, -not by "DRGs" or by
Medicare payments.

• You have the right to be fuUy informed about decisions effecting your Medicare
coverage or peyTnent for your hospital stay.

• You have a right to appeal any written notices you receive from the hospital or
Medicare stating that Medicare will no longer pay for^our care.

TALK TO YOUR DOCTOR

You and your doctor know more about your condition and your health care needs than
anyone else. If you have questions about your medical treatment, your need for continued
hospital care, or your discharge date, consult your doctor. TTiese decisions should be made
between you and your cocior. If you have questions or concerns about hospital services,
you should talk to the hospital's patient representative or discharge planner. Don't
hesitate to ask cruesticr^— you and your family should ask about your care, your stay in the
hospital, BJid your planned discharge.

PEER REVIEW ORGANTZATIONS

Peer Review Orgajiizations (PROs) are groups oi doctors who ere paid by the Federal
Government to review medical necessity, appropriateness and quality of hospital
treatment furnished to Medicare patients. Peer Review Organizations will respond to
your request for review and appeal of written notices stating that Medicare will no longer
pay for your hospital stay.

IF YOD THINK YOD ARE BEING ASKED TO LEAVE THE HOSPITAL TOO SOON

• .'^sk a hospital representative for a written notice of explanation immediately, if
you have not aL-eady received one. The hospital's written notice is necessary if
you decide to appeal to the PRO. The written notice must describe how you
appeal.

• If vou decide to eooeal. do so immediately — either call or write the PRO. If you
lose the appeal, you may be billed for all costs of stay beginning with the 3rd day
after you receive the written notice. The appeals process can take up to three
workine days from the time your appeal request is received. Thus, if you appeal
and lose, you may have to pay for at least one day of hospital cost.

• REMEMBER: WITHOUT A WRITTEN NOTICE, YOU HAVE NO RIGHT TO
APPEAL.

The Peer Review Organization for this area is:

Rev. TELEPHONE: (

MEDICARE APPEALS SYSTEM

491

EXHIBIT 4

i-i

•H

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BACKGROUND REPORT FOR RECOMMENDATION 86-6

PETITIONS FOR RULEMAKING: FEDERAL AGENCY PRACTICE AND
RECOMMENDATIONS FOR IMPROVEMENT

William V. Luneburg

Professor of Law

University of Pittsburgh

School of Law

Report to the Administrative Conference of the United States
December 1986

494 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

PETITIONS FOR RULEMAKING: FEDERAL AGENCY PRACTICE
AND RECOMMENDATIONS FOR IMPROVEMENT

T£d5le of Contents

I. Introduction

II. The Right to Petition: Constitutional and
Statutory Sources.

A. The Constitution

B. The Administrative Procedure Act:
Sections 553(e) and 555

C. Section 553(a): Purported Exceptions
to the APA Petition Process

D. Statutory Regulation of the Petition
Process Outside the APA

1. Special Petition Statutes

2. Regulatory Flexibility/Impact Analysis
and the Regulatory Planning Process

III. Agency Petition Regulations: Overview, Observations
and Conclusions

IV. Agency Petition Practice

A. In General: Responses to Agency
Questionnaire

B. Seven Case Studies

1. Department of Health and Human
Services: Food and Drug
Administration (FDA)

2. Federal Communications Commission (FCC)

3. Federal Energy Regulatory Commission (FERC)

4. Federal Trade Commission (FTC)

5. Department of Transporation: National
Highway Traffic Safety Administration
(NHTSA)

PETITIONS FOR RULEMAKING 495

6. Nuclear Regulatory Commission (NRC)

7. Environmental Protection Agency (EPA)

V. Judicial Review of the Petition Process

A. Standing

B. Forum

C. Timing

D. Preclusion

E. Scope of Review

F. Record for Review

VI . General Conclusions

Appendix A: Selected Special Statutory Petition
Provisions (arranged by agency)

1. Department of Energy

2 . Environmental Protection Agency

3 . Food and Drug Administration

4. Department of the Interior

5. Interstate Commerce Commissior.

6. National Highway Traffic Administration

Appendix B: Regulatory Flexibility/Impact Analysis
and the Regulatory Planning Process

Appendix C: A Narrative Overview of Rulemaking
Petition Regulations

1. Filing of the Petition

2 . Consideration of Petitions

3 . Decision on the Petition

4. Reconsideration

Appendix D: (Proposed Recommendations to ACUS Committee
on Rulemaking, September 15, 1986)

496 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Introduction

While in this era of Gramm-Rudman federal agencies are
confronted with tight budgets, there is no similar scarcity of
proposals for regulatory change emanating from a variety of
sources, including Congress, the President, and various sectors of
the public. The methods for communicating ideas are similarly
multifarious. Some are more formal than others. One of those
which has not previously been studied to any substantial extent is
petitions for rulemaking. In fact it is probably the only
significant aspect of the rulemaking process that has escaped
close scrutiny during the reign of the "hard-look" doctrine.

-Since the enactment in 1946 of the Administrative Procedure
Act, federal agencies have been directed to give interested
persons "the right. to petition for the issuance, amendment, or
repeal of a rule." Congress was not, however, content to rely
solely on that provision and subsequently enacted other statutes
affording the right to petition for rulemaking, which provisions
in various particulars differ from the APA. In addition, many,
though not all, agencies have elaborated on the sparse outlines of
the petition processes thus established by means of rules,
statements- internal directives to staff and other written
documents. Not surprisingly, while there are similarities among
agencies with regard to how they deal with petitions for
rulemaking, the differences, even within a particular agency, can
be substantial. Those differences have numerous sources including
the nature of the substantive and procedural statutory mandate
confronting an agency, the nature of its "clientele," and its
regulatory "style."

Along with Congressional and agency elaboration of the
petition process, much of which has occurred since the mid-1970 's,
the federal courts have become increasingly active in reviewing
agency responses to petitions for rulemaking, in particular
denials and inaction. The Supreme Court's recent decision in
Heckler v. Chaney might, however, foreshadow future retreat from
judicial scrutiny^ in this area, though it seems not to have
occurred to date. Assuming their authority is largely
unimpaired, these lower court decisions have some important
ramifications regarding how agencies should structure their
processes for receiving, considering and disposing of petitions
for rulemaking.

In conducting this study, sources other than statutes,
regulations and court opinions were deemed to be of primary
importance, however. The focus was rather on obtaining the views
of both agency officials and experienced petitioners in order to
find out exactly how the various petition processes function, what
benefits, if any, accrue to the agencies and the public from those
processes, what problems consistently recur, and how these

PETITIONS FOR RULEMAKING 497

problems might be resolved in order to improve those processes and
increase their value both for the agency and the public.

Accordingly, a questionnaire seeking cejjain general
information was sent to over fifty agencies^2 Based on their
responses and other factors, seven agencies were chosen for more
in-depth study through interviews of officials and examining
docket room practice and petition files. Practitioners having
some experience with each of these agencies were also requested to
provide information and views .

The results of the study suggest Congressional
reconsideration of the need for special petition statutes and
adoption by all agencies of a set of petition procedures which are
described more fully at the conclusion of this report. While
agencies should have discretion to elaborate more fully on their
petition practice, the process should generally include a
description of the format required for a petition, establishment
of a public docket for each petition, public solicitation of views
prior to denial or formal commencement of a rulemaking proceeding,
and formal notice to the petitioner, and sometimes to the public,
of the disposition. Most of the agencies studied in detail
currently have written procedures in place which exceed in varying
degrees the minimum recommended. While the research did not
discover numerous instances where an agency's failure to adopt
formal procedures for the receipt, consideration and disposition
of rulemaking petitions ha^ created documented problems for the
petitioner or the agency, the experience of agencies which have
handled petitions, various statutory provisions and the dictates
of sound administrative practice support agency adoption of at
least the minimum procedures described at the conclusion of this
report.

In order to put the study and its results in focus, it should
be noted at the outset that there was no attempt to examine iy^any
depth agency practices with regard to requests for "waivers , "
"exemptions," "variances" or other types of administrative
action that generally impact on one person or legal entity. Such
relief can, however, apply to an entire class and, therefore,
bears certain important similagities to a "rule" as defined by the
Administrative Procedure Act. Nor were some very specialized
rulemakings comnjenced at the request of persons outside JJe agency
such as ratemaking, establishment of marketing quotas, and
export controls surveyed to any great degree, though here again
rulemaking in the sense used in the APA is involved. To some
extent these self-imposed limitations on the study were artificial
and based on time and resource considerations. Nevertheless, it
is likely that many of the findings, conclusions and
recommendations apply equally well to at least some of these more
specialized matters.

Certain fundamental characteristics of the petition processes
as established by the APA and other statutes should be noted at

498 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

the outset since they help structure the following discussion and
its conclusions.

The language and history of the statutory petition provisions
suggest that agencies should assign some significant priority to
the handling of petitions for rulemaking. Petitions must be
given serious and expeditious consideration. However, as employed
in this report, the term "priority" is not intended to suggest
that agencies must necessarily put the handling of rule-making
petitions ahead of any other type of matter on which the agency
may or must expend its resources, with the exception of response
to suggestions for rulemaking changes made by the public through
means other than those sanctioned by statute. Rather, "priority"
is given by treating the consideration and disposition of
petitions as one of the agency's important responsibilities, one
which makes a legitimate claim to its time and resources and
should not be given short shrift in allocating these.

Moreover, the statutes, and in particular the APA, demand
that petitions for rulemaking not be treated entirely on an ad hoc
basis but rather pursuant to written procedures adopted by the
agencies. An agency should by either rule, staff directive or
other formal statement lay down at least the basic outlines of the
petition process. This type of formality has a number of benefits
for both the petitioner and the agency. But one of the most
important is to help assure that some priority is given to the
treatment of petitions. The formality of the process achieves
this in a variety of ways, some subtle though not necessarily
ineffective on that account.

Finally, while a petition may launch an agency proceeding
that involves the participation of many persons and legal
entities, the agency has the obligation to directly inform the
petitioner of an unfavorable disposition of his or her petition
and the reasons for this action. To the extent that there is a
perception that the bureaucracy deals with the public in an
impersonal manner, this obligation has significant symbolic value
today.

PETITIONS FOR RULEMAKING 499

II.

The Right to Petition: Constitutional and Statutory Sources

A. The Constitution

In English-speaking countries the right to petition can be
traced back to the Magna Carta in 1215. In 1669 the House of
Commons resolved that every commoner in England possessed the
right to prepare and_present petitions to it in the case of
alleged grievances. The Bill of Rights of 1689 declared that
"it is the Right of the Subjects to petition the King."
Assertion of the right in the colonies in North America appeared
in the Stamp Act Congress of 1765 when its Declaration included
the right to petition the King and Parliament.

The First Amendment to the United States Constitution,
ratified in 1791, enjoins Congress from making any law "abridging
. . . the right of the people ... to petition the Government for
a redress of grievances." The right of petition thus recognized
first came into prominance in the early 1830 's when petitions
against slavery in the District of Columbia flooded Congress. In
response to this development the House of Representatives in 1840
adopted a standing rule that no such petition could be received or
entertained by the House. However, the efforts of the former
President John Quincy Adams resulted in the repeal of this rule in
1844. His attack on the rule was based in part on
constitutional grounds .

As it has been interpreted by the courts, the right to
petition has not been confined to demands for a redress of
grievances in any technical sense but encompasses demands for the
exercise of government powers to further the interest of the ^^
petitioners and their views on politically contentious issues.
Moreover the Supreme Court has held that the right extends to all
departments of the government, including administrative
agencies .

Given all this, it might^be argued that Section 553(e) of the
Administrative Procedure Act is superfluous on the ground that
it merely directs agencies to afford "interested persons" the
"right to petition" with regard to the issuance, amendment and
repeal of a rule. when the Constitution itself forbids both
Congress and impliedly federal administrative agencies from
preventing the petitioning of citizens. In fact it might be
argued that the constitutional protection is broader than the
opportunity to petition afforded by the APA since by its terms ^g
Section 553(e) is limited to petitions by "interested persons."

More importantly, if 553(e) were interpreted as not adding
anything to existing constitutional protection, the criticism
leveled by some commentators at Section 553 as currently drafted
would be beside the point. On their reading of Section
553(a), the statutory right to petition does not apply to rules

500 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

involving "a military or foreign affairs function of the United
States" or to "a matter relating to agency management or
personnel or.to public property, loans, grants, benefits, or
contracts." The express language and arrangement of Section
553(a) seems to support this interpretation. But even if that
interpretation of the APA were correct. Congress in 1946 could
hardly achieve such a result to the extent that 553(e) provides
nothing more than the First Amendment, a position not without
support in the legislative history of the APA.

This makes it crucial to ascertain the exact scope of the
constitutional right to petition as well as the intended scope of
Section 553(e). As to the former, the Supreme Court held in Smith
V. Arkansas State Highway Employees and most recently reiterated
in Minnesota Board for Community Colleges v. Knight that the
first amendment rights of speech, association and petition do not
require government policymakers to listen or respond to the
communications by individuals on public issues. In short the
constitutional right to petition is no more than the right to
"make a clamor."

That the drafters of the APA saw the need to include a
provision such as Section 553(e) suggests that they intended to
provide an opportunity going beyond that which was
constitutionally protected, though thev-may have considered the
First Amendment for their inspiration. In this connection it
should also be noted that while the First Amendment assumes that a
"right to petition" exists independently of its strictures and
merely commands that Congress not abridge it. Section 553(e)
directs agencies to "give an interested person" the right to
petition, a choice of language and syntax which suggests that the
operative effect of the provision is not merely to confirm and
protect but to create. Furthermore, even if the ADA drafters
intended that the statutory provision merely reiterate what they
understood to be the existing constitutional right, the
legislative history of Section 553(e) clearly establishes a scope
for the statutory right to petition that goes far beyond what the
First Amendment, as currently interpreted, encompasses.

B. The Administrative Procedure Act: Sections 553(e) and 555

As noted above, the constitutional right to petition is not
"action- forcing" with respect to administrative agencies for its
strictures do not compel them to receive, consider or act upon
petitions submitted by anyone. However both the Senate and House
Reports on the bill that ultimately was enacted in 1946 as the
Administrative Procedure Act emphasize that agencies have the
obligation under Section 553(e) tp^receive and consider petitions
filed pursuant to that provision. Moreover, in accordance with
Section 555(b) the agency must "[w]ith due regard for the
convenience and necessity of the parties . . . and within a
reasonable time, . . . proceed to conclude a matter presented to
it." Where it denies a petition, the agency must, according to
Section 555(e), give "prompt notice" and, "[e]xcept in affirming a

PETITIONS FOR RULEMAKING 501

prior denial or when the denial is self-explanatory, the notice
shall bet-accompanied by a brief statement of the grounds for the
denial." The legislative history indicates that the notice of
denial must be calculated to inform the petitioner personally of
the action taken and the reasons therefor.

Section 555(e) by itself does not expressly or impliedly
require that an agency consider the contentions raised in a
petition. Unless or until an agency determines to deny a
petition, its obligations are not triggered. The_ obligation to
consider the petition arises from Section 553(e) and the
requirement that it dispose of it in some fashion seems to come
from Section 555(b) which requires an agency to "proceed to_„
conclude" matters presented to it within a reasonable time.
Therefore it simply is not true that "[t]he chief practical
significance of this express right to petition requirement" is
"that the denial of a section 553(e) petition is governed by the
provisions of section 555(e)."

The APA specifically refers to only one type of possible
disposition of a petition: Section 555(e) expressly refers to
denial of petitions. Since the language of Section 553(e)
refers to the right to petition "for the issuance, amendment, or
repeal of a rule," it can be argued that a final affirmative
disposition of a petition, that is, a "grant," occurs only with
the final promulgation of a rule which corresponds to some degree
to the petitioner's request (though that action may also
constitute a denial to the extent the petitioner does not get
everything it initially called for).

There are several pre-promulgation steps an agency can take
in response to a rulemaking petition including: internal
investigation of the merits of the petition, publication in the
Federal Register of the petition or a summary of it requesting
comments from interested persons, publishing an advance notice of
proposed rulemaking soliciting comments, holding a hearing or
conference on the proposal, and issuing a notice of proposed
rule-making. Each of these is an intermediate stage in the
consideration of a proposal, the terms of which may undergo
significant change throughout the process of consideration.
Logically there is no basis for considering one rather than
another of these as a final affirmative disposition of a petition.
In fact, if any tiling other than the issuance of a final rule were
considered a "grant" of the petition, there is no reason why an
agency could not reply to a petition by thanking the petitioner
for an idea that has merit and is worthy of consideration but
treat that as the end of the matter. As long as that type of
response was issued in a timely fashion, it would arguably have
discharged its duty under Section 555(b) to "proceed to conclude"
the matter presented to it with reasonable promptitude. Under
this reading, the APA provisions applicable to petitions would
assure nothing other than some consideration followed by an
encouraging response. Since a denial could invite judicial review
and reversal, it would be much easier for an agency to issue

502 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

this type of disposition and then forget about the matter.
Certainly if it could legitimately do this, the APA petition
procedures do amount to-little more than a requirement that the
agency answer its mail.

On the other hand, if a "grant" of the petition occurs only
when a final rule is issued, the agency can fulfull its Section
555(b) obligation only by a denial (in whole or part) or by
issuance of an adopted rule. In this circumstance a denial may be
judicially reversed if not well-considered and a grant will not
be lightly made. Moreover, unless a denial is forthcoming, the
agency is under the obligation to complete the entire rulemaking,
not just answer its mail, with reasonable promptitude. A denial
would occur when the agency first formally indicates its
unwillingness to adopt, in whole or part, the suggestions of the
petitioner, though a "final" denial subject to judicial review
may not be deemed to occur until the immediate possibilities of
agency change of heart appear unlikely.

The APA petition process requires little of the agency in
terms of the consideration given to petitions if a polite "thank
you" is an acceptable final disposition. Only if the grant of an
APA petition is deemed to occur at the time of final issuance,
amendment or repeal of a rule can it be realistically said that
the APA requires serious consideration of rulemaking petitions and
that their disposition has been statutorily designated as an
important aspect of an agency's workload.

There is nothing in the text or legislative history of the
APA that unequivocally indicates which construction represents the
intent of Congress in 1946. However the latter interpretation is
more consistent with these materials. If adoption of this
construction would create substantial problems for agencies by,
for example, consuming large portions of their scarce money and
manpower, this might be enough to argue against its adoption where
the evidence is as relatively inconclusive as it is on this issue.
But such results are not likely to be forthcoming. This
interpretation does not require that an agency grant petitions,
only that it seriously and with reasonable promptitude decide
whether or not to issue the proposed rule and, if it decides in
the affirmative, to proceed with reasonable dispatch, consistent
with other agency business, to issue a rule which may reflect
petitioner's suggestions to some degree and differ from them as to
others (a grant in part and denial in part). Accordingly, it is
suggested that this first interpretation is the preferred one.
As noted below, agencies currently differ in their approaches to
this issue.

70
Both the House proceedings on the APA and the Attorney

General ' s Manual indicate that it was expected that agencies

would expressly adopt procedures to govern the receipt,

consideration and disposition of petitions. As an example of

the type of procedural framework contemplated, the Manual

indicates that rules might "call, for example, for a statement of

PETITIONS FOR RULEMAKING 503

the rule making action which the petitioner seeks, together with
any data available in support of his petition, a declaration of
the petitioner's interest in the proposed action, and compliance
with reasonable formal requirements." As will be seen later,
many agency regulations implementing Section 553(e) seem to have
been modelled on this suggested outline of a procedural framework
for considering petitions.

Despite the absence in the APA of language mandating that
agencies formally adopt and publish anything regarding the
petition process, the Freedom of Information Act appears to fill
the gap in this regard, at least to some extent. Section
552(a)(1) provides in relevant part that:

Each agency shall separately state and
currently publish in the Federal Register for
the guidance of the public-

(A) descriptions of . . . the established
places at which, the employees . . . from
whom, and the methods whereby, the public may
obtain information, make submittals or
requests, or obtain decisions;

(B) statements of the general course and
method by which its functions are channeled
and determined, including the nature and
requirements of all formal and informal
procedures available;

At a minimum this suggests that the agency must publicly indicate
the place or places where petitions may or must be filed,
mention petitions for rule-making as one "method" of making a
request, describe generally the manner in which the agency
decides to grant or deny a petition pQ^nd provide some guidance
regarding the content of a petition.

While the right to petition is reserved to "interested"
persons and the- Attorney General suggested that it would "be
proper for an agency to limit this right to persons whose
interests are or will be affected by the issuance, amendment, or
repeal of a rule," it is doubtful that Congress contemplated the
requirement of "interest" as a substantial restriction. Neither
the Senate nor the House Reports in 1946 purported tOg^xplain the
meaning of this term as it is used in Section 553(e). It is
employed without illuminating explanation in other parts of the
APA, including Section 553(c) 'Sggrovision for opportunity to
comment in informal rulemaking, 555(b) 's direction that the
agency permit persons to appear before it for the presentation of
requests, and 555(e) 's obligation to give prompt notice and

504 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

explanation of denial of petitions. An "interested person" is
presumably not necessarily the same as one "adversely affected or
aggrieved" as that phrase is used in Section 702 which defines
standing to obtain judicial review of agency action. To the
extent the APA petition process is action- forcing it might make
some sense from the point of view of conserving agency resources
to read the requirement of an "interest" as referring to more than
an "abstract," "academic" interest. But to the extent that good
ideas for regulation or deregulation that should in fact be
seriously considered are not necessarily the monopoly of regulated
or beneficiary groups, such a reading has little to recommend it
and, as wggShall see, is not the one generally adopted by
agencies. At the same time, however, requiring a petitioner to
describe the nature of its interest in the subject matter of a
petition may provide the agency with information helpful in
deciding what action to take with regard to the petition. For
example, in some instances a petition from an individual whose
"interest" stems from years of prominent research and teaching in
an area may justifiably be taken somewhat more seriously than one
from someone entirely without Pgigr demonstrated "interest" in the
subject matter of its proposal.

Since the APA gives "petitions" some type of special status
in forcing their receipt, consideration and final disposition that
does not attach to "requests" that might otherwise be presented to
an agency, it is crucial for the agency to determine whether a
particular communication from an outsider is in fact entitled as a
matter of law to this special treatment. In the course of a
week's work, agency personnel may be bombarded in a variety of
ways with requests for action. A citizen "complaint" may be
relayed over the telephone to the secretary of a regional
administrator and express indignant disapproval of a recent
announcement of agency policy. Or a two hundred page,
type-written document, prepared by a lawyer, entitled "petition,"
addressed to the Secretary of the Department of Agriculture, and
expressly invoking Section 553(e) may be hand-delivered to the
agency's offices in Washington. Literally any communication, oral
or written, from an outsider to agency employees, asking directly
or indirectly, in a formal or informal manner, for regulatory
change, could be considered a "petition" within the meaning of
Section 553(e). Each agency would appear, however, to possess
some discretion to require that a communication bear certain
characteristics before it triggers the obligations that follow
presentment of a petition. Reasonable (that is, not overly
burdensome) procedural rules or other written guidelines can
presumablygdraw the line between what will be treated as a
"petition" and what will be handled as "correspondence" or a
"complaint." If the latter, the agency has no unqualified legal
obligation under the APA to accept or consider it. Such rules or
other written instructions defensibly help the agency conserve its
scarce decision-making resources for those persons who are willing
to comply.

PETITIONS FOR RULEMAKING 505

If a request does not meet such threshold requirements, an
agency can refuse to accept ifc, for filing as a petition or refuse
to consider it on the merits. In those circumstances its
procedural decision is arguably subject to the requirements of
Section 555(b) that it "proceedgto conclude" matters "presented"
to it within a reasonable time. This means that the rejection
of an attempted filing for procedural defects should occur with
promptitude following presentment. Even if the agency can
permissibly find that the submission does not qualify as a
petition and refuse to receive it, Section 555(b) imposes the
obligation on it to make a decision one way or another on this
matter and it implicitly would seem to require it to consider the
petition for these limited purposes, though the obligation to
consider the merits of a petition arguably finds its source in
Section 553(e). If its determination of noncompliance and
consequent rejection of a filing or refusal to consider a petition
is considered a "denial" within the meaning of Section 555(e), the
agency is alsg subject to the requirements of prompt notice and
explanation. Of course if an agency adopts rules to govern its
handling of petitions, where judicial review is available, the
courts will expect the agencies to comply with them, or at least
explain instances of noncompliance.

Section 553(b) exempts from the APA's notice and opportunity
to comment procedures an agency's adoption of interpretative
rules, general statements of policy, rules of agency organization,
and agency rules of practice and procedure. However, all of
these are subject to the right to petition and the obligations
found in„Section 555 that attach upon filing of a petition or its
denial. In fact since the agency's initial adoption of these
rules may (though need not be) without public input, the right to
petition allows interested persons following adoption to afford
the agency the benefit of their views^and information which may
suggest the need for reconsideration. A denial of the petition
for amendment or repeal may invite judicial correction where the
explanation for the agency's refusal to change its mind is not
satisfactory.

In sum, agency handling of petitions for rulemaking submitted
under the authority of the APA has (or should have) three salient
characteristics :

a. Sections 553(e), 555(b) and 555(e) together create a
method of citizen contribution to the regulatory process that is
action- forcing. If considered a petition within the meaning of
the APA and reasonable implementing guidelines, a request for
rule-making action must be received, considered, and disposed of
on the merits with reasonable promptitude. Accordingly,
regardless of what is considered a "grant" of a Section 553(e)
petition, the APA insures that agencies give some priority in
ordering their workloads to the disposition of petitions for
rulemaking over informal response to suggestions from the public
for rulemaking changes. Moreover, to the extent that a "grant" of
a petition is not deemed to occur until the final rule conforming

506 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

to the petition is issued, the APA ensures that more than cursory
treatment is accorded to petitions for rulemaking. Therefore, the
priority assigned to the handling of petitions becomes somewhat
more significant as a general matter in terms of the allocation of
agency resources. To the extent that an agency's failure to
receive, consider or act on a petition in a timely fashion or its
denial of the petition do not fall with the exceptions to judicial
review found in Section 701(a)(1) or (2) of the APA, the courts
can to some degree enforce the procedural obligations imposed on
the agency as well as assure a minimum degree_of reasoned
decision-making in the denial of petitions.

b. While section 553(e) is silent on the matter, the
legislative history of that provision as well as the Freedom of
Information Act require that the petition process be described in
writing to some degree. The content of petition rules or
guidelines may vary from agency to agency, however. The factors
that should enter into their design will be discussed later.
Their vervQexistence can both expedite the handling of
petitions as well as indicate to the public and agency
employees that the agency considers the petition process
important. In these ways, as well as others, a written
description (or prescription of the petition process) can ensure
that petitions are given the priority contemplated by Congress in
1946. By the same token, however, excessive formality in the
petition process can interfere with expeditious handling of
petitions.

c. While a petition may trigger agency consideration that
goes far beyond the materials submitted by the petitioner and
ultimately result in a proceeding involving many sectors of the
public, an obligation rests on the agency, if it ultimately
determines not to take any action or not to take the type of
action initially requested, to personally notify the person who
initiated the process.

C. Section 553(a): Purported Exceptions to the APA Petition
Process

As noted above, it has generally been assumed that the
Section 553(e) right to petition is subject to the exceptions for
various matters and functions found in Section 553(a), a
construction, suggested by the express language and structure of
Section 553. However, in discussing Section 553(a), the House
Report noted:

The exception of proprietary matters is
included because a main consideration in such
cases relates to mechanics, interpretations,
or policy and it is wise to encourage and
facilitate the issuance of rules by dispensing
with all mandatory procedural requirements.
Changes can then be sought through the
petition procedures of section 4(d), by which

PETITIONS FOR RULEMAKING 507

such rule-making may also be initially
invoked .

In referring^to "these exemptions" immediately after making this
statement, the comments with regard to petitions are arguably
not limited only to petitions with regard to proprietary matters.
No similar statement suggesting that the right to petition applies
to both exempt-and non-exempt matters and functions, occurs in the
Senate Report and it was in the Senate that the bill
originated, only to be amended^bv the House in minor detail not
relevant for present purposes. If the originating chamber
intended one result to be achieved by specific language and
structure and the other intended a different result but retained
the original language and structure, a difficult problem would be
presented. In this circumstance a good argument could be made
that if the second chamber differed in the meaning it attributed
to the language used by the originating chamber it had the
obligationgto expressly amend the bill for its meaning to
prevail .

However, in looking closely at the the language of both the
Senate and House reports, the focus of the discussion regarding
the exemptions is on the need to avoid the alleged burdens of
"public rulemaking" in the case of the exempt functions and
matters. Both note that "[tjhese exemptions . . . merely
confer a discretion upon agencies to decide what, if any, public
rule-making procedures^shall be utilized in a given situation
within their terms." Moreover, to the extent the APA petition
provision was motivated by Congress's interpretation of the
mandates of the First Amendment, it is difficult to argue that
Section 553(a) was intended to be applicable to the right to
petition found in Section 553(e).

In his earlier study of the section 553(a) exceptions, ^^^
Professor Bonfield assumed that they applied to Section 553(e).
His ultimate conclusion was that "an exemption from the right to
petition conferred by section 553(e) seems no more necessary or
justifiable for subsection (a) . . . rule-making than for
rule-making already covered by section 553." This itself casts
some doubt on the correctness of his initial premige regarding
Congress's intent regarding the scope of 553(a). In fact poor
draftsmanship, not conscious legislative design, is likely
responsible for the structure of^Section 553 on which his initial
premise was presumably founded.

Since the Supreme Court has yet to adopt the standard
interpretation that Section 553(a) applies to the right to
petition, there is nothing to prevent the agencies or the courts
from reexamining this matter and adopting the construction
suggested above. As Professor Bonfield has argued, the right to
petition is important from the point of view of allowing affected
parties to protect their interests and forcing agencies to open
their doors to new ideas and information not otherwise available
to them. While the APA right of petition imposes some costs on

508 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

118
an agency given its action- forcing characteristic, those would

seem to be relatively modest. There is no empirical data now

available indicating the burdens that might be imposed on agencies

which up until now may have considered themselves exempt from

petitions with regard to the exempted areas. However, even under

the traditional interpretation of Section 553(a), some agencies

currently authorize in a limited fashion the filing of petitions

for rulemaking with regard to exempted functions and matters.

Regardless of whether or not 553(a) is reinterpreted in the
manner suggested above. Congress should amend Section 553 to make
clear that the right to petition applies even to exempt matters
and functions. It will thereby either finally set matters
straight after years of confusion, assuming the revisionist
interpretation suggested above is correct, or, if that
interpretation is in fact incorrect, eliminate an unnecessary
restriction on the public's ability to contribute in some degree
to the fashioning of agency regulatory policy.

D. Statutory Regulation of the Petition Process Outside the APA

1. Special Petition Statutes

Over the years, but in particular since 1970, Congress has
enacted a variety of statutory provisions giving the right to
petition for the issuance, amendment and repeal of specific types
of rules. It has chosen not to rely solely on the APA petition
process, in part, because in many of these instances it has
perceived needs for strict time deadlines for agency action, for
procedures in addition to those expressly mandated in the APA, and
for laying down specific substantive criteria to direct the grant
or denial of petitions. Legislative desires to promote, or at
least facilitate, citizen participation in the administration of
programs for public health and safety, which^is evidenced
elsewhere in the legislation of the 1970 's, found expression in
many of these special petition provisions. They sometimes
require, for example, public notice of receipt of petitions for
the purpose of solicitation of views by interested persons with
regard to the merits of rulemaking petitions. In several cases
judicial review of petition denials and failures to act on
petitions are made expressly subject to judicial review. A brief
summary of some of these special petition statutes is included in
Appendix A to this report. It demonstrates both the variety of as
well as similarity among many of these statutory provisions.

A few of these petition statutes expressly mention APA
Section 553(e) and their language gives support to the view that
the "grant" of a Section 553(e) petition occurs at some point
before the issuance of a final rule. Where in enacting
statutes after 1946 Congress purported to construe (and not amend)
Section 553(e), its views regarding the meaning of that provision
may be persuasive but are not dispositive of this issue.

PETITIONS FOR RULEMAKING 509

loyer, other petition. statutes refer to petitions to
;" or "initiate" a proceeding. In these instai

Moreoi
"commence" "^'^~' or " initiate" "^"^^ a proceeding. In these instances
it is clear from the language that the grant occurs prior to the
formal beginning of the rulemaking. The language of APA
Section 553(e) differs significantly from these schemes, referring
to petitions "for the issuance, amendment, or repeal of a
rule." Assuming a different intended meaning can be attributed
to such differences in language, these special statutes give
support to the interpretation of Section 553(e) that a grant (i.e.
final affiinnative disposition) of an APA petition occurs not at or
prior to commencement or initiation of a rulemaking but at its
conclusion.

Some of the special petition statutes mandate Federal
Register publication of the receipt and/or denial of
petitions. However, the benefits of publication notice may be
outweighed by its costs where publication is required in all cases
falling under the statute. In other instances Federal Register
notice may not be enough to reach persons who should know of the
pendency or disposition of a petition. In the case of a
denial, certainly the petitioner should be personally notified, as
is the case under Section 555(e).

2 . Regulatory Flexibility/Impact Analysis and the
Regulatory Planning Process

Regulation of the federal rulemaking process has its sources
not only in the Administrative Procedure Act and the organic
statutes establishing various substantive programs but also in
various other statutes and executive branch pronouncements. With
regard to the petition process, the mpst significant of them are
the Regulatory Flexibility Act (RFA), Executive Orders
12,291 and 12,498, and the directives of t^g^Office of
Management and Budget implementing those Orders . Appendix B to
this report describes both the substantive and procedural impact
of these on the petition process.

510 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

III .

Agency Petition Regulations: Overview, Observations

and Conclusions

There is considerable variation among federal agencies
regarding the extent to which they have adopted procedural rules
or other written statements describina or prescribing their
petition processes. Some have none; others laraely mirror,
without elaborating much on, statutory procedures; and still
others have adopted rather detailed requirements for and
descriptions of their petition processes goina considerably beyond
the procedures expressly mandated by statute. This variation
can be attributed to a variety of factors (some interrelated)
including the number of petitions filed, agency priorities in
establishing a regulatory framework, differing views regarding the
usefulness of elaborating such procedures in writing, and
individual regulatory "style" of agency staff. A detailed
overview of the extant written procedures is contained in Appendix
B to this report. That summary is based primarily on procedural
rules contained in the Code of Federal Regulations, where most
agency statements of the various petition processes are found.

Two principal issues must be addressed. As a general matter
should an agency adopt some written statement of the procedures
applicable to the receipt, consideration and disposition of APA or
other statutory petitions for rulemaking? If so, what factors
should it consider in designing this framework?

140
With minor exceptions, agencies are not expressly mandated

by the petition statutes to adopt procedural rules or other

written statements that prescribe or describe their petition

processes. The Freedom of Information Act, however, requires not

necessarily "rules" but some public statement^ of various

matters pertaining to the petition process.

Some agencies deal with some or all rulemaking petitions on
an ad hoc bagis, without implementing rules, written directives or
guidelines. Where few petitions are filed, such an approach
may seem expedient from the agency's point of view. In fact the
existence of regulations may expose the agency to judicial
reversal in those instances where the procedural requirements are
arbitrarily disregarded. As we will see, in holding that
denials of petitions are generally subject to judicial review, the
courts have indicated that procedural deficiencies may be
particularly vulnerable to judicial correction.

However, such reasons alone do not justify ignoring the ^._
Freedom of Information Act, the legislative history of the APA
and the dictates of good administrative practice which suggest,
on the contrary, that implementing regulations, public statements
and/or internal directives prescribing or describing the petition
processes are required. While many petitions may present unique
problems for an agency, it is unlikely that their uniqueness

PETITIONS FOR RULEMAKING 511

overwhelms the ability to discern and articulate basic
similarities in the process for receiving, considering and
disposing of such petitions.

In dealing with agency regulation of the petition process,
three distinct, though interrelated, matters are presented:

a. the need for the agency to make the
formal decision regarding what the
process should as a general matter look
like rather than treat petitions on an ad
hoc basis;

b. the need for a written description of the
process as formulated by the
decisionmakers; and

c. the need for making that process known to
persons in the agency who will be
responsible for processing petitions and
to prospective petitioners.

The written description may be called a rule, staff manual,
order, directive or other type of pronouncement. Its existence
obviously indicates that the agency has in fact made a decision
regarding what the petition process should look like but does not
necessarily assure that affected persons will be aware of its
terms. In part the Freedom of Information Act attempts to solve
this last problem.

The purposes advanced by the existence of a set of
implementing rules, directives or other written statements of the
petition process (es) include the following:

1. Such statements reinforce the priority assigned by the
APA, and arguably other petition statutes, to the disposition of
petitions for rulemaking. The very existence of these
indicates to the public, as well as the agency's own employees,
that the agency considers response to petitions an important part
of its work and in so doing may help focus staff attention on
their expeditious and well-considered handling. By sketching the
course of a petition from filing to disposition, a routine is
established, the very existence of which, if adhered to, may also
assist in this regard.

2 . Such statements conserve agency resources . By
prescribing such matters as form of petition, the agency can more
easily segregate those communications that are entitled to the
priority treatment accorded petitions by statute from
"correspondence" or "complaints" that do not. Such
reguirements may also assure that the agency obtains at the outset
the type of information needed for a decision. They also reduce
the need to respond to citizen inquiries with respect to the
required contents of a petition. By establishing at least the

512 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

minimal outlines of a routine, resources in handling petitions may
be saved.

3. Such statements advise prospective petitioners what is
necessary to activate the agency consideration required for
proposals that qualify as petitions. Guesswork by the petitioner,
which may undercut its chances of success, may be reduced
substantially .

4. Such statements, by limiting discretion, may help the
agency eliminate instances of unequal treatment of petitioners.

Written statements of the petition process would appear to be
valuable even though, to a significant extent, they may expressly
mirror the discretion in the manner of processing petitions
reserved by the agency. Such discretion may include whether or
not to issue a public notice of receipt of a petition in order to
solicit comments from interested persons, to hold a meeting,
hearing or conference, or to publish notice of a denial. At least
both staff and the public are advised regarding the possible
alternative actions available where they are specified in, for
exeimple, a rule and they can direct their attention to arguing for
or calculating the costs and benefits of those designated
alternatives .

Neither the APA nor generally the special petition statutes
describe the petition process in any great detail. If an
agency adopts regulations or other written statements that merely
mimic, without more, these statutory provisions, the above
described purposes will simply not be fully achieved.

Therefore, agency statements must elaborate to some degree on
the statutory language, though how much should in the end vary to
a great degree with each agency. In tailoring its set of
procedural regulations applicable to the petition process, the
agency must consider, among other things, the substantive policy
mandates of governing statutes, the nature of the sector of the
public the agency serves and/or regulates, as well as the degree
to which uniqueness may characterize the matters raised in
petitions that may be filed.

For example, if the organic statute creating the program
administered by the agency requires that the agency make various
findings of law or of scientific fact before adopting a particular
standard, a requirement that the petitioner submit certain
specific types of technical information or address certain issues
of law or fact may expedite processing the petition and save
agency resources along the way. Where the agency's "clientele"
possesses an effective network for discovering and publicizing
matters of common interest through, for example, newsletters or
trade magazines. Federal Register publication of ncptice of filing
a petition may be unnecessary to solicit comments. A final
example relates to the volume of petition business. While the
number of petitions filed with an agency should not determine

PETITIONS FOR RULEMAKING 513

whether or_not regulations or other written directives should be
adopted, it might suggest, in some instances, and at times in
connection with other factors, the elaborateness with which the
process is regulated. The more the volume, potentially the more
need there is for a clearly established administrative routine and
the more agency resources, such as answering inquiries regarding
the form of petition, that might be saved through a detailed
framework for filing and decisionmaking.

All of this suggests that there^is good reason for variation
between, and even within, agencies with respect to procedures
applicable to the petition process and even for encouraging the
adoption of procedural regulations that do not always impose hard
and fast requirements but permit the exercise of some discretion.

Somewhat along this same line, the agency should have and
exercise reasoned discretion to overlook non-compliance by
petitioners with its petition regulations, in particular
requirements regarding the form of documents, though of course
this discretion must be exercised with some restraint or the
existence of the regulations fails to serve the purposes outlined
above. Several agencies have rules that specifically state
that non-compliance means that a document will be treated as
routine correspondence, a pronouncement that has much to
recommend it in terms of putting the public on notice of the
consequences of failure to comply.

The Consumer Product Safety Commission is apparently alone in
its distinction between the provisions of its regulations that
must generally be complied with ("requirements") for a document
to be treated as a petition and processed accordingly and those^
with which compliance is only encouraged ("recommendations").
Where an agency has determined the bare minimum of what it wants
(and needs) to demand of petitioners, such an approach avoids the
spectre of agency disregard of its own express procedural mandates
when it accepts as a petition something which fails to meet what
appear to be the generally applicable requirements. At the same
time the agency gives guidance to those petitioners who have the
knowledge and resources to supply the agency with all that is
necessary to expeditiously dispose of the petition. The approach
obviously evidences a thoughtful and generally hospitable attitude
toward the petition process .

Quite a- few agencies have two or more sets of petition
regulations, and this is often based on the fact thst the
regulations relate to different substantive programs which may
be administered by different parts of the same agency. On the
assumption that a petitioner may be most familiar with and/or
likely to resort to regulations contained in the part of the Code
of Federal Regulations pertaining to the substantive program of
interest to it, the publication by an agegcy of several sets of
regulations, even if largely identical, may seem to make some
sense, though, as noted below, Vgre efficient ways of effecting
the same goal may be available. Substantial variation within

514 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

an agency among sets of petition regulations where the variation
is not apparently responsive to statutory command or such factors
as those listed above is not, however, defensible and suggests
a lack of communication within or an oversight by the agency. An
excimple here seems to be the Department of Housing and Urban ^_
Development which has a set of regulations generally applicable
and one applicable specifically to the Interstate Land Sales
Disclosure Act. The latter, but not the former, imposes
various time limits for agency action on petitions, provides for
the holding of public hearings, requires that a copy of the notice
of proposed rulemaking be sent^to petitioner and contains various
differences of form and style.

In order to avoid inconsistency of treatment of petitions
where such inconsistency has no reasoned basis, provide economy of
statement of procedures, and mitigate confusion by outsiders
dealing with the agency, the following general approach to the
arrangement within the Code of Federal Regulations of agency
petition procedures appears advisable where the agency administers
more than one substantive program:

1. Where there is no reason to differentiate the petition
procedures for each program, the agency should publish one set of
procedures in the section of the Code of Federal Regulations
governing its general practices. To facilitate location of those
by potential petitioners focused on one particular program, a
brief reference back to the general set of petition procedures
should be, where appropriate, inserted in those regulations which
are specifically applicable to each substantive program. A
general requirement that the petitioner state expressly in the
petition the legal authority for the adoption of the regulations
proposed can help sorting out to which substantive program office
the petition should be forwarded for action.

2. Where the agency administers more than one substantive
program but, as will generally be the case, a substantial degree
of uniformity in treatment of all petitions is possible, the same
approach described above is generally appropriate with the
following exception. Where a substantive program requires, ^„-
because of statutory or other factors mentioned previously, a
procedure different from or in addition to those generally
applicable (including vesting greater or less discretion to take
certain types of action with regard to treatment of petitions),
the part of the Code of Federal Regulations relating specifically
to that program should contain both cross references to the
general set of petition regulations, where applicable, and also
set forth the distinct petition procedures relevant to that
program. For example, for ease of administration the docket room
for one program may be at a different location than for others and
this difference can be noted in the specific set of petition
regulations. Of course, in some instances clarity of statement
may require a self-contained petition regulation pertaining to a
particular program despite the similarity of such petition process
to the general one .

PETITIONS FOR RULEMAKING 515

3. Where uniformity of treatment of petitions addressed to
different substantive programs cannot be achieved to any
substantial degree, probably a rare situation, the petition
procedures designed for each program should be placed in the part
of the Code of Federal Regulations containing the other rules
specifically applicable to that program.

Such an arrangement may also help to avoid a serious problem:
underinclusiveness of agency petition regulations. For example,
some agencies have petition regulations applicable to one set of
rules or one program, but not to others. The frequency of
occurrence of this is not altogether clear, though an
impressionistic judgment suggests that it may be a very common
problem. Some of the petition regulations may purport to
implement, not Section 553(e) but other statutory petition
provisions, though those provisions do not encompass the entire
sphere of the agency's substantive rulemaking authority.

Another type of underinclusiveness is the failure of petition
regulations implementing Section 553(e) to cover, or at least
clearly extend to, all of the types of "rules" within the scope
of Section 553(e), that is, not only substantive rules but also
interpretative rules, general statements of poiicy and rules of
agency organization, procedure and practice. There is no
reason not to expressly encompass these rules within the scope of
published petition procedures. The same reasons favoring the
adoption of petition procedures operate here as elsewhere. In
fact the argument for formal petition procedures with regard to
these types of rules is particularly strong since the APA does not
mandate notice and opportunity for„comment from interested persons
prior to adoption of these rules. The petition process is a
way of forcing the agency, albeit after the fact, to consider
specific arguments against adoption. Written agency procedures
with regard to the handling of petitions may help assure that
these arguments are not taken lightly and are disposed of
expeditiously .

While petition regulations or directives of some type should
be adopted by each agency to apply to all grants to it of
substantive and other rulemaking authority, is it possible to
recommend the basic outlines of a set of petition regulations for
uniform adoption when it is conceded that each agency should
possess substantial discretion to treat the petitions it receives
in a distinctive fashion? Before answering this question, two
types of agency discretion must be distinguished: (1) agency
discretion to impose more procedural formality than any
recommended set of guidelines suggest, discretion clearly required
by the existence of different statutory directives and other
factors; and (2) agency discretion expressly reserved or described
in any set of proposed procedures to take one rather than another
step in the processing of a particular petition. Proposal of a
uniform set of regulations is facilitated by their incorporation
of provisions recognizing the latter type of discretion, which
provisions are in turn based on the assumption that mandating a

516 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

particular procedure for all petitions of the same type may be
unwarranted. At the same time specification in the regulations of
the possible alternative actions that might be taken serves an
important purpose and, at any rate, the model set ne'ed not be
without its mandatory provisions.

With regard to this model set, it is difficult to summon a
viable argument against the establishment of certain specific
requirements in view, most importantly, of (1) a prospective
petitioner's need to know minimally what is expected of him or her
in order to activate the obligation for receipt, consideration and
disposition of petitions, (2) the agency's need to conserve its
resources, and (3) the reviewing court's needs in order to conduct
whatever judicial review may be permitted. The general contours^
of the body of regulations pertaining to the petition process,
as well as the agency experience with handling petitions,
provides insight into. exactly what these minimal petition
procedures should be.

Adoption of this set of model regulations by Congress, or
uniformly by the agencies themselves, may obviate to a great
extent the need for many special petition statutes. The proposed
regulations equal or exceed the statutory requirements and, in
many instances where they give less, there is good reason for it,
suggesting that the statutory procedures are excessively
restrictive. Upon repeal of many of these statutory provisions,
the federal petition process with regard to rulemaking by federal
agencies would possess the following overall structure:

I . Minimum Petition Rules [Directives]:
Each agency with rulemaking power would
adopt at least one set of these, which
would expressly reserve discretion to the
agency to take or omit certain types of
action with respect to the receipt,
consideration and disposition of
petitions .

II . Special Petition Rules [Directives]:
Each agency could impose additional
requirements for receipt, consideration
and disposition of petitions (or
expressly reserve the discretion to take
certain actions). Such regulations
[directives] would either —

A. apply to all programs administered
by the agency; or

B. only certain of those programs or
parts thereof.

III. Exceptional Cases: In exceptional
circumstances, if such exist, an agency

PETITIONS FOR RULEMAKING 517

might depart from the uniform rules or
even adopt an ad hoc approach to deal
with a distinct class of petitions.
Congress could specify that an agency is
authorized to adopt this course of action
only after publishing its reasons for
doing so following opportunity for public
comment .

518 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

IV.

Agency Petition Practice

A. In General: Responses to Agency Questionnaire

For the purposes of this study, a questionnaire was sent to
obtain certain basic information regarding federal agency petition
practice. The addresses included the major executive
departments, or certain of, their components, as well as_t.he
independent commissions. Responses from almost all were
received. They disclose several significant general features of
the existing framework for the receipt, consideration and
disposition of petitions.

More than thirteen of the forty-six responding agencies do
not currently have any set of procedural regulations specifically
governing rulemaking petitions. The applicability of APA
Section 553(a) to the agency was not invoked as the reason.
Where an explanation was offered, the, one most frequently advanced
was the lack of any or substantial petition business. The
ease of informal communication of suggestions to the agency from
"outsiders" was suggested on several occasions as a reason for the
dearth of petitions and the consequent lack of need for petition
regulations. Another reason given for the lack of implementing
regulations was that other agency business had a "higher
priority. "

There are agencies, however, which have not been confronted
with a significant number of petition filings which nevertheless
have procedural regulations implementing APA Section 553(e). ^q_
The National Labor Relations Board is an example of the latter.
It explained its small number of filings by the fg^t that the
agency rarely engages in substantive rulemaking. Where
Congress has enacted a special petition statute, almost invariably
the agency has adopted some implementing regulations, though they
may no more than largely repeat the statutory provisions.

A few agencies have manuals, internal memoranda, orders or
directives to staff that describe the procedure for the receipt,
consideration and disposition of rulemaking petitions^ Even where
they do exist, they may be rather short and general and focus
on the allocation of responsibility within^ the agency for various
aspects of the processing of the petition. There are several
instances, however, where the express internal ordering by written
directive takes a very elaborate form. In several cases, the
petition process is not governed by a procedural rule published^ in
the Code of Regulations but by internal memoranda or directive.

There appears to be some substantial correspondence between
the existence of petition rules, staff manuals, orders or
directives, along with their elaborateness, and the number of
petition filings reported by the agency. In other words, the
greater the number of petition filings the more likely the agency

PETITIONS FOR RULEMAKING 519

has adopted a statement or statements describing or prescribing
the process for their disposition and the greater the likelihood
that these will be detailed in some degree. While it might be
argued that the absence of regulations has some deterrent effect
on the filing of petitions, this study disclosed no empirical
support for this proposition. Any person insistent on
communicating his or her proposals for regulatory change to an
agency will probably do so without regard to the existence of an
express agency process for receiving and acting on them, though if
they are treated as ordinary correspondence the priority assigned
by the APA to the consideration and disposition of petitions may
be lacking.

Ranking agencies according to number of rulemaking petition
filings alone is difficult for a variety of reasons, including the
fact that some do not maintain statistics in such a way as to
easily distinguish rulemaking petitions from others, or requested
general-rulemaking from rulemaking of^§^more specialized sort
which is not the focus of this study. Therefore, the available
statistics can convey only a general sense of where petition
filings are most common. With this caveat, the following listing
of some of the busiest agencies, along with the approximate number
of petitions filed each year, is set forth:

198
Food & Drug Administration (289)

199
Environmental Protection Agency (over 200)

Federal Communications Commission (72)

200

National„Highway Traffic Safety Administration
(20-25)^^"

Interstate Commerce Commission (less than
20)^""^

203
Department of Energy (over 17)

204
Federal Aviation Administration (15)

205
Department of the Interior (15)

P 06

Federal Highway Administration (10-15)

Bureau of Alcohol^ Tobacco and Firearms
(Treasury) (12)

Federal Energy Regulatory Commission (less
than 12)^

209
Veterans Administration (less than 10)

Department of Agriculture (Food Safety and
Inspection Service) (8)

520 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

211
Consumer Product Safety Commission (6)

212

Nuclear Regulatory Commission (4-6)

Occupational Safety and Health Administration
(4-6)

214
Commodity Futures Trading Commission (4-6)

Since this list includes the agencies that most frequently
receive petitions among all those surveyed, one of the most
obvious conclusions is that the scope of petition activity is
generally not great except with respect to certain programs and
these may involve specialized rulemaking which is not the focus of
this study. This is due to a variety of factors including the
current deregulatory climate and consequent perception by
potential petitioners that their requests for more^/ rather than
less) regulation will not be favorably acted upon, the expected
delay in agency action on petitions filed, and the availability
of means other than petitions_for influencing agency action,
including informal contacts and lawsuits.

Of course an inter-agency comparison of the numbers of
petitions filed is somewhat deceptive. It does not necessarily
indicate how much agency time and resources are expended on the
processing of petitions since the nature of the issues raised,
among other things, can make the decision-making process very
complex and time-consuming for some agencies and not for others .
Similarly a comparison between agencies with regard to the number
of grants or denials reveals nothing significant by itself. For
whatever it is worth, denials generally seem to outnumber grants
among agencies responding.

Rarely do the agencies expressly impose time limits
applicable to their disposition of petitions where there is no
underlying statutory time limit. Also unusual are instances where
the process for responding to a rule-making petition differs
depending on whether the requested change relates to the issuance,
amendment or repeal of a rule.

With respect to the time for disposing of petitions, the
available statistics are so sparse that drawing any general
conclusions is impossible. For instance, it cannot be said with
any certainty based on agency responses whether the existence of a
written petition process or time limits for agency action, imposed
by statute or otherwise, assures more expeditious disposition of
petitions than might otherwise occur. Delay in meeting deadlines,
however, does appear common. Statistics in this area can,
moreover, be very misleading since an agency's interpretation of
what constitutes a final disposition of a petition can
substantially affect its reported processing time. If, for
example, a "grant" is considered to occur only with the issuance
of a final regulation, it is more likely that delay will be
reported given the lengthy nature of certain types of

PETITIONS FOR RULEMAKING 521

219
rulemaking. On the other hand, if a "grant" means no more than

a friendly letter thanking the petitioner for a good idea or

signifies the intention to begin a rulemaking sometime in the near

future, the final disposition rate may seem impressive.

B. Seven Case Studies

In order to obtain a more complete understanding of agency
petition practice than the format of a questionnaire permitted,
interviews were conducted with the personnel of several agencies,
petition files were reviewed, and the organization and operation
of docket rooms were studied.

The choice of an agency for this more intensive examination
was dictated by a variety of considerations, the most important of
which were the following:

i. Voliime of Petition Filings

Agencies with significant experience in handling petitions
were chosen on the assumption that some of their experience might
be usefully relied upon by other agencies, or at least those
operating in similar regulatory contexts. By the same token,
agencies with comparatively little petition activity were included
for their points of view.

ii. Elaborateness of Written Petition Procedures

The degree to which an agency expressly regulates the
petition process was considered. The alternative approaches on
this score range from having no procedural rules on the books, to
intermediate complexity, and finally to rather elaborate
frameworks for disposing of petitions for rule-making. This
criterion permitted exploration of the reasons for the degree of
procedural variety currently existing in the petition area, which
reasons might have some generally applicable implications.

iii. Statutory Petition Procedures

By choosing some agencies subject to specific petition
statutes, particular problems experienced in their administration
might be discovered and conclusions drawn that could have broad
applicability .

iv. Regulatory Jurisdiction

An attempt was made to cover as much of the spectrum of
current federal regulatory activity as possible, including natural
resources and energy, business regulation, consumer protection,
and public health and safety. Issues peculiar to these areas
might call for specific tailoring of any general recommendations
made.

522 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The results of this process of choice and the ensuing
investigation follow.

1 . Department of Health and Human Services; Food and Drug
Administration (FDA)

Much of the substantive regulatory activity of the Food and
Drug Administration of the Department of Health and Human Services
is currently conducted through four "centers": Devices and
Radiological Health, Drugs and Biologies, Food Safety and Applied
Nutrition, and Veternary Medicine. Responding to petitions,
whether for rulemaking or other action, constitutes a significant
portion of FDA's business. As indicated in Appendix A, the
agency is subject to several statutes that regulate to some extent
the procedural manner in which it responds to the filing of
petitions^for rulemaking. The agency has elaborated considerably
on those as well as established a framework for filing,
considering and responding to those petitions whose treatment is
governed only by very general statutory regulation, such as found
in the APA. Unless more specif ic^regulations are applicable to
the subject matter of a petition, petitions for rulemaking are
governed by the procedures for so-called "citizen petitions" found
largely in 21 CFR §§ 10.20, 10.30, and 10.33.

Any "interested" person may petition the agency for the
issuance, amendment or revocation of a regulation within FDA's
statutory jurisdiction. The regulations do not, however,
require the petitioner_to state its "interest" in the subject
matter of the action and the FDA has not interpreted the APA
reference to "interest" in a technical or legalistic fashion.
Anyone is eligible to file a petition.

A petition must, be filed (in quadruplicate) with the Dockets
Management Branch which is located in_Rockville, Maryland. It
must meet certain requirements of form. Most importantly, it
must identify the relevant statutory authority for regulation;
furnish "the exact wording of the existing regulation" sought to
be amended or revoked and describe "the proposed regulation or
amendment requested" i state the factual and legal grounds for
the action sought; and set forth the information relied upon
along with "representative information known" to the petitioner
which is unfavorable to the petitioner's position. In some
instances-environmental or economic impact information may be
required. Finally, the petition must be signed^ and
certified by the petitioner or its representative. Any
petitioner wishing to submit information but protect it from
public disclosure must follow designated requirements.

The Dockets Management Branch has the responsibility for
examining a purported petition to ascertain whether it meets these
technical requirements and, if it does not, for returning it to
the petitioner with a copy of the applicable regulations^^^
indicating which provisions have not been complied with. While
some documents have been accepted for filing as petitions which

PETITIONS FOR RULEMAKING 523

238
have not fully complied with these requirements, recently the

agency has been less willing to waive them in certain

particulars. The regulations expressly provide that

"correspondence" does not constitute a petition unless it meets

the applicable requirements.

If a petition meets these format requirements, it is file^^
stamped with the date of filing and assigned a docket number.
The file created by Dockets Management contains all submissions
related to the petition. The petition and any comments on it
are expressly subject to public inspection and copying.

The Dockets Management Branch notifies the petitioner ift^A
writing of the filing and the docket number of the petition.
It maintains a chronological list of filed petitions including the
docket number, date of filing. ^name of petitioner, subject matter
and disposition of petition. It also prepares a public log for
each petition file listing its contents. On a monthly basis it
circulates to each Center a report summarizing petition filings
during the reporting period as well as pending petitions not
disposed of.

Following the filing. Dockets Management has the
responsibility for determining which Center has subject matter
jurisdiction^over the petition and makes the appropriate
reference. Thereafter initial decisionmaking authority with
regard to the petition lies with the Center, each of which is
responsible for "tracking" petitions referred to it in order to
insure compliance with applicable deadlines for action and final
disposition. The Docket Management Branch's monthly status
memorandum can be used for tracking purposes but it appears that
the Centers rely primarily on their own records for these
purposes .

With the^exception of any applicable statutory time limits
for action, the principal deadline is self-imposed. It
requires that the agency furnish a response2t0 each petitioner
within 180 days of receipt of the petition. However that
response need only be a "tentative" or "interim" one indicating
why the agency has not been able to reach affinal decision with
regard to the disposition of the petition. Authority to issue
these interim responses has generally been delegated to each
Center. 2§2^"^o"^Pli^^*^® with this deadline is not
infrequent, though the personnel of some Centers reported high
compliance rates. FDA officials interviewed considered such a
deadline a^gpod management technique for forcing action on
petitions .

The regulations afford "interested persons" the ggj^ortunity
to submit written comments regarding filegoPstitions, which
comments- are included in the docket file with copies to the
Centers. While FDA regulations indicate that Federal Register
notice is a means that the agency might employ in gonsidering
preliminarily what action to take on a petition, the agency

524 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

infrequently publishes notice of the receipt of these petitions
for rulemaking where there is no statutory requirement for such
publication. ^Non-publication is apparently due to several
considerations : the APA does not require solicitation of views
prior to action on petitions, unless of -course the agency desires
to adopt the proposal as a final rule ; the agency has limited
resources but many demands on its budget; there is a very active
"trade press" that keeps close scrutiny QVgr FDA's activities and
advises its readership of recent filings ; the likelihood of
comments forthcoming may be slight due to the lack of interest in
the subject matter of many petitions; and the agency has in-house
expertise deemed adequate to evaluate the merits of many
petitions .

The decision to publish is made on an ad hoc basis, initially
at the Center level, with consideration given to the agency needs
for additional information and the desire to obtain public input
into the decisionmaking process. Other than Federal Register
publication, press releases and letters to potentially interested
persons or organizations may-be used by the agency to alert them
to the filing of a petition. Whether for lack of publication,
lack of interest or other reasons, it is the exceptional case
where a petition filing generates more than a modest number of
comments .

The applicable regulations provide a variety of other means
for soliciting the views of outsiders with regard to a petition at
the preliminary stage of consideration- These include
conferences, meetings, and hearings.

While the responsibility for issuing an interim response has
been delegated to the Centers, the FDA Commissioner or his
delegate (usually the Associate Commissioner for Regulatory
Affairs) retains the authority to finally approve a petition for
rulemaking and formally^ launch a rulemaking or deny the
petition in whole or part. The FDA has announced that its
decision in-this regard will take into account "available .agency
resources," "the priority assigned to the petition," and
statutory time deadlines.

P 7 6

The contents of the exclusive record for decision are
described in the regulations to include the petition, comments,
applicable Federal Register notices, letters to the petitioner
with regard to grant or denial, hearing transcripts, as well as
"all information identified or filed by the Commissioner with the
Dockets Management Branch as part of the record supporting the
decision." This record may include letters or memoranda
reflecting contacts between agency personnel and outsiders which
took place during agency consideration of the petition and,
less frequently, intragency memoranda and reports relating to the
petition. This record is folded into the rulemaking record if
a rulemaking is launched.

PETITIONS FOR RULEMAKING 525

Sometimes a^decision to deny the petition-will be published
in the Register, though this may be rare. Regardless of the
final disposition, the petitioner is notified in writing of the
decision.

Within 30 days of the final decision on a petition, the
petitioner (or any interested person) may request

reconsideration based^on information contained in the original
administrative record. The requirements for form of request,
filing, and opportunity for comment are very similar to those
applicable to the original petition.

288
In 1985, the FDA received a total of 217 citizen petitions.

Since the agency records do not separate petitions for rulemaking

from other types of citizen petitions, it would be impossible to

identify how many of the former are filed annually without

reviewing all petitions individually. When asked to evaluate

the effects of the FDA petition process generally, agency

officials suggested that it did compel the agency as a whole to

listen and make a decision one way or the other on proposed

regulatory changes, where ordinary correspondence might not

achieve that result. There was some doubt expressed, however,

whether it had been a significant source for regulatory policy

initiatives that were not already under consideration somewhere in

FDA. Some Center officials emphasized the equivalent (or

greater in some instances) effect of informal contacts with the^^

agency in transmitting ideas and obtaining regulatory changes.

It was suggested at several points that the petition process
might serve in at least some cases as a recourse of last resort
where informal importuning was unsuccessful. On the other
hand, the agency itself might favor a particular change yet refer
regulated parties to the petition process to obtain relief where
the agency does not want to appear ^publicly to be weakening
regulation on its own initiative or, in the current
deregulatory climate, prefer that the initiative for increased
regulation come from the public.

The priority assigned to handling rulemaking petitions varies
depending on the subject. With regard to allocating agency
resources generally, one official suggested that most citizen
petitions have a lower priority^than other regulatory matters
which demand agehcy attention. Yet at times where the action
requested involves serious safety issues or is related to pending
litigation, existing priorities may take a back2§eat to the
resolution of an issue presented by a petition.

2 . Federal Communications Commission (FCC)

The only statutorygRetition provision applicable to the FCC
is APA Section 553(e). Any "interested", person may, therefore,
petition the FCC^for the issuance, amendment Qr_repeal of a rule
or regulation. As in the case of the FDA, the Commission
does not interpret the term "interest" in a technical or

526 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

301
legalistic fashion. There is a paucity of FCC precedents

interpreting the term "interested" as used in this context,

perhaps because the Commission ordinarily focuses on the merits

of the petition, and, if it believes the petition is otherwise

meritorious, it rarely, if ever, -will dismiss a petition for

rulemaking for lack of standing.

A petition must be submitted or mailed to the Secretary of
the Commission, whose office is located in Washington.
Detailed requirements for the^form of documents submitted, such as
paper size, spacing, margins, signature_and verification and
number of copies must be complied with. A document
submitted as a petition must also include the text or substance of
the proposed rule together with all facts, views, arguments and
data deemed to support the action requested and^show how the
interests of the petitioner will be affected.

Upon receipt the Secretary ' s, Office forwards the document to
the appropriate Office or Bureau where the principal workload
operations of the FCC are conducted. The Bureaus of concern
for the ^ study were Mass Media, Common Carrier and Private
Radio.

Following such a reference, the Bureau assigned the document
must make two decisions. First, it must ascertain whether the
document satisfies the requirements for a petition laid down by
the Commission's regulations. If it does not, the petitioner is
so notified and may, if it wishes, refile. However, the agency
has treated as petitions communications that do not meet the
literal mandates of the regulations. Secondly, if the document
is accepted as a petition for rulemaking, the Bureau, with or
without consultation with other parts of the agency, decides
whether it should be summarily denied or dismissed without
prejudice on the basis that it is "moot, premature, repetitive,
frivolous or-3-.c- • plainly do[es] not warrant consideration by the
Commission." Apparently the inclination to dismiss summarily
varies from bureau to bureau- The petitioner is informed by
letter of such a^dismissal and may petition for
reconsideration, which proceeding is governed by the same
procedural regulations applicable generally to petitions for
reconsideration. There is no formal docket file opened_or
index maintained that includes petitions denied summarily.

If the document both meets the formal requirements and
escapes summary dif^issal, the Dockets Branch opens a public file
for the_Betition which is assigned an "RM" (rulemaking)
number. At that point a docket history is prepared which
includes, inter alia, the RM number, the subject of the petition,
the name of the petitioner, the name of- those filing the petition
on its behalf, and the date of filing. This is updated to
include a chronological list of further action on the petition,
such as comments and reply comments filed (when, by and for whom),
Federal Register notices and disposition of the petition. The
Secretary's Office is currently compiling histories by means of

PETITIONS FOR RULEMAKING 527

324
computer technology rather than file cards and eventually the

data base will be made available to a third party contractor who,

for a fee^c^ill supply printouts or on-line access to interested

persons. The old file card history and the computerized

history, are and will remain open for public inspection (without a

fee). The files themselves are so available o^q^^ ^^®

Commission's Docket Reference Room in Washington and include

all the documents referenced in the docket history arranged in

chronological order. While the Dockets Branch has no formal

responsibility for tracking petitions for rulemaking to insure

their expeditious disposition, it does answer public inquiries

regarding the status of petitions as^that status is evident from

an examination of the history card. Moreover personnel of the

Branch may contact a Bureau to ascertain what action, if any, has

been taken_on the petition in order to determine whether to close

the file.-^"^^

Once a petition has been assigned an "RM" numbe^, a "public
notice" is given by means of a Commission release. Essentially
what occurs is that a written document is prepared which is
entitled "public notice" and lists the "rm" number, rule affected,
name of petitioner, name and address of the person who filed the
petition on its behalf, the date the petition was^received and a
general statement of the nature of the petition. Copies of it
are made available at the offices of the FCC's Press and News
Media Division and commercial subscription services provide
these to their subscribers. The purpose of this notice is to
solicit comments on the petition by interested persons . Federal
Register notice of receipt is expensive and, at any rate, the
assumption seems to be that persons who might have something
significant to say will find out about the petition through the
news media or otherwise.

Within 30 days after public notice is given, interested
persons mdy„file statements in support or opposition to the
petition. Such statements are^included in the "rm" file in the
order in which they are received, ^og They must be accompanied by
proof of service on the petitioner and conform to the same
form, signature and^copy requirements which are applicable to the
original petition. Replies to these statements, by the
petitioner or others, may^be filed within fifteen days of the
filing of the statements. Such reply comments must be
accompanied by proof of service on the party or parties filing the
statement or statements to which the reply is directed and conform
to the same form, signature and copy requirements. The
explanation offered for this two stage comment process was that
most comments tend to be filed at the last moment and, absent a
provision for a separate period reserved for replieg^ rebutting
material in comments might be made more difficult.

Some officials expressed the view that the mandatory^gpmment
process could be eliminated without losing much of value. This
was based on the perception that the Bureaus generally possess
enough expertise to adequately evaluate most petitions by

528 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

346
themselves, _^_and that the nature of many comments is

predictable. Where a petition clearly deserves to be issued as

a notice of proposed rulemaking, the comment period may contribute

unnecessary delay of over a month to the rulemaking process. It

was suggested that where appropriate, public or private

solicitation of outside views on a petition could be undertaken at

the discretion_of the Bureau concerned at the preliminary stage of

consideration. Under this revised scheme, for petitions

surviving summary dismissal, solicitation of outside views would

usually come at the notice of proposed rulemaking stage when the

most valuable outside input is apparently now generally found.

With regard to the strict format requirements for petitions
and comments, the less sophisticated or experienced are most
likely to violate these and yet itcjs in just such instances where
non-compliance may be overlooked. Phrasing these as
"recommendations" and not "requirements" would appear to be the
preferable course to take, if they are retained.

Requiring service of comments and replies is certainly a
convenience of sorts to the petitioner and commentators and may in
fact be most helpful to persons who are not members of the
communications bar or those who cannot themselves easily visit the
FCC docket room. However, persons (other than the petitioner)
seeking to reply to statements in support or opposition to the
petition must still check the docket file. If service is deemed
important, regulating the manner and proof of service in some
detail, as is FCC practice, would seem to follow as matter of
course.

The comment process is the usual mode of soliciting
information from sources outside the FCC regarding the
advisability of granting or denying a petition for rulemaking. On
some occasions, however, a notice of inquiry, which is similar to
an advance notice of proposed rulemaking, may be published in
the Register in order to investigate the merits of a petitioner's
proposal. Comments are filed in the same manner as in response
to a "public notice." Even more rare is a public hearing.

Once the comment process has run its course (generally 45
days after the public notice of the filing^pf a petition has been
given) the^ Commission may act at any time. With one
exception, the Commission is nptp-subject to any statutory time
deadlines for action on petitions nor has the agency or its
bureaus adopted uniform timelines for-,the disposition, summarily
or otherwise, of rulemaking requests. The Commission has
adopted a "management by objectives" system whereby, to a large
extent, agendas for action are generated initially by negotiation
among the Chairman of the Commission, the Managing Director, and
the Bureau Chief and later by negotiation between the Bureau Chief
and his subordinates. It is these agendas that result in the
timing of final action on petitions^ Similarly, tracking is
done primarily within the bureau, though the Offige of the
Managing Director may on occasion become involved.

PETITIONS FOR RULEMAKING 529

A non-summary denial of a petition, which may be^^y
memorandum opinion and order of the full Commission, is marked
by the issuance of a "public notice" indicating the "rm" number,
the rule affected, the petitioner, date the petition was received,
nature of the petition, 4§te of disposition, and date of public
release of the decision. The order dismissing the petition
gives the reasons and is sent to the petitoner. GenerallVg
orders that deny a petition are not published in the Register.

The grant of a petition is similarly includedgin a "public
notice." The petitioner is personally notified. The grant is
followed by the issuance of a notice of-proposed rulemaking, or in
some cases, issuance of a final rule. Generally only the
Commission may grant a^petition since rulemaking authority is
largely vested in it. While Section 553(a) of the APA is the
only applicable^ statutory petition provision, the FCC, like some
other agencies, appears to take the position that grant of a
petition for rulemaking can be considered to occur prior to the^
issuance of a final rule conforming to petitioner's requests.

The FCC regulations do not expressly define the record for
decision on a petition. However it includes, at the least, the
petition, public notices and the comments, all of which are found
in the public file. That file might in some instances include
internally generated studies. If the petition is granted, the
docket history so indicates. When a rulemaking is commenced, a
docket number is assigned to the proceeding and all documents
associated with the petition are incorporated into the docket
file.

Any interested person may petition for reconsideration of a
decision on a petition. Where the action at issue was taken by
the Commission, the Commission will act on this petition. Where
the action was taken by the staff pursuant to a delegation of
authority, the petition may be acted on by the staff or referred
to the Commision. Such petitions may^gely on facts not
previously presented to the Commission. Federal Register
notice of the filing of the petitionees required and is ^g^
followed by statements in opposition and replies to those.
The order granting or denying the petition will state the reasons
for the action. The same procedures ^ apply to petitions to
reconsider the final adoption of rules.

For the years 1983 through 1985 the FCC received, on the
average, 72 petitions for rulemaking of all types. Within this
same period four petitions wereggranted, thirty- two were denied
and twenty-one were dismissed. In June 1986, there were^g-y
approximately two hundred and forty- four petitions pending.
Obviously there is a substantial backlog of petitions. In fact
delay has been the principal criticism voiced with regard to the
agency's handling of petitions.

In evaluating the value of the petition process from the
point of view of contribution of regulatory proposals deemed by

530 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

the agency to be meritorious, several officials interviewed
suggested that in view of changes in technology the petition
process is very important in keeping the FCC responsive to new
developments and that disposition of petitions was given high
priority. However another official suggested that in recent
years, at least in some areas, the Commission has seemed to^put
more emphasis on pursuing internally initiated proposals. As
in the case of the FDA, informal contacts outside-the petition
process also provides valuable regulatory ideas.

393 ...
As noted above, disposition of petitions constitutes one

aspect of the agenda compiled as part of the FCC's management by

objectives system and, accordingly, that activity is closely

monitored by various officials in the Bureaus, the Managing

Director's Office and the Commissioners. This gives some impetus

to expeditious processing, though the apparent petition backlog

indicates that it does not assure it in many instances.

Like the FDA, the existence of the rather elaborate petition
regulations of the FCC suggests that the agency considers the
handling of petitions an important, though perhaps not always
welcome, aspect of its work. This attitude results in inclusion
of their disposition as an objective in the management by
objectives system which can help speed their processing.
Obviously the more an agency believes it can learn from petitions
the more likely it is to spend the time to create a petition
framework where it can in the most efficient manner elicit the
information necessary for decision. At any rate, since the APA
itself mandates the receipt, consideration and expeditious
disposition of petitions, it clearly is in the agency's interest,
as well as the public's, to design a petition framework which can
in a cost effective fashion identify worthy proposals for further
study.

3 . Federal Energy Regulatory Commission (FERC)

The Commission "encourages the public, including those
persons subject to regulation by the Commission, to submit
suggestions, comments, or proposals concerning substantial
prospective regulatory policy issues and problems."
Ascertaining how to file a petition for rulemaking with the agency
requires sorting through the generally applicable procedural rules
of the Commission. This examination discloses that a person
must file a document known as a petition when seeking_a_rule of
general applicability. A petition is a "pleading" which
means that it is subject to the^detailed requirements applicable
to the content of a pleading. For instance, it must include
the name of the petitioner, the action sought, and the relevant
facts. It must be delivered or mailed to the Secretary of the
Commission, contain a heading which describes the nature of the
filing, _ and comply with various requirements-for paper size, ._,
format, citation form, number of copies and signature.
If a document does not comply with applicable regulations, it may

PETITIONS FOR RULEMAKING 531

be rejected fgr^ filing with an indication of the
deficiencies .

The Secretary of the Commission maintains a system for
docketing proceedings, including petitions. When a document is
received for filing as a petition, it is assigned a docket
number, a file is opened and the docket number and other
pertinent information are recorded in the Commission's
computerized tracking system. Next the Division of Rulemaking
and Legislative Analysis of the Office of General Counsel forwards
a copy of the petition to each Commissioner and^all interested
offices of the agency for analysis and comment. Generally they
are requested to offer a preliminary recommendation within 30
days .

The receipt of a petition for rulemaking is generally not
published.in the Federal Register as a means of receiving
comments. However apparently comments from persons outside the
agency are received and filed in the docket file. The
Commission's rules in fact expressly provide that an "answej^^can
be made to any pleading unless the ru^es otherwise specify.
The content of an answer is regulated and that dgj^ent musj2o
also meet the agency's reguirements for papgr size, format,
citation form, copies, ^24 ^^^ signature. Answers must be
served on the petitioner. The fact that comments are received,
when they are not directly solicited, is apparently due to an
active trade_press which publicizes the filing of petitions for
rulemaking. Unless the receipt of a petition is published in
the Register, comments QOgit must be filed within 30 days of the
filing of the petition. The petition and answers are open to
public inspection.

After the receipt of comments from persons outside the agency
and affected offices within the agency, the petition is assigned
to the appropriate Assistant General Counsel for any further
investigation. After the completion of staff analysis, the
Commission acts^on the recommendations of the staff with regard to
the petition. If the petition is denied, the agency issues an
explanation of the reasons for this action, which explanation is
published in the Federal Register and the petitioner is provided
personal notice of the denial. If the petitioner desires to
seek judicial review of the denial, the petitioner must request a
rehearing first. ,

The Commission is not subject to any statute other than APA
Sections 553Ie) and 555 which relates to petitions for
rulemaking. It has consistently interpreted the former to mean
that the final affirmative disposition, that is a "grant," of a
petition occurs only upon the final issuance, amendment, or repeal
of the rule requested by the petitioner. If the Commission
believes that public comment would prove helpful, the petition is
generally issued as a notice of prgposed rulemaking or it is
incorporated into such a notice. However, work on the proposed
rule is not begun until authorized by the Chairman, usually at the

532 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

435
request of a technical office. At this point a relatively

strict timetable for agency action on the petition may be

established. If the rulemaking is ultimately terminated

without the adoption of.a„rule, the petition is denied and the

petitioner is notified. If the ultimate rule adopted differs

from the proposal in substantial_respects, a denial occurs at that

point and notification occurs.

Compared to other agencies the volume of petitions filed with
the FERC is not insubstantial. While the number varies from year
to year, on the average the Commission receives somewhat less than
twelve each year and grants or denies about one-third of those
pending each year. The average time for processing a petition
from its^filing to its grant or denial is approximately two
years. In September 1986, there, were 26 petitions for
rulemaking pending with the agency. Since a grant is not
considered to occur until final action is taken to adopt, revise
or amend a regulation, statistics with regard to processing time
may not be entirely comparable to those agencies which consider
the grant to occur no, later than the issuance of a notice of
proposed rulemaking.

In evaluating the adequacy of the FERC ' s practice of handling
petitions for rulemaking, it must be kept in mind that the
entities subject to regulation and their representatives tend. to
be very sophisticated in terms of the workings of the agency.
They keep themselves current on developments of interest by
subscribing to the "trade press" and through that or other means
gain knowledge of the filing of petitions. In other words
publication of receipt of a petition is not seen as necessary to
solicit comments from interested persons. Moreover the agency
itself appears to consider itself sufficiently capable of
evaluating the merits of a proposal without the need for comments
from the outside. It is at the notice of proposed rulemaking
stage that general solicitation of cgmments takes place, assuming
the petition is not denied earlier.

Only a relatively close reading of the agency's generally
applicable procedural rules discloses the requisites for the
filing of a petition for rulemaking. To the extent the
petitioners are represented by persons who have considerable
experience in dealing with the FERC and its regulations, this
situation may not create problems for either the petitioners or
the agency. One official who regularly handles these petitions
indicated that he had not received any complaints regarding the
regulations. At the same time it is not inconceivable that
persons lacking this experience may wish to petition the agency
given the scope of FERC ' s regulatory authority. The lack of a
clear reference to the procedures applicable to petitions for
rulemaking may disadvantage them. While the agency informs
persons who file documents regarding their noncompliance with
applicable regulations, it would certainly save everyone's time
if the applicability of certain requirements was clear at the
outset. In fact some of the petition format requirements should

PETITIONS FOR RULEMAKING 533

more appropriately be phrased as recommendations rather than
requirements for the benefit of the unsophisticated.

Moreover, since the agency's general procedural rules are
crafted with a view to covering a variety of different
proceedings, it is not always clear gg^ ^ particular requirement
applies to petitions for rulemaking. While this problem might
be a minor one for experienced practitioners, it is likely to
confuse those less sophisticated and at least provoke numerous
questions that the agency's officials will have to answer.

The agency has regulations that specifically authorize the
filing of petitions for the issuance of interpretative rules
regarding any question arising under the National Gas Policy Act
of 1978 or any rule promulgated thereunder and for the
institution of proceedings for the purpose of issuing statements,
rules or regulations with regard to oil pipelines. The
existence of these, along with the absence of a clear general set
of regulations dealing with the filing of rulemaking petitions,
might create further confusion outside the energy bar by
suggesting that the agency will consider only the types of
petitions thus expressly referred to. Jf-special procedures are
required for particular types of rules, a general set of
petition regulations could so indicate while at the same time
consolidating in one place the procedures generally applicable.

4. Federal Trade Commission (FTC)

The APA is the only statute applicable to the FTC which
requires that it receive, consider and dispose^of petitions for
the issuance, amendment, or repeal of rules. Anyone can file
such a petition with the agency; it does not interpret the term.- ,
"interested person" in Section 553(e) in a restrictive fashion.
Because the agency wants to encourage petitions from the public at
large, its regulations pertaining- to the filing and processing of
petitions are relatively simple. Their simplicity also gives
the agency the flexibility of dealing with unforeseen situations
where very formal^and specific regulations might overly restrict
its discretion.

In fact the agency has several sets of petition regulations
and the process of handling petitions varies in part because of
certain statutory provisions. For simplicity each petition
process will be described separately.

Proceedings to establish rules defining acts or practices^c7
which are unfair or deceptive, that is trade regulation rules,
may be commenced by the FTC pursuant tPg^ written petition filed
with the Secretary of .the Commission. No special form of
petition is required, though the petition^must at the least
state "reasonable grounds" for the request. Occasionally,
however, some petitioners think they have to comply in addition
with the format requirements applicable to formal proceedings
because of the way the latter regulations are written.

534 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Where it is not clear from the face of a document whether it
is in fact a petition for rulemaking, the Secretary's office makes
the determination following consultation with the person
submitting the document and sometimes after discussing the matter
with the staff of the agency. Since most petitions for
rulemaking received by the Commission also seek FTC administrative
enforcement, some of the material in a submission may, be exempt
from public disclosure under the Commission's rules. Otherwise
once it is received the petition is put in a looseleaf binder in
the public reference room after having been assigned a control
number. It is then referred to the Bureau of Consumer
Protection for , investigation and recommendation to the
commissioners .

The, receipt of the petition is not noticed in the Federal
Register because at this early stage the focus in on the
staff's making its own investigation regarding the merits of the
petition. Nevertheless at times interested persons file
comments in response to the petition which are included in the
non-public investigatory file and are considered by the staff in
its decision-making. The Commission's operating manual
requires that the Bureau forward its recommendation for action on
the petition to the commissioners within 90 days of receipt of a
petition by the Bureau. That staff manual includes the
criteria to be considered in deciding whether to initiate a
rulemaking proceeding, whether on the basis of a petition or on
the agency's own initiative.

The Commission maintains an automated management information
system which includes the date of filing of the petition and other
relevant dates such as the date on which the Bureau forwards its
recommendation to the commissioners. It is used by the Bureau
to track petitions and other matters. History sheets are also
maintained which list all documents that have been received
relating to particular matters including petitions. It is
available for public inspection. It is somewhat comparable to
the FCC ' s docket history. The Commission is in the process now
of transferring it to a computer system.

The authority to formally dispose of petitions has not been
delegated to the Bureau as it has in some agencies such as the
FCC. Rather all formal dispositions are determined by the„_
Commission. This is due to the small size of the agency.

Once the Bureau's recommendation is forwarded to the
commissioners, there_is no deadline for action and this has also
provoked criticism. However once a majority of the
commissioners have voted on the recommendation one way or the
others-there are deadlines for the remaining commissioners to
act.

Prior to publication of any notice of proposed rulemaking,
the Commission is required by statute to publishgan advance notice
of proposed rulemaking in the Federal Register. That notice

PETITIONS FOR RULEMAKING 535

must contain a brief description of the area of inquiry under
consideration, the objectives which the Commission seeks to
achieve, and possible regulatory alternatives under-consideration
as well as invite comments of interested persons. Thus if the
Commission decides not to deny a petition for rulemaking and to
continue with its consideration of the petitioner's proposal, it
must involve persons outside the agency in the process by the
solicitation of their views. The issuance of the advance notice
may mean no more than that the Commission findggthe proposal may
have some merit and it needs more information. The notice, if
issued, must be submitted to the Committee on Commerce, Science,
and Transportation of the Senate and to the Committee on
Interstate and Foreign Commerce of the. House. A copy of the
notice is also sent to the petitioner.

Following issuance of the advance notice, a rulemaking record
is formally established and the submisgipns are categorized by
type, such. as consumer, business, etc. This file is publicly
available. Apparently receipt of comments at this stage is
common, .certainly more so than prior to the issuance of this
notice. The time period for submitting comments is generally
60 days. The Commission entertains, though does not always grant,
requests to extend the comment period. After considering all
information and comments received in response to the advance
notice, the Bureau forwards its recommendation to the
commissionerg^regarding whether or not to proceed with the
rulemaking. Apparently the 90 day time limit applicable to
initial action on petitions does not apply at this stage. A
favorable decision means the issuance of an "initial" notice of
proposed rulemaking and later, if the proceeding is^not earlier
terminated, by a final notice of proposed rulemaking and still
later by the final rule. The petitioner is required to be sent
copies of the initial and final .notices but apparently not the
notice of adoption of the rule. Parts of the file compiled as
part of considerationqpf the petition initially may be included in
the rulemaking file.

Rather than proceeding with the issuance of an advance notice
of proposed rulemaking, the Commission may deny a petition for
rulemaking where it is not deemed "sufficient to warrant
commencement of a rulemaking." In that case the petitigngr is
notified by letter of the decision along with the reasons. If
an advance notice is issued but the proceeding is later terminated
following either that notice, the initial notice of proposed
rulemaking^gOr the final notice, the petitioner might be also
informed. Since, however, to date the FTC has generally gone
on to a rulemaking following issuance of an advance notice, it is
difficult to know for certain what approach the FTC would take in
the case of a termination. While the Commission has not
formally considered the question, the agency's rules of practice
suggest that a petition for rulemaking would be deemed to be ^qi
granted when a final notice of proposed rule-making is issued.
It might, therefore, argue that a later withdrawal of the proposal
does not constitute a denial of the petition since it has earlier

536 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

concluded "the matter presented to it" within the meaning of APA
Section 555(b). Therefore APA_Section 555(e) would not require
a written notification of denial. If it were deemed to have
concluded the "matter presented to it" by issuing a notice of
proposed rulemaking, the duty under Section 555(b) to act within a
reasonable time may not apply to require the agency to complete
the rulemaking promptly.

Finally, the Commission has general authority to use
mechanisms in addition to advance notice in^SPliciting suggestions
regarding the subject matter of a petition. Moreover, the
Commission retains some discretion in individually tailoring the
procedures following the commencement of a rulemaking
proceeding.

Decisions on petitions are expressly subject to
reconsideration. If a denial occurs, the petitioner may be given
the opportunity to submit additional data. The agency is
apparently under no obligation to grant requests for
reconsideration.

The specific procedures mandated by statute for trade
regulation rules do not apply to interpretative rules and general
statements pf^policy with respect to unfair methods of
competition or unfair or deceptive acts or practices in or
affecting commerce. This means that there is no statutory duty
to issue an advance notice of proposed rulemaking. Also the
petition regulations applicable to trade regulation rules are
inapplicable.

However, except for the issuance of an advance notice of proposed
rulemaking, such petitions are handled in about the same manner as
petitions for trade regulation rulemaking. The factors
entering into staff consideration may, however, differ to some
extent. The same is true with regard to petitions for the
issuance of procedural rules.

In addition to the petition regulations applicable to trade
regulation rules, the FTC has two other sets of petition
regulations. One covers petitions for substantive rulemaking
under the authority of statutes other than that providing for the
issuance of trade regulation rules. This regulation is _^_
generally similar to that applicable to trade regulation rules.
It differs in certain ways, however. For instance there is no
express requirement that the petition be in writing; notification
of any denial must be given "promptly"; and the petitioner is
apparently assured of_the opportunity to submit additional data in
the case of a denial. It is unclear why these differences
exist, but at any rate their effect in practice may be
inconsequential .

While proliferation of largely identical sets of petition
regulations would seem unnecessarily confusing in most instances,
in the FTC case the existence of special statutory requirements,
such as advance notice of proposed rulemaking might justify, on

PETITIONS FOR RULEMAKING 537

the basis of clarity of statement, this separate treatment of
trade regulation petitions and petitions for other substantive
rulemaking. At the same time it is not clear why the
promulgation of general statements of policy, rules of agency
organization and procedure have been made-expressly exempt from
this second set of petition regulations in view of the fact
that the petition regulations applicable to non-trade regulation
rules elaborate very little on the bare mandates of the APA.
General policy statements and rules of^procedure are in fact
subject to the APA right to petition.

The second set of regulations applies to requests (not
petitions so-called) for interpretations of the Fair Credit
Reporting Act, which interpretations appear to be^^
interpretative rules within the meaning of the APA. Here the
FTC publishes Federal Register notice of the^proposed
interpretation and solicits comments on it. No statute
expressly mandates these procedures. In view of the existence of
these regulations, it is curious that the agency has not adopted a
set of regulations expressly applicable to interpretative rules
generally or, if the treatment of petitions for interpretative
rules, requires nothing different than the handling of petitions
for non-trade regulation rulemaking, why it has not expressly
covered-them in the catch-all petition procedures described
above.

In sum where a statute or agency policy require substantially
different treatment for different types of petitions, it makes
sense to have more than one set of petition regulations but
generally not otherwise. Moreover, petition regulations should
exist for all the types of rules which fall within Section 553(e)
of the APA or other statutory petition provision and the extent of
coverage of these regulations in terms of types of rules should be
clear.

At least within the last five years, the FTC has not been
swamped^with petitions for rulemaking. Only nine have been
filed. Of those, five were denied, two were granted, and two
were pending in July, 1986. Disposition time from filing to
final grant or denial has varied from less than one year to more
than three years. Why so few are filed is unclear, though it
is possible that the current deregulation climate, along ^i^h
prior congressional displeasure with Commission activity,
suggests to prospective petitioners that they will not have much
success in having the agency act favorably on their petitions.

5. Department of Transportation: The National Highway
Traffic Safety Administration (NHTSA)

Among the agencies whose petition practices were examined in
depth, NHTSA 's attempt to formalize the process by both regulation
and internal staff directive is particularly remarkable. While
the regulations themselves do not display kinship with the more
adversary procedures of judicial practice (as is the case with the

538 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

531
FCC ), the express internal ordering of the petition process is

detailed to the point of specifying who within the agency gets

copies of the letters granting or denying petitions.

Apparently, however, the attempt to describe the flow of the

decisionmaking_process is typical of this agency even outside the

petition area. At the same time the processing of petitions,

and engaging in rulemaking efforts when they are granted, may

consume as much as fifty percent of the agency's resources. As

much as eighty percent of its rulemaking efforts can be traced in

recent years to petitions.

The existing formalized structure had its origins in 1977
during Joan Claybrook's tenure as Administrator. It was
further elaborated in 1983 when very detailed time deadlines for
various stages of the decisionmaking process, along with specific
tracking responsibilities, were added. The statute providing
for the establishment of motor vehicle safety standards
expressly authorizes petitions for rulemaking, specifies,. -^
procedures to be followed upon the filing of such petitions and
lays down a time deadline for action on petitions. However the
regulations elaborate to some degree on the statute and the
internal orders go far beyond what the statute mandates .

The statutory procedures for petitions are described in
Appendix A to this report. Turning to the agency's elaboration
of them, its rul§s mandate the format of formal communications
with the agency^ the address where they are tQjhe submitted,
signature form, and language ysed [English] . These general
regulations apply to petitions, though they are not expressly
cross-referenced in the petition procedures.

More detailed requirements applicable to form of submission
are also contained in the petition regulations themselves.
They include requirements that a document intended as a petition
for rulemaking be submitted to a designated address, be in
English, carry a heading that includes the word "petition," set
forth the facts establishing that the rule is necessary, give a
brief description of the substance of the rule desired, and
contain the name and address of the petitioner. Except for
failure to address the petition properly, a document failing to
conform to any of the requirements of the petition regulations
(though not the more general agency regulations for form of
documents) will not be treated as a petition but ordinary
correspondence and any suggestions will be considered "at the
discretion" of the agency.

By agency order any petition received by a NHTSA official
must be immediately forwarded to the Executive Secretariet for
initial processing as controlled correspondence. The
Secretariet then directs the petition to the appropriate "office
of primary responsibility" (OPR) for response and distributes
copies to various agency officials. The Associate Administrator
for Rulemaking is the designated OPR for petitions relating to
motor vehicle standards. If a petition is filed improperly or

PETITIONS FOR RULEMAKING 539

is incomplete, the Secretariet and petitioner (within 14 days) are
notified by the OPR and the petition is removed from the
correspondence control system. If the petition later is
amended-SQ that it is complete, it is reentered into the
system. Once the petition is complete and in proper form, the
statutory 120 day period for action on the petition starts to
run. The OPR sends a letter of acknpviedgement to the
submitter of a properly filed petition. The petition is
assigned_a_docket number and made publicly available in the docket
section.

The Associate Administrator for Rulemaking must classify
petitions within 7 days of their receipt according to the
complexity or difficulty of responding to them:

a. Class I includes relatively simple petitions to which the
agency can respond by making minor amendments to a standard or
regulation or by denying the petition without the need for much
technical review.

b. Class II includes petitions of moderate difficulty which
can be acted on by the adoption of a final rule in less than a
year.

c. Class III petitions require substantial analysis,
possibly some research and complex rulemaking.

Once assigned, a classification can be changed. Strict
timeframes apply to requesting and acting on a request for a
modification. Following receipt and classification of a
petition, the Office of the Associate Administrator for Rulemaking
commences a technical view of the petition.

While the agency does not generally publish Federal Register
notice of the receipt of a petition, both regulated entities
and public interest groups visit^the docket room on a frequent
basis to review recent filings. Thus comments may be filed on
the petition, they are included in the docket file and are
considered by the agency. The reluctance to formally publish
notice of receipt can be attributed to various factors. Merely
putting the petitions on public display does at times solicit some
input without incurring substantial cost; there is an apparent
general lack^of interest in commenting even when a notice is
published; the agency usually feels competent to evaluate most
petitions on its own; and, finally, substantial additional time
delay might be built into-, the decisionmaking process by a
mandatory notice stage, delay that can make meeting the
statutory deadline or coming close„even less a realistic
possibility than it currently is. As to the latter problem,
any public notice must be prepared and cleared through the various
levels in the bureaucracy; a thirty to sixty day comment period
follows; and work on_the proposal is likely to be suspended until
all comments are in. The agency also notes that if the
petition is granted, there will be an opportunity to comment as

540 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

part of the rulemaking, and if it is. denied, interested persons
can then file their own petitions.

Nevertheless at times the agency has publicly solicited
comments on a petition prior to grant or denial as a way to
explore the issues raised_when the agency feels it does not know
enough about a proposal. Moreover a public meeting can be
held. If it is determined that such a meeting is desirable, a
Federal Register notice of its time, place and subject matter and
inviting public participation is published, generally within
four weeks of receipt of the petition. At that meeting
interested persons may submit their views and evidence through
oral and written presentations, though there is no cross
examination permitted. A transcript of the meeting is kept.

The technical review of the petition is required to be
concluded within seventy-five days with an OPR draft evaluation
which proposes a recommended decision, taking into consideration
the merits of the petition, its implication for agency resource
requirements and its compatibility with the existing rulemaking
program. If it is proposed that the petition be granted, the
evaluation must include an estimate of agency resources necessary
to carry out the rulemaking and a schedule for the rulemaking
activity. This document is distributed to various offices within
the agency for comment. The OPR then reviews the internal
comments, prepares a summary of them, revises the rulemaking
schedule (if applicable) and then drafts a memorandum of proposed
decision. All of these documents are sent to the Chief Counsel
for preparation of a Decision Notice which is then sent to the
OPR. After the documents and notice are circulated to appropriate
offices for concurrence, the package is sent to the Administrator
for approval. The agency publishes notices of grant and denial
in the Register as well as personally informs the petitioner in
writing of the disposition of its petition.

While the APA refers to petitions "for the issuance,
amendment, or repeal of a rule," the National Traffic and Motor
Vehicle Safety Act authorizes petitions "requesting [the
Administrator] . . . to commence a proceeding c- respecting the
issuance" of a motor vehicle safety standard. If such a
petition is granted, the agency "shall-promptly commence the
proceeding requested in the petition." Thus unlike the APA,
the grant of a petition technically occurs prior to the issuance
of the final rule. Nevertheless the agency has interpreted its
obligation upon a grant to include at least issuance of an advance
notice of proposed rulemaking or, more usually, a notice of
proposed rulemaking. The agency's rules expressly provide that
a grant of the petition will follow upon a finding that "there is
a reasonable possibility that the order requested in the petition
will be issued^at the conclusion of the appropriate
proceeding. "

Given the fact that the grant or denial of a petition
technically occurs under the statute prior to the commencement of

PETITIONS FOR RULEMAKING 541

a rulemaking, if the rule-making is later terminated or the rule
adopted differs substantially from that requested by the
petitioner, the agency has no duty under the National Traffic and
Motor Vehicle Safety Act to publish a notice of a denial along
with reasons nor arguably are the requirements of APA Sections
555(b) or 555(e) applicable to the extent the grant and
commencement of the rulemaking are considered the final
disposition of the petition. The NHTSA regulations in fact
expressly note that the granting of a petition does not signify
that the rule requested will be issued.

The timing for issuance of a notice of proposed rule-making
following a grant varies depending on the type of petition
involved. With Class I petitions the agency's internal directives
require the publication of the notice at the time of publication
of the grant and establish various other deadlines. For
Class II petitions, the agency must develop a rulemaking support
paper within the first 120 days of receipt of the petition, draft
a notice of proposed rulemaking for circulation to the Office of
Management and Budget within 60 days of the grant, hopefully
publish the notice a month later and, soon after the expirat^^^ of
the comment period (60 days or so), promulgate a final rule.
For Class III petitions, there are no such specific timetables for
start or completion of the rulemaking except, of course, that the
grant mustgpccur within 120 days of the receipt of the
petition.

The agency is under a statutory duty^tP either grant or deny
a petition within 120 days of its filing. If it denies the
petition, the statute requires that it publish its reasons in the
Federal Register. The agency has elaborated on these
requirements by providing that the petitioner ^wust be notified in
writing of a denial within the 120 day period and the Federal
Register notice of the denial must be issued within 45 days of the
denial .

At the time the grant or denial occurs, any materials that
are specifically referenced in the grant or denial decision and
that are not available elsewhere in the docket section are filed
in the docket assigned to the petition. If the petition is
granted, these materials becomgQpart of the record for the
rulemaking that is initiated. There is no regulation that
deals with,Retitions for reconsideration of decisions on
petitions, though there is a prescribed procedure fg52
petitioning for reconsideration of rules once adopted.

The agency maintains a computerized tracking system which
reflects the filing date of the petition, all relevant gjjestones
in its processing, and its status at any point in time. While
the public does not have direct access to this system, the Office
of the Associate Administrator for Rulemaking will^g^pply
information on the status of petitions on request.

542 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Agency officials are alerted by agency directive that on
failure to meet a deadline the Administrator and the Office of
Rulemaking must be advised in writing. The Executive Secretary
is required by order to provide a monthly report to the
Administrator outlining the-orogress in meeting deadlines and
highlighting delinquencies. All associate administrators and
staff office directors are directed to ensure that their
performance standards and those of their subordinates responsible
for processing petitions contain an element relating to timeliness
in meeting the deadlines established.

Despite the directives establishing deadlines for action, and
the apparent threat of negative performance evaluation in case of
unexcused delay, action on petitions rarely occurs on schedule,
and thggStatutory deadline is met only about five percent of the
time. One official suggested he thought the deadlines were
unrealistic since they failed to take into account the need to^-
resolve differences within the agency regarding issues raised.
Despite the apparent lack of ^strict enforcement of the deadlines
from the top of the agency, however, the timeframe for ,^^
processing petitions has improved over the last several years.
For 1985 the average time for processing a petition was about
eight months from its receipt to the publication of a grant or
denial notice in the Register.

In describing the flow of the decisionmaking within the
agency, the internal directives dp largely represent the actual
workings of the petition process, a flow that has seemingly
been internalized by a senior staff-that has worked together in
the agency for quite a few years. The orders serve the purpose
of educating younger staffers with regard to the system. In
this way a detailed routine has been established and maintained
and the processing of petitions may have been expedited thereby.
Such a routine is particularly important given the extent of the
agency time and resources spent on petitions. However, internal
directives of the detailed type found in NHTSA might hinder rather
than expedite the process where agency officials, for one reason
or another, want to insist on exact compliance, though at this
agency the long-term working relationships of the principal actors
appears to have avoided this problem.

Since 1981, between 20 and 25 petitions for rulemaking of
various kinds, both for motor vehicle safety standards and others,
have been filed each y^Ar. Of these 45% have been granted and
55% have, been denied. As of June 5, 1986, 28 petitions were
pending. Vehicle and equipment manufactures submit
approximately one-half of the petitions with trade associations,
interest groups and private citizens accounting for the
remainder.

6 . Nuclear Regulatory Commission (NRC)

As in the case of most of the other agencies whose petition
practices were examined in some detail, the NRC is not subject to

PETITIONS FOR RULEMAKING 543

any statute other than the APA that requires it receive, consider,
and dispose of petitions for rulemaking. Its process is
outlined by rule^. and by directives of the Executive Director
for Operations. An internal (.staff manual represents guidance
for implementing the process. With the exceptipn of procedures
involving the National Environmental Policy Act, the
regulations applicable to the general petition process are largely
contained in one sxibpart of the Code of Federal Regulations
and, therefore, prospective petitioners do not usually have to ,^^
search elsewhere in order to discover what is required of them.

Petitioners are encouraged to confer with the staff^of the
agency prior to the filing of a petition for rulemaking. Where
the agency is currently taking action that may obviate the need
for filing the petition or the agency will need certain specific
information in order to evaluate the merits of the petition,
taking advantage of this opportunity may save both the petitioner
and the agency a great deal of time. A memorandum summarizing the
substance of any meeting held is included in the official file on
the petition.

Petitions should be addressed to the Secretary of the
Commission but if any other NRC employee receives a document
which appears to be a petition for rulemaking, he or she must
forward the document to th^ Docketing and Service Branch of the
Office of the Secretary.

In order to qualify as a petition, a docximent must set forth
a general solution to the problem identified by the petitioner or
the substance or text of a proposed rule, state the petitioner's
interest in the action requested, and include a statement in
support of the petition indicating the issues involved, arguments
with respect to those and relevant technical, scientific or other
data.

The NRC is one of the few agencies that has adopted
regulations applicable to the petition process that relate to the
responsibilities of the agency under the National Environmental
Policy Act. In some cases the agency may require the
petitioner to submit such information as may be useful in aiding
the agencVgin complying with NEPA in its action on the
petition. The format of the^environmental report required is
described in the regulations. If a draft NEPA statement is
prepared, it is made available to the petitioner and so is the
final NEPA statement. The impact statement accompanies the
petition^and may be considered in the agency's decisionmaking
process. These regulations are not, but should be,
cross-referenced in the petition regulations so that prospective
petitioners can more easily identify their obligations and rights.

Upon receipt in the Secretary's Office of a document that may
qualify as a petition for rulemaking, that office logs in the
document, establishes a docket control number, and sends a copy to
the Division of Rules and Records of the Office of Administration

544 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

where it is determined whether or not the document meets the
threshold requirements for a petition for rulemaking. If it
appears not to meet them, DRR drafts a memorandum to the Executive
Director for Operations indicating its finding along with a draft
letter to the petitioner^pointing out the aspects in which the
petition is deficient. The Executive Director makes the formal
determination that the document fails to satisfy the requirements
for a petition for rulemaking. This should be done ordinarily
within 30 days of the receipt of the petition by the Secretary's
office. A letter is then dispatched to the petitioner ^fefiq
can submit additional information to correct the deficiencies.
If the petitioner does not correct the deficiency within 90 days
from the date of notification by the EDO, the petition may be
returned to the^getitioner without prejudice to its right to file
a new petition. The Commissioners are sent copies of any
letter to a petitioner indicating that a petition is-deficient or
which returns a petition because it is incomplete.

If a document meets the requirements for a petition for
rulemaking, DRR assigns a docket number to the petition and
forwards a copy of the petition to the appropriate office. The
DRR also has the responsibility to see that the petition is
formally docketed and a copy deposited in the Commission's Public
Document Room.

At this point a determination is made whether the petition
should be processed routinely or handled as a so-called
"fast-track" petition. Classification determines whether the
petition will be published initially as a notice of proposed
rulemaking ["fast-track"] or whether the additional step of
publishing notice of receipt of the petition to solicit comments
will be taken. The purpose of this system is obviously to
expedite the processing, of certain petitions where they appear to
be clearly meritorious. The staff office to which a petition
has been assigned identifies a contact person to handle the
petition and make the "fast- track determination" within 10 working
days .

The staff handbook identifies the types of petitions that are
eligible (though not necessarily handled) as "fast-track"
petitions. These include requests for interpretative rules, rules
of agency organization, procedure and practice, and rules for the
orderly conduct of Commission business; proposed amendments to
commission rules that are "corrective or of a minor or nonpolicy
nature"; rules that propose actions involving a minor safety,
safeguards or environmental issue, an increase in NRC efficiency,
or a reduction in the regulatory burden on licensees; proposals of
action already under consideration in an ongoing rulemaking; or
proposals that are "clearly meritorious and will not adversely
affect the rights of other licensees or persons." At the same
time the handbook specifies that "fast- track" processing is not
generally appropriate with regard to petitions that require
preparation of an Environmental Impact Statement or those seeking
rules that would impose new or increased reporting, application or

PETITIONS FOR RULEMAKING 545

recordkeeping requirements siibject to clearance by 0MB, or would
have significant economic impact on a substantial number of small
entities or b§ve a significant impact on NRC staff and resource
commitments. Moreover, the^agency does not process denials of
petitions on the " fast- track. "

If the staff office determines that "fast- track" processing
is appropriate, it informs DRR of this decision and develops a
notice of^proposed rulemaking that addresses the issues in the
petition. Such a notice must be developed for transmittal to
the Executive Director of the Commission^for approval within 90
days after DRR assigns a docket number. At the conclusion of
the comment period, the contact person in the assigned office
sends a letter to the petitioner enclosing copies of any comments
that were received in response to the proposed rule. This letter
also indicates the initial target date for completion of staff
review of the comments received and development of a final rule.
The assigned office is responsible for notifying the petitioner of
any subsequent changes in the target date or of the contact person
to whom the petition is assigned.

The "fast=track" procedure has been utilized only
infrequently. Apparently few petitions filed since theggg
procedures went into effect met the eligibility standards.
Whether bureaucratic caution was also in part responsible for
classification decisions in some cases is not clear.

If the office to which the petition has been assigned
determines that a petition for rulemaking is not suitable for
"fast- track" processing, then DRR is informed of this decision.
The staff office concurs or provides comment on the draft notice
of receipt of a petition for rulemaking which is prepared by DRR
for Federal Register publication. This notice of receipt
describes the contents of the petition and allows at least 60 days
for public comment. ^^While the agency's regulations do not
expressly indicate it, publication of a notice of receipt is
routinely done in the case of petitions not put on the
"fast-track." This means that even if a petition is likely to
be denied, aggomment period will almost invariably precede its
disposition.

As part of the processing of non- fast- track petitions, the
assigned office must establish a schedule and^target date for
completion of staff action on the petition. The Commission in
1977 indicated that it believed that the time for response to the
petition, that is the denial or issuance of a notice of proposed
rulemaking, should "seldom^exceed 6 months for minor petitions or
12 months for major ones." The agency has npt^ however, been
able to meet their schedule in the recent past.

Following the comment period specified in the Federal
Register notice of receipt of a petition, the DRR sends a letter
to the petitioner enclosing copies of any comments received and
indicating the initial target date for completing staff review of

546 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

the petition and the name and telephone number of the contact
person responsible for the petition. The assigned office is
responsible for notifying the petitioner of any subsequent changes
in the target date or of the contact person.

In view of the time it may take to respond to a petition for
rulemaking following its receipt, the contact person is
responsible for giving the petitioner a status report on the
petition every three months- though in practice communication
may occur less frequently. Not only can this report assist in
reducing what may be the petitioner's impatience with any
perceived delay, but this periodic contact is a means to discover
whether the petitioner is changing its position on a particular
issue related to the petition or believes that its concerns have
been satisfied by„other actions occurring subsequent to the filing
of the petition. Such contact may thus result in withdrawal of
a petition and save agency resources. Copies of all
correspondence sent to a petitioner must be forwarded to DRR and
the official docket file which is maintained by the Office of the
Secretary.

Action on a petition for rulemaking is considered complete
when the petition has been withdrawn, denied or granted. Only
the petitioner may withdraw a petition, an action which is noted
in the Federal Register. For "fast-track" petitions a denial
may occur after the issuance of a notice of proposed rulemaking
and involve the termination of that rulemaking without the
issuance of a final rule. For others, a denial may occur after
the issuance of the notice of receipt of a petition. NRC
petitions often involve many complex technical issues. Each issue
may be handled differently, one aspect of a request may be
withdrawn, one denied, and several others addressed in
rulemakings, ongoing or otherwise. Action on the petition would
not be deemeg„completed until all issues have been finally
disposed of.

If a petition is denied, a notice of denial is published and
the petitioner is informed in writing of the reasons. The
Executive Director has been delegated authority to deny those
petitions for rulemaking of a "minor or nonpolicy nature where the
grounds for, denial do not substantially modify existing
precedent." The notice of denial includes a summary of each of
the issues raised in the petition, a summary and analysis of
public comments received on the petition, the agency's response to
each of the issues raised and the reasons for denying the
petition.

679
Like the FERC, the NRC has until recently interpreted

Section 553(e) of the APA to suggest that a grant of a petition

for rulemaking does not occur until a rule conforming to the

petitioner's request has been finally issued, not simply

proposed as a rule as is the case with some agencies. This

means, among other things, that if the final rule which is adopted

does not comply with the petitioner's initial request, there is a

PETITIONS FOR RULEMAKING 547

denial at least in part and the agency must-issue an explanation
for the denial because of Section 555(e). This is true with
regard to "fast- track" and, other petitions. As was indicated at
the outset of this report, this interpretation of the APA is
the appropriate one to adopt. However, the_NRC is currently
reconsidering its position on this matter, perhaps in part
because this interpretation makes it look particularly slow in
finally disposing of petitions. Unless it earlier denies a
petition, it must complete the rulemaking before it can claim that
the matter has been finally resolved. Given the nature of the
issues which have been presented to the NRC over the last decade
or so, as well as intervening legislative and regulatory
developments, completion of a rulemaking in short order has not
proven feasible in many instances. For petitions received since
1980 for which action has been completed, the average elapsed time
for processing a petition fggw its filing to its final grant or
denial has been 22H months.

If the NRC changes its interpretation of the APA, it will
mean that with regard to "fast- track" petitions, the grant will
presumably be considered to occur relatively soon after the
receipt of the petition, with or before the issuance of the notice
of proposed rulemaking. As to the remainder of the petitions, the
grant would presumably also occur no later than the issuance of
the notice of proposed rulemaking. However, improving statistics
would not appear to be an adequate justification, by itself, for
rejection of what is the most appropriate interpretation of the
APA.

If the agency were willing to dispense with its apparently
standard practice of publishing notice of receipt of petitions for
comment where the chances of the agency's formally including the
proposal in a notice of proposed rulemaking or final rule are not
very good, statistics for denials would be improved without
violating the APA. Perhaps, however, the agency believes that
publication for comment is sufficiently likely to elicit valuable
information or at least protect or improve its public image so
that the changes in its current publication practice would be
unwise, at least at this time.

Delay in disposing of petitions for rulemaking is not a new
issue for the Commission. During 1977 the agency spent a
considerable amount of time in self -study in order to determine
how to expedite the processing of petitions, the nature of which
had changed from requests for a general license or licensing
exemptions and minor procedural amendments to matters involving
significant policy and safety matters. At that time it was
estimated that the typical petition required 70 weeks for a denial
and 137 weeks for a rulemaking.

During the course of the NRC's self-examination, several
proposals were made by the staff which appear to have some
potential in improving processing time not only in the NRC but
other agencies :

548 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

a . Delegation from the top of various types of decisions on
petitions . Ultimately the Commission delegated to the
Executive Director^the authority to deny petitions of a minor or
nonpolicy nature. Given the duties of the typical head
administrator of an agency, waiting for his or her approval to
rather routine matters can introduce considerable delay as well as
waste his or her time.

b. Requiring the petitioner in its initial, submission to
supply as much relevant information as possible. This reduces
the drain on agency resources to the extent the staff attempts on
its own to discover pertinent data and arguments. Even if the
agency does not take on that responsibility, such a requirement
may obviate, to some extent, the need for the staff to contact the
petitioner to obtain further documentation for the request.

The clearer the agency is in the regulations regarding the
type(s) of issue(s) that need(s) to be addressed and/or the type
of information required for a decision on a petition, the less the
need for petitioner inquiries to the staff and the faster the
staff can complete at least the early stages of considering a
petition on the merits. Where a statute conditions the issuance
of a regulation on certain specific findings, it will obviously be
easier to delineate the agency's needs. Not only are clear
regulations important but the expressed willingness of the agency
to meet with the petitioner before a petition is filed can
potentially save everyone's time in avoiding misunderstandings.

c. Involvement of persons with ultimate decisionmaking
authority,as early in the process of considering a petition as
possible. If the proposal will ultimately be rejected at the
top for policy or other reasons, the earlier this is known the
better in order to eliminate unnecessary staff work.

592

d. Streamling the decisionmaking process. Delay m

disposition of petitions may be due to unduly long comment
periods, requiring or permitting repetitive review of decisional
documents by the same office where not necessary or allowing
sequential review of matters where simultaneous review would work
just as well.

693
e.- Assign petitions higher priority. As indicated

before the APA assigns some priority to the consideration and

disposition of petitions without directing that internally set

agendas be disregarded. Where an agency believes it can benefit

from the petition process, assigning a high priority is obviously

more likely to be forthcoming. Where it has many matters on its

agenda, petitions may appear as unwelcome distractions. For

priority to be given recjuires some form of statement from the top

that indicates that the petition process is important. Such a

statement can be made in a variety of ways, including the mere

presence of a regulation or internal directive dealing with

petitions, making disposition of petitions a formal objective of

PETITIONS FOR RULEMAKING 549

the management system and holding persons accountable for their
failure to meet assigned goals.

Improvement along these lines may reduce delay. But of
course there is no assurance that the progress in this regard will
satisfy either the public or the agency itself. While in 1977 the
NRC attempted to expedite its handling of petitions, it has not
satisfied itself that the situation cannot be improved further.
During 1986 it has been again evaluating what can be done to
shorten the^time required for disposition of petitions for
rulemaking. In August 1986, the Executive Director for
Operations advised staff responsible for handling petitions that
all pending petitions should be "resolved" within 12 months and
that action on petitions filed in the future (either denial or
issuance of a Federal Register notice indicating the intention to
grant the, petition) should similarly take no more than 12
months. If the staff believes a rule should be issued in
response to a petition, the final rule should bg, promulgated not
later than three years of the petition filing. The status of
each petition must be reported^to the Division of Rules and
Records on a quarterly basis and schedules for resplution are
to be published in NRC's quarterly regulatory agenda.
Proposed extension of the resolution date must be approved in
advance by the EDO who is to review prpppsed extensions and the
reasons therefor on a quarterly basis.

The "fast- track" system itself is a recognition by the
Commission that it can responsibly in some instances proceed
directly to the issuance of at least a notice of proposed
rulemaking without a preliminary stage for solicitation of
comments. Provision for summary denial in some cases may bg^
equally appropriate and likely to save time and resources.

The NRC frequently incorporates petitions or parts of them
into an ongoing rulemaking where similar or related issues are
presented. Such incorporation is allegedly not permitted where it
would unduly delay completion of the pending rulemaking or final
action on the petitioner's request or would prelude adequate
consideration of the matters raised in the petition. The NRC's
incorporation practice is not uncommon among federal agencies
surveyed. Howgyer the statistics regarding time of disposition of
NRC petitions may in fact reflect delays incident to such
incorporation.

Even where such incorporation occurs, however, the NRC
recognizes that the petition does not lose its identity as a
discrete matter calling for some final„disposition, either
withdrawal or express denial or grant. On the other hand,
where an agency sees the final disposition of a petition as
occurring upon the issuance of a notice or advance notice of
proposed rulemaking, such incorporation arguably does in fact
complete action on the petition.

550 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Once a final decision on a petition has been made by the NRC,
the regulations do not expressly provide for petitions to
reconsider the decision nor do they apparently provide for
petitions for reconsideration of rules finally adopted.
Therefore the administrative remedy to correct alleged errors or
to bring new information to the agency's attention is a petition
for rulemaking. This may not be the optimal procedure in all
instances to the extent that the petition procedures mandate
certain steps be taken by the petitioner or the agency that are
unnecessarily burdensome at the reconsideration stage, for example
a mandatory requirement for publication in the Federal Register of
the receipt of a petition.

The Office of the Secretary of the Commission maintains the
official docket file on petitions for rulemaking. Copies of all
petition-related documents are required to be sent for inclusion
in the official docket. The office assigned the initial
responsibility for considering the merits of a petition is also
directed to send a copy of these documents to the DRR so that that
office can monitor the current status of each ongoing action.

When the petition results in a proposed or final rulemaking,
the petition record, which includes the petition, relevant Federal
Register notices, comments, and correspondence with the
petitioner, become part of the regulatory history file whose
collection is mandated by the recently adopted NRC regulatory
history procedures. The objective of the regulatory history of
each rulemaking is to ensure that all documents of central
relevance tQ_a particular rulemaking are identified and
acce^g;^ble, both for the purposes of interpretation of the
rule andgjudicial review. An index of this file is
prepared.

The DRR currently maintains an historical log of all
petitions filed with the NRC since 1961, which lists the "prm"
(docket) number, name of petitioner, the date the petition was
received, the date and citation to the Federal Register notice of
receipt, the disposition, and the date and citation to the Federal
Register notice of disposition. „0n a quarterly basis the
agency publishes an agenda document which lists the petitions
incorporated into final rules, petitions denied, petitions
incorporated into proposed rules, petitions pending staff review,
and petitions with deferred action. For each petition, it lists
the docket number, name of petitioner, the part of the regulations
affected, pertinent federal register citations, subject, summary
of the petition and its objective, brief history of the agency's
action in response to the petition, a timetable for any future
action, and the name and address of the agency contact person.
This agenda_is rapidly becoming the principal tracking document in
the agency .

Compared to some other agencies, the volume of the NRC's
petition business is modest. During the years 1980 to 1985 and
the first half of 1986, the Commission received 6, 9, 8, 7, 4, 6,

PETITIONS FOR RULEMAKING 551

713
and 1 petitions respectively. As of the end of June 1986, it

had 36 petitions pending. That niimber included 16 petitions

received by the agency prior to 1980. Of the petitions

received since 1980, the agency has granted 7 at least in part,

denied 11 at least in part, and four have been withdrawn by the

petitioner. In terms of the nature of the petitioners,

industry (that is, licencees) have filed 15 of the 41 petitions

presented since 1980, environmental and other public interest

groups 9, private citizens 7, the federal government 1, trade

associations 2 and state government 1.

7. Environmental Protection Agency (EPA)

Since its organization in 1970 and extending to the present
time, the EPA has been almost continuously faced with the
challenge of elaborating the major components of the regulatory
programs for which it has been responsible, first air and then a
major restructuring of water pollution control and now hazardous
waste. Those attempts at translating the broad outlines of
congressional programs into specific operating controls has
confronted the agency with major issues of public policy that have
provoked a substantial amount of litigation. Issues have been
resolved by judicial degree or settlement agreements arrived at
between the agency and other parties to the litigation and not
generally by means of petitions for rulemaking. As a general
rule in fact it might be expected that the petition process is
more likely to be important in contributing to the evolution of
regulatory programs only when the basic outlines of those are
largely in place.

Given its preoccupation with major issues of policy-making
and implementation, the development of regulations under APA
Section 553 and certain other statutes providing for petitions for
rulemaking have not apparently been considered a matter of high
priority. The lack of petition filings in many areas has no
doubt also contributed to a perception that ad hoc treatment of
petitions when they are filed is the optimal way to deal with
them. The result is that written description or prescription
of the petition process, whether by rule, internal staff directive
or otherwise is absent with respect to many of the programs within
EPA's jurisdiction. Agency officials interviewed claimed that the
lack of regulations had not been the source of complaint or
problems .

What follows is a discussion of the petition practice in the
area of toxic substances, hazardous waste, and air and water
pollution. It does not include petitions received„under the
Federal Insecticide, Fungicide and Rodenticide Act for ^23
reclassification of pesticides from restricted to general use
or petitions for .establishing tolerances for pesticide residues in
food and feed. The aaency receives an average of one hundred
of the latter each year. While rulemaking within the meaning
of the APA is involved in these cases, it is rulemaking usually at
the request of the registrant of the pesticide and not the public

552 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

generally. Moreover the applicable procedures tend to be either
of such specialized nature that generalization for the purpose of
application in the case of^pther types of substantive regulatory
programs appears unlikely or the applicable statutory
procedures do^not differ significantly from other areas covered by
this study.

The special statutory petition procedures appliceible under
the Toxic Substances Control Act are described in Appendix A to
this report. Briefly, any person can petition the
Administrator "to commence" a rulemaking; the petition must set
forth its basis; the agency may hold a hearing or other proceeding
to consider the petition; within 90 days of filing of the
petition, the agency must either grant or deny it; if the
Administrator grants it, the agency must "promptly commence an
appropriate proceeding"; if he denies it, the reasons for the
action must be published in the Federal Register; judicial review
of denials and inaction on petitions is expressly authorized.

There are no agency procedural rules either reiterating these
statutory procedures or elaborating on them. One agency
official indicated that the presence^of the statutory procedures
obviated the need for regulations. In November 1985, however,
the agency published in the Federal Register a statement to assist
prospective petitioners in preparing their submissions.
Guidance was deemed necessary in order to assist petitioners in
presenting the information required in order to obtain favorable
action on their petitions and for the purpose. of expediting agency
consideration of and response to petitions. Given the type of
findings and judgments necessary to justify adoption or amendment
of the rules under the Act, it was deemed both desirable and
feasible to be very specific regarding the type of_technical and
other data required to be included in a petition.

The guidance informed the petitioners that their submissions
should include their names, addresses, phone numbers, whom to
contact for further information, the purpose of any organizational
petitioner and a precise description of the relief requested.
As in the case of the NRC, petitioners were_also encouraged to
confer with the EPA before filing a petition. This would
enable the petitioners to determine what information the agency
already had on the matters at issue, what action it had taken or
was currently taking, what information the agency needed to make
its decision and what alternatives to federal regulation might
exist.

Apparently EPA receives an average of approximately three
petitions each year under TSCA. Twenty-eight have been filed
since 1978. Eight of those have been granted in whole or in part
and 18 have been denied. Two are pending. The experience in
processing these petitions, and in particular two involving
"multimedia" pollution problems, suggested to the agency the
desirability of guidance to prospective petitioners.

PETITIONS FOR RULEMAKING 553

Receipt of a TSCA petition is not routinely (if at all)
published in the Federal Register for the purpose of soliciting
comments, though it is put in a docket room where it is publicly
available for inspection. However, ^p^lic meetings may and
sometimes have been held on petitions . „^^ Comments are received
and these are put into the publ^g file. Following receipt and
assignment of a docket number, the flow of the decision-making
process apparently does not differ substantially ^jom the
situation where the proposal is agency-initiated. The agency
must within 90 days either deny or grant the petition. TJ|
agency indicates that it meets this deadline in most cases.
Agency practice is to personally notify the petitioner in the case
of a denial as well as publish the denial along with the
explanation in the Register as reguired by the statute.

It is important to note, however, that the petition
provision of TSCA is different from APA Section 553(e) in one
crucial respect of relevance to deadlines for agency action.
Under TSCA the grant occurs prior to the formal commencement of
the rulemaking. The statute refers to petitions to the agency "to
initiate a proceeding" and, therefore, the grant of the
petition is not coincident with the issuance of a fi^&i rule as
should be the case where APA petitions are involved.

Once the agency grants a TSCA petition it must "promptly" commence
the rulemaking by, for example, issuance of a notice of
proposed rulemaking or perhaps an advance notice of proposed
rulemaking. However at this point no time limits under TSCA, and
arguablXcgot even those of Section 555(b) ("a reasonable
time" ) , apply to completion of the rulemaking by either
withdrawal of the notice or adoption of the final rule.
Moreover in the case of a termination of the rulemaking without
issuance of a rule or the adoption of a rule that differs
substantially from that requested by the petitioner, there is
arguably no statutory obligation to explain the denial to the
petitioner personally, though such an explanation may be
demanded by the courts where judicial review occurs.

With regard to the record for decision on a TSCA petition, it
includes all documents relied upon by the agency in making its
decision to grant or deny the petition. If a rulemaking
proceeding is commenced, thej-petition file becomes part of the
record for that rulemaking.

758
Under the Resource Conservation and Recovery Act, any

person may petition EPA for the promulgation, amendment or repeal

of any regulation authorized by the statute; within a reasonable

time following receipt, the agency must "take action" with respect

to such petition and publish notice of that action in the Federal

unlike TSCA, the statute talks of petitions for the issuance of

rules, not for the commencement of proceedings for the issuance of

rules, suggesting that a final affirmative disposition does not

occur until the formal adoption of a rule conforming to the

554 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

petitioner's request. Moreover, as in the case of the APA,
disposition of the petition is subject to a requirement that it
occur within a reasonable time.

However some confusion regarding EPA's obligations under
RCRA is introduced by the fact that the agency is merely directed
to "take action with respect to such petition, " and it is not
clear what qualifies as "action" within the meaning of this
provision. It might be argued that sending a friendly letter of
acknowledgement of a petition and thanking the petitioner for a
good idea is an acceptable final disposition.

However, the agency appears to have construed RCRA in a
fashion similar to the interpretation proposed in this report for
APA Section 553(e). That is to say, final affirmative action
on the petition is the issuance of a rule. This agency
interpretation has not been made explicit but can be derived from
the regulations which the aaency has adopted to implement the
petition provision of RCRA. It is not clear, however, how much
thought the agency has given to this matter since apparently the
relevant part of those regulations was developed as part of a
vastly broader rulemakina in response to a court order and under
strict time deadlines.

Turning to those rules, there are some very specialized ones
applicable to certain types of rulemaking; the purpose of these
regulations is predominantly to specify the type of information™-,
and showings required from the petitioner for favorable action.
In fact a large portion of the petitions for rulemaking filed with
EPA each year (over 100) are processed under these provisions.

These rules are supplemented by a general set which applies^
also to petitions not falling within those special categories.
By its terms, however, this set is limited to regulations _,,
contained in certain parts of the Code of Federal Regulations.
Each petition must be sxibmitted to the Administrator (no address
specified) by certified mail and must include the petitioner's
name and address, a statement of the petitioner's interest in the
proposed action, a description of the proposed action including
suggested regulatory language, and a statement of the need and
justification for the proposed action-including any supporting
tests, studies and other information. Upon„receipt a petition
is generally placed in the RCRA public docket. The agency then
makes a "tentative decision" to grant or deny the petition. An
affirmative tentative decision is published as an advance notice
of proposed rulemaking or even a proposed rule. A negative one is
published in the Federal Register as a tentative denial. _In both
instances written comments from the public are solicited. A
hearing to receive oral comments may be held on the initiative of
the agencv- or in response to a written request from interested
persons. Following evaluation of all public comments, the
Administrator makes "a final decision by publishing in the Federal
Register a regulatory amendment or a denial of the petition."
It is this final provision in context that suggests that final

PETITIONS FOR RULEMAKING 555

affirmative action on the petition within the meaning of the
petition provision of RCRA is deemed to be a grant that adopts the
proposed rule.

The agency is currently engaged in putting large parts of the
regulatory scheme under RCRA into place and, therefore, currently
has rulemakings underway on numerous fronts. Therefore, to date,
it has been possible to incorporate petitions relating to general
policy matters into ongoing rulemakings.

The principal statute relating to petitions for rulemaking
that applies to EPA outside of the special statutory provisions
just described is the Administrative Procedure Act. The agency
has no set of implementing regulations or internal operating
directives that apply expressly to this petition process. This
means, among other things, that petitions submitted which relate
to most of the agency's duties^and powers under the Clean Air
Act,„„„ the Clean Water Act, and the Safe Drinking Water
Act, are handled purely on an ad hoc basis, which^practice
has, according to the agency, "worked acceptably well." No
complaints regarding the^lack of implementing regulations have
allegedly been received.

The agency estimates that during the past three years, it has
received eight petitions in all under the Clean Water Act and Safe
Drinking Water Act. It has granted none of these: one was
denied, three are pending, and the rest have beeg-withdrawn or
were "superseded" by events such as litigation. For some
unknown reason, the agency does not apparently consider requests
to revise state implementation plang-under the Clean Air Act to be
"public petitions for rulemaking, " though it would seem to be
clear that federal approval or promulgation of such plans, or^
parts thereof, is rulemaking within the meaning of the APA.
One petition under the Clean Air Act has been filed in the last
several years .

Apparently there is usually no formal docket established for
APA petitions for rulemaking. An informal record of documents
that supports the agency's decision on a petition may be
maintained in the affected program office and is generally
comprised of „ technical materials and agency pronouncements of
relevance. If a petition is not denied and a rulemaking is
commenced^ the petition file becomes part of the rulemaking
record. The agency does not apparently maintaingg publicly
available index of pending and disposed petitions. Nor does
the agency appear to have agformal tracking system that applies
specifically to petitions. Apparently there is no routine of
public notification of the filing of petitions for the purpose of
soliciting comments from interested persons except where a
petition may have national significance. In terms of notice
of grant or denial of an APA petition, the agency may write a
letter to the petitioner and other interested persons and, in
appropriate cases, publish a notice of the action in the Federal
Register.

556 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Putting aside delay in final disposition of matters, a
problem that afflicts agencies with or without elaborate
regulations and internal directives and deadlines for disposing of
petitions, interviews with agency personnel did not disclose any
criticism of EPA for its lack of procedural elaboration in the
petition area and pinpointed no specific problems that have arisen
from the lack of such regulations.

One agency official expressed the opinion that persons who
are relatively "sophisticated" legally or otherwise do not need
regulations in order to formulate and submit petitions for
rulemaking; that the "unsophisticated" would probably not read any
regulations even if they existed. For example, persons having
some knowledge about the workings of the EPA would address a
petition to either the Administrator or the appropriate program
office and may have no need for a regulation specifying the street
address of EPA headquarters in Washington. Aunt Millie in
Kalamazoo might send her petition to the wrong agency official
even if there were such a regulation on the books. This reaction
overlooks, however, those persons and organizations that need, are
willing to, and expect to look for guidance where it is generally
provided, that is in the statutes, the Federal Register and the
Code of Federal Regulations.

With regard to TSCA, the_EPA could perhaps rely on the
statute to give some guidance and perhaps assume that those
persons who would not look there would probably not look at the
CFR. At the same time it felt the need to elaborate on TSCA's
provisions-through a guidance paper published in the Federal
Register. Moreover, in the case of RCRA which gives no more
help than the APA to the prospective petitioner in terms of
explaining what is necessary to qualify as a petition and how the
agency must respond to a petition, EPA did adopt a set of
implementing rules while it continues to eschew development of
similar ones for APA petitions. While the general RCRA petition
regulations may have been developed„largely as an adjunct to the
more specific petition regulations, it is worth noting that it
made this effort at the same time that more substantial issues
relating to the regulatory program demanded its attention. This
should be contrasted with the fact that, while the air and water
programs have hardly entered a quiescent stage, the basic outlines
of the regulatory schemes there are largely in place and yet no
petition regulations have been adopted.

PETITIONS FOR RULEMAKING 557

Judicial Review of the Petition Process

A comprehensive exploration of the issues related to judicial
review of agency action on petitions for rule-making is neither
possible here nor necessary for purposes of this study which is
primarily directed at recommendations for improving the current
handling of petitions by the agencies themselves. Nevertheless,
an examination of the current state of the case law in this area
is important background for any recommendations that might be
made.

A. Standing

797
Under the APA "any interested person" and under certain

other statutes "any" person may petition for rulemaking.

Section 553(e) is not generally interpreted by the agencies to

impose significant restrictions on who may invoke it. In most

instances, it is denial of petitions (or inaction thereon) that

provokes attempts to obtain judicial relief of one sort or

another. Such denials may "injure" the petitioner directly or

indirectly in very tangible ways or merely disappoint a petitioner

having only an "academic" or "organizational" interest in the

regulatory change proposed. The discretion of the agency to grant

or deny the petition may be narrowly cabined by statute or

otherwise or practically unfettered. Any tangible benefit

accruing to the petitioner is generally not a matter of legal

"right." In fact in many cases any concrete injury might just as

appropriately be seen as attributable to the action of the person

regulation of whose activities is sought, rather than agency

action.

With regard to agency action on petitions for rulemaking
submitted under the APA, the courts to^date have inquired whether
the petitioner seeking non-statutory judicial review had
standing under the traditional test of injury in fact traceable to
the action challenged, remediable by the courts and within the
zone of statutory protection. In the case of, for example, the
Toxic Sul)stances Control Act, the right to petition is givengtg
"any person" and the rights to judicial review of a denial
appears to be as expansive, suggesting that Congress may have
attempted to confer standing on even those only "abstractly
interested." More precisely, TSCA may be seen as creating a legal
right, "the invasion of which creates standing even though no
injury would exist without the statute."

B. Forum

Obviously where a statute specifies the court in which
judicial review of agency action — or inaction — on a petition
is to take place, its mandates control. A denial of a petition on
its merits may not occur until a final rule is issued which
differs from the one proposed by the petitioner. In this

558 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

circumstance if there is a forum designated by statute for review
of the adoption of a final rule, this court is presumably the one
authorized to review the "denial" of the petition. Of course it
is always possible that an agency considers the final rule to be a
"grant" of the petition while the petitioner believes that its
request has not in fact been substantially complied with. Such
disputes are presumably within the cognizance of any court
authorized to hear appeals from the adoption of final rules.

In those instances where Congress has not expressly addressed
the issue of the forum for judicial review, review of agency
action or inaction with regard to a petition will usually take
place in the district courts in a so-called non-statutory review
proceeding. In a significant recent case, however, the Court
of Appeals for the District of Columbia indicated that where a
statute committed final agency action to review by a court of
appeals, the appellate court had exclusive jurisdiction to hear
suits seeking interlocutory- relief that might affect its future
statutory power of review. In this case undue delay was
alleged and was said to qualify for court of appeals interlocutory
review as a general matter.

C. Timing

Determining when to intervene to review agency action
pursuant to specific statutory review authority or in
non-statutory actions is a task whose resolution requires a
delicate balancing of numerous factors. Ascertaining when a
"denial" of a petition for rule-making is final for purposes of
review is not unique in this regard. Obviously if an agency has
unequivocally rejected all of a petitioners' proposal and has
stated its intent not to proceed further, agency action is as ripe
for review as it can be. At the other extreme an agency may
initially react negatively to some of petitioner's suggestions but
at the same time issue a notice of proposed rule-making modelled
verbatim on others and announce its willingness to consider
comments regarding the advisability of pursuing the remainder of
the petitioner's request. Here the court should stay its hand.
Other cases are not so clear cut. The variations are so numerous
and the balancing so context specific and necessarily subtle that
statement of more than general guidelineSois impossible. Those
the case law has laid down in otherQareas are largely
applicable in the petition context.

D. Preclusion

The federal courts have increasingly since the 1970 's been
confronted with challenges to agency denials of petitiops for
rule-making as well as to inaction on such petitions. They
have reviewed their legality despite contentions that the agency
action at issue was so far committed to agency discretion by law
as to be unreviewable under APA Section 701(a) (2^^_ They have
even done so in non-statutory review proceedings in the face of
the existence of statutes expressly authorizing judicial review of

PETITIONS FOR RULEMAKING 559

1X8
agency action on certain types of petitions not before them.

Obviously the hoary common law maxim, "expressio unius-est

exclusio alterius," has not had much influence here, though in

some instances, the courts may have acted without awareness of the

existence of these other statutes.

820
Whether the Supreme Court's decision in Heckler v. Chaney,

will change matters is not at all clear. While that case dealt

with judicial review of an agency's refusal to prosecute, some

commentators have suggested that many of the factors that the

Court relied upgn-in Heckler to justify the presumptipn.of

unreviewability are found in the rule-making area. Clearly

Section 553(e) of the APA does not require the granting of any

petition. It merely mandates receipt, consideration and

expeditious disposition, along with a statement of the reasons for

denial. No substantive considerations to govern grant or

denial are there laid down. Any such considerations are to be

found elsewhere. For example, other petition statutes (or

agency substantive rules, policy statements, or internal

directives) may limit the administrative discretion to deny

petitions to a greater degree or at least specify the factors

to be considered in deciding whether to grant or deny a

petition. Where this is the case, obviously theregis a

somewhat greater chance to escape the logic of Chaney to the

extent it extends to petitions for rule-making, a matter^on which

the Court expressly reserved judgment in that opinion.

E. Scope of Review

Where review is available, it is^much more intensive with
respect to alleged procedural errors than with respec^ to
"matters within the agency's broad policy discretion," unless
there is a statute otherwise specifying the scope of review.

Thus an agency's violation of applicable statutory procedural
requirements, whether contained in APA Sections 553 or 555 or
elsewhere, and the violation of the agency's own procedural rules
risks reversal. If the complaint is inaction or unreasonable
delay, however, the court may give great^deference to the agency's
judgment of when it should finally act, though the existence of
statutory or non-statutory time limits for action might in some
cases be usedgas a benchmark for what delay is considered
unacceptable. It is clear, however, that a court will permit
an agency to refuse to accept a petition for filing only in "the
clear case of a filing that-gatently is either deficient in form
or a substantive nullity."

Where the APA provided the only statutory procedural
regulation applicable to an agency's petition process, one court
expressly refused, in part on the basis of the Supreme Court's
Vermont Yankee decision, to reverse an agency's denial of a
petition. There it was urged that the agency failed to utilize
procedures not found in the APA: the petitioner claimed that it
should have been afforded notice of the documents to be relied

560 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

upon in the agency's decision at some point prior to the denial
and opportunity to conunent thereon.

However, where an agency receives comments on a petition, it
likely has an obligation, as in rule-making, to respond to the
significant issues raised thereby in its Section 555(e) statement
of denial. Failure to do so could arguably be considered a
substantive error iustifying remand consistent with the strictures
of Vermont Yankee .

When it comes to the substance of the agencv-decision, a
denial risks reversal less when based on policy (including
resource availability) than on legal interpretation and more when
the governing substantive .statute hems agency discretion tightly
than in other instances. Practically speaking, the intensity
of review may also vary depending on when the denial under review
occurs. The earlier it occurs in the rulemaking process the less
substantial the record for review is likely to be and,
accordingly, the more likely the court will have to accept the
agency's assertion at face value.

An agency may possess the authority to develop policy
elaboration of the substantive statutes it administers either by
means of legislative rules or on a case-by-case basis. In these
cases presumably the considerations listed in the second Chenery
case and the disposition there evidenced to defer to agency
judgment with regard to how best to proceed enter, or should
enter, into the calculus with regard to whether to reverse the
denial of a petition. This is the case at least where the
agency's denial explains its action in ways that invoke this line
of precedents.

F. Record for Review

845
Ever since Citizens^to Preserve Overton Park y._Volpe,

both the Supreme Court and lower federal courts have

generally assumed that judicial review of administrative action

should be on the basis of materials which were relied upon by the

agency in reaching the decision under review. No different

approach has been-jtaken in the cases dealing with review of

petition denials. At least one of these opinions noted the

waste of time and confusion for the court and parties which may be

caused by the agency's failure to maintain, contemporaneously

during the decision-making process, a clearly identified group of

materials as "the record" for decision which can be later

presented to the court on review. This suggests the

advisability of formally maintaining a docket file for each

petition which at the least contains a copy of the petition, any

federal register or other public notices issued relating to it,

any comments received in support or opposition, hearing or

meeting transcripts, and other documents submitted by the

petitioner, commentators or others or generated within the agency

which contain materials, not exempt from disclosure under FOIA,

which are likely to be considered by the agency in reaching the

PETITIONS FOR RULEMAKING 561

decision on the petition. ®^^ The contemporaneous maintenance and
clear organization of Jg| record can assist petitioners, the
agency and the courts.

562 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

VI.

General Conclusions

While the number of petition filings with a few agencies is
substantial and a major portion of their resources is devoted to
their consideration and disposition, one of the surprising
findings of this study is the comparative infrequency with which
most federal agencies are presented with statutory petitions for
rulemaking, whether filed under the authority of the 0^4,

Administrative Procedure Act or other congressional enactments.
In discussing the petition process with individuals who are
regularly engaged in administrative practice, quite a few
indicated that there were more effective ways to influence agency
action, such as informal contact or litigation, and that they
would be loath to file a petition for rulemaking because of the
delay they expect in the final disposition of their requests.
This rather low opinion of the petition process was not, however,
shared by all practitioners surveyed. Others viewed the petition
process as an important avenue for influencing agency action and
some of these considered the existing procedures of various
agencies to be well-designed and operated in an acceptable fashion
at least in part.

From an agency's point of view, the statutory right to
petition for rulemaking is a mixed blessing. It has been and
continues to be a source of some valuable ideas for regulatory
change, though this may vary from agency to agency. At the same
time it can impose strain on already tight agency budgets and be
perceived as an unwanted disruption of internally established
regulatory priorities. Studies of the Consumer Product Safety
Commission have demonstrated the problems which are presented when
an agency gives too much priority to the petition process.

It would seem to be impossible to demonstrate with any degree
of accuracy that affording the statutory right to petition as it
exists under the APA is cost effective. But even if it were not,
its continued maintenance is required by the need to give
regulated entities and the public at large a formal opportunity to
request changes in schemes of regulation which, in matters both
large and small, are to a great degree the creation of an
unelected bureaucracy which might not always be aware of the need
for regulatory modification. Improvement of the process can
facilitate and thereby encourage further use of this mechanism.

As indicated at the outset of this report, statutes creating
the right to petition for the issuance, amendment and repeal of
rules implicitly mandate that some priority be given to the q^,
consideration and response to proposals contained in petitions.
In surveying current federal agency practice with regard to the
treatment of petitions, two issues appear to be of particular
importance. First of all, to what extent should agencies solicit
the views of the general public or selected sectors thereof prior
to the decision to take some formal action on a petition?

PETITIONS FOR RULEMAKING 563

Secondly, what degree of procedural formality in the treatment of
petitions is required and what degree is optimal for a particular
agency or substantive program?

In order to resolve the first question, it is necessary to
observe how the petition process relates to the more general
process of agency formulation of policy by rule. To state the
obvious, ideas for regulatory innovation have numerous sources,
both inside and outside the agency. With regard to the latter,
the methods of input are various, both formal and informal, and
often it is simply not clear where a particular rule had its
origin. The APA and other statutes insure that out of the welter
of suggestions emanating from the public at least those presented
as "petitions" receive serious and expeditious consideration.

The Administrative Procedure Act requires generally that
before a proposal, whatever its origin, be formally adopted the
agency must solicit the comments of interested persons. The
agency may learn much from such submissions, or little, but at
least those who may be burdened or benefitted by regulation have
been given the opportunity to offer what they believe is relevant
factual information, their views and arguments. Some statutes
and agency regulations mandate two or more such opportunities.
The motivating factor in these instances may be that more
information is necessary in order to develop or refine a proposal
or it may be deemed politically imperative that the agency move
slowly in developing its regulatory program.

Where a petition for rulemaking is filed and the agency is
favorably disposed to the ideas presented, the APA thus assures
that there is at least one opportunity to convince the agency not
to adopt the proposal or at least to modify it in certain
particulars. However if an agency, for whatever reason, does not
believe that adoption of a proposed regulatory innovation or
change is appropriate, there is no requirement in the APA that
public input be invited before the agency decides to deny the
petition, g though such a mandate may be found occasionally in other
statutes. It might be argued that just as agency-generated
proposals need not be exposed to public view prior to their
rejection, an agency should be free to reject the ideas flowing
from the public without the need for the solicitation of comment.
If an agency believes that it can learn something of relevance as
a result of sucli solicitation, that the proposal is of such
significance that the public should know it is under
consideration, or that its public image will be bolstered by the
practice of soliciting comments, it should feel free to issue a
public notice of some kind discussing the petition and requesting
reaction. But it should not be bound to do so given the possible
costs of public notice and delay that may be occasioned by a
comment period.

However, it is likely that an agency may be more resistant to
seriouSggonsideration of proposals that do not originate
within. Inertia may also be a powerful force operating on

564 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

agency heads and their staff. To the extent the APA mandates that
proposals contained in petitions be given serious

consideration, an agency should have to engage in at least one
round of public solicitation of views on a petition, whether by
means of a notice of proposed rulemaking which mirrors
petitioner's suggestion or other method that does not so strongly
suggest tentative agency approval of the petitioner's ideas. The
agency can then reject the proposal only after being confronted
with information that may undercut any initial adverse reaction
but at any rate only after it explains why, in view of the
information forthcoming from the public, it feels it is
inappropriate to adopt the petitioner's suggestion.

Discussions with agency personnel for the purpose of this
study indicated that often few comments were received until a
notice of proposed rule-making was issued by the agency. Since
issuance of such a notice might be considered by the agency or the
public as a tentative commitment to the ideas proposed therein,
agencies may be justifiably reticent to routinely use that
mechanism to solicit comments on a petition. But even if they
feel this way, as long as the interested public is aware that
another mode of solicitation of views on petitions will generally
be relied upon and failure to utilize it may mean that the agency
will deny the petition for want of supporting information, the
number of helpful comments may increase. Even if they do not, at
least the agency has made the effort to open up its decisionmaking
process in an effort to counteract biases or preconceptions that
may otherwise operate both to its and the public's detriment.

The fewer the petitions an agency receives, presumably the
lower the aggregate cost to it of comment periods. This suggests
that usually any agency which receives a small number of petitions
each year is on particularly weak ground in resisting a mandatory
comment period. Moreover there are numerous methods of involving
persons outside the agency in the decisionmaking process and the
costs of these vary significantly. The traditional one is
publication of a Federal Register notice soliciting comments,
which notice may be entitled "notice of receipt of petition for
rulemaking, " "advance notice of proposed rulemaking, " "notice of
inquiry," or "notice of proposed rulemaking." Where those who are
most likely to comment are regularly informed by the trade press
or otherwise of notices of petition filings posted at the agency's
offices, the monetary cost of a comment period may be
relatively minimal even where petition filings are substantial in
volume. In other instances mailings to selected interested groups
can solicit at least a cross-section of the type of comment tb§"t
might be expected from more extensive solicitation of views.

The delay in the decisionmaking process that may be
occasioned by a comment period also involves costs. The
petitioner whose proposal might otherwise be summarily rejected is
unlikely to complain too vociferously regarding such delay. The
petitioner whose suggestion is favorably received by agency
personnel may be impatient with the delay caused by an initial

PETITIONS FOR RULEMAKING 565

round of comments, though such comments may disclose that its
proposal has less merit than it seems superficially to possess.
However the agency can mitigate this latter problem if there is no
legal requirement that it solicit comments before it moves to the
issuance of a notice of proposed rulemaking or, where appropriate,
the adoption of the final rule. If, however, an initial
solicitation of comments on the petition prior to the notice of
proposed rulemaking is deemed appropriate, delay can also be
reduced by a comment period of relatively short, but reasonable,
length such as thirty days .

With respect to those agencies which are under a rigid
statutory deadline to grant or deny petitions, as in the case of
NHTSA with regard to motor vehicle safety standards and EPA in the
toxic substance area, it may be difficult to both publish in the
Federal Register a notice requesting comments and meet the
deadline onQgccount of the time required for agency clearance of
the notice. In these circumstances, the agency might utilize
methods other than publication notice, such as letters to
potentially interested persons and organizations requesting their
input. If solicitation likely to elicit relevant information is
simply not feasible if the deadlines are to be met, amendment of
the statutes, as recommended later in this report, may be the only
way to permit these agencies to engage in meaningful comment
periods prior to denial of a petition or issuance of a notice of
proposed rule-making.

Otherwise the only exceptions made to the requirement of
pre-denial solicitation should usually be in cases where the need
to decide the issues raised in the petition have been mooted by
other developments , Q the same issues have been disposed of through
the grant or recent denial of a similar petition, the petition
requests action that is clearly beyond the statutory jurisdiction
of the agency, or the request is clearly frivolous. Any
standard devised for summary disposition will inevitably vest some
discretion in the agency so that in particular cases the avoidance
of the mandatory comment period may be of questionable wisdom or
propriety. The good faith of the agency must, however, be assumed
here for lack of a better alternative.

Statutes mandating publication of the receipt of a petition
for rulemaking in all cases should be amended to permit, on the
one hand, summary denial or dismissal on the grounds listed
previously and, on the other, dispensing with public notice of the
receipt of a petition and proceeding directly to issuance of a
notice of proposed rulemaking if the agency is favorably inclined
toward adopting the suggestion of the petitioner.

Requiring that agencies generally permit at least one round
of comments prior to denial of a petition for rulemaking has
certain procedural consequences. A formal public file or docket
with identifying control number should be opened and contain a
copy of the petition along with any comments received. This
permits examination by interested persons of the contents of not

566 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

only the petition but also any conunents and, in this way, allows
the filina of reply comments. The two stage comment process of
the FCC is not essential for the latter purpose as long as the
agency is willing to consider late comments or to reopen the
comment period in the case where good cause is shown for the late
filing of a comment. Where necessary, presubmission review of
requests to hold certain materials confidential can be provided
for.

Each public file should be organized in chronological order
and also contain copies of letters to the petitioner of grant or
denial of the petition, any federal register or other public
notices with regard to agency action on the petition as well as
correspondence, reports, and other documents that contain factual
information that may be relied upon in the decisionmaking process.
Documents should be included in the file as soon as possible so
that reply comments can address matters contained therein.
Correspondence with people outside the agency which contain
arguments of law or policy should also be included, though
internal staff memoranda of that nature may be excluded. Finally,
if a hearing or public meeting has been held to consider the
petition, any transcript that was prepared should be added to the
file.

If there is judicial review of denial of the petition, the
court will expect-the record for review to include most of these
materials any^/ay. The creation and maintenance of a public
file in this manner may reduce arguments by litigants regarding
what should and what should not be in the record for review or at
least simplify and expedite the process of compiling the record
for review when it becomes necessary to do so. In some cases, the
existence of such a file may facilitate agency decision-making by
insuring that there is one location where all relevant materials
can be found. It is worth noting that some agencies maintain
petition records largely in this form at the present time.
Assuming the petition is granted, the petition file should become
part of the rulemaking record maintained by the agency for reasons
surveyed in Appendix C.

Some agencies compile and regularly update piiblic indices
which record for each petition the name of the petitioner(s ) , date
of filing, docket or control number, status and/or„disposition,
subject matter of petition and other information. Q_„Some also
maintain indices of the contents of petition files. Agencies
should at least prepare the former for the benefit of itself and
others. Interested persons can use such a list to identify
petitions on which they may wish to comment and the control
numbers necessary to gain access to relevant files. It operates
as an important supplement to other methods chosen to give public
notice of the opportunity to comment. At the same time the
compilation of this information in one place reduces the need for
agency employees to answer questions relating to the
identification of a particular petition file and the status of
agency action on petitions.

PETITIONS FOR RULEMAKING 567

Turning to the second issue posed above, that is the degree
of formality of the agency petition process, it is clear that the
greater the volume of petition filings, the more important it is
for an agency to describe the petition process in writing to
advise both the public and agency employees of the requirements
and decisionmaking flow. The existence of such documents
reduces the amount of agency resources needed to answer questions
regarding, for example, the format for petitions and to obtain
information from the petitioner that is necessary in ordeg^^o
begin consideration of the proposal made in the petition.
Express guidance to staff similarly eliminates time and energy
wasted when review responsibilities are not clear. The less
distinctive the problems presented by individual petitions the
more it is feasible to describe the petition process in some
detail. While adoption of such regulations or directives may not
eliminate delay, it may reduce it to some extent.

Whether description of the petition process takes the form of
a "rule" or internal "handbook," "staff manual," or "order" is not
all that important in the abstract. What is crucial from the
petitioner's point of view is that the requirements for filing a
petition be easily accessible, which generally means publication
in the Federal Register or Code of Federal Regulations.
Publication of the general outlines of the actions the agency may
take in response to the petition, such as issuance of Federal
Register notice of receipt or notice of proposed rulemaking or
holding a public meeting, is also important. As a matter of
fairness, if not good public relations, petitioners and the pubj^g
at large should not be kept in the dark regarding such matters.

As this report has indicated at various places, some agencies
which receive few petitions have not attempted to formally
describe in writing any part of the petition process. While this
has not apparently provoked substantial criticism or resulted in
easily identifiable instances where petitions were either not
filed or considered on their merit§g2 it is not consistent with
the legislative history of the APA or some of ggg
recommendations of the Administrative Conference. More
importantly, the absence of even basic formality in the sense of
some implementing regulations or directives can convey the
impression to the public and agency employees that consideration
and expeditious disposition of petitions is not really that
important and in this waYgJhe priority attached to petitions by
the APA may be undercut. Formalizing the process can mean that
the agency- adopted management system includes disposition of
petitions as a category of actiongWith respect to which goals must
be set and met on a timely basis. In fact agencies which have
not publicly explicated even the basic petition process may
violate the Freedom of Information Act. That statute requires
the publication in the Federal Register of "the established places
at which . . . and the methods whereby, the public may . . . make
submittals or requests," "statements of the general course and
method by which [an agency's] functions are channeled and
determined, including the nature and requirements of all formal

568 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

il procedures available, "and "instructii
:ontents of all papers."

and informal procedures available, i^^^nd "instructions as to the
scope and contents of all papej

The lack of such basic information as the address to file a
petition may mean that a submission is lost in the correspondence
response system of an agency for a considerable period of time.
In some instances an agency can be very specific regarding the
type of information which it needs in order to consider taking
action and the issues that must be addressed, though in others
only general instructions are feasible. Published directions to
submit in as much detail as possible references to the statutory
authority for the requested action, information and arguments
supporting the action requested, and the content of the requested
rule would seem to be indispensable from the agency's point of
view. Most of -these are generally found in existing petition
regulations. Inviting prospective petitioners to confer with
the agency prior to filing in order to make sure that the
submission is as complete as possible as well as to explore the
need for filing the petition iSgan excellent practice which is now
utilized by several agencies.

Clearly prescribing the form of submission in order to
qualify as a petition has the additional advantage from the
agency's point of view of allowing it to segregate those
communications that must be treated specially under the APA or
other petition statute in terms of the seriousness of
consideration, expedition in disposition, and explanatory
obligations for action taken. Those not meeting the requirements
can be treated like ordinary correspondence.

This is not to say that an agency should impose format
requirements that are overly strict or that it should not overlook
failures to comply with its regulations where appropriate. For
example, mandating size of margins-and paper are of questionable
virtue when it comes to petitions. Experienced practitioners
may be used to such requirements and be easily able to comply,
though the infrequent petitioner may not. Such restrictions are
hardly necessary in order to evaluate the merits of petitions.
They are likely to discourage rather than encourage petitions.
While it might be argued that neither the APA nor other statutory
petition provisions were intended to do the latter but merely to
create a right that might be utilized, their very existence
suggests that the former is not an appropriate tactic for agencies
to adopt.

Moreover since detailed specifications as to form of a
petition are the ones most likely to be violated by any other than
the experienced petitioner and yet an agency faithful to the
spirit of the APA and the petition statutes is most likely to
waive compliance with them, an agency is well-advised at the least
to adopt elaborate format provisions as recommendations and not
requirements. A consistent pattern of waiving compliance with
regulations creates more problems than it solves. Where a
document does not contain even the basic elements required to

PETITIONS FOR RULEMAKING 569

begin processing as a petition, the practice of some agencies to
advise the petitioner regarding what it needs in order to consider
the petition is a good one to follow and clearly consistent
with the purpose of petition statutes.

How much beyond basic information regarding form of petition
and decisional flow is laid down by rule or otherwise and in what
detail should vary from agency to agency depending on the
distinctive problems presented by various types of petitions and
the felt need to bolster the institutional memory, among other
factors. However, in drafting such written documents several
general considerations should always be kept in mind:

a. Cross-Ref erence . In more than a few cases, procedural
regulations have been adopted by an agency where i^Q^^ simply not
clear whether they apply to the petition process. In order to
clarify matters for other than the experienced petitioner, a set
of petition regulations should expressly cross-reference any other
applicable procedural regulations. While experienced
practitioners might be able to ascertain, for example, that
certain regulations regarding the form of documents filed with the
agency must be complied with in filing a petition, other
petitioners may not.

b. Coverage . The regulations or other agency descriptions
of the petition process should clearly specify their scope of
coverage. For example, are they applicable to all petitions,
whether filed under the APA or other statutes, to all agency
statements whether denominated substantive, interpretative or
procedural rules, and to all agency substantive programs?

c. Multiplication of Petition Regulations. There should be
a good reason^to have more than one set of petition
regulations. If, for example, the same requirements apply to
all petitions regardless of the type of rulemaking action
requested, there is generally no reason to have more than one set
of regulations. Cross-references to that set can be included in
the various parts of the Code of Federal Regulations when it is
deemed likely that prospective petitioners may not resort to the
general regulations.

One of the consistent complaints regarding the petition
process iSgthe delay encountered in the final dispog^gion of
petitions. As indicated earlier in this report, a grant of
an APA petition should be considered to occur only on the issuance
of the final rule conforming to the petitioner's request. This
interpretation may give the impression that an^^^ency has been
particularly laggard in disposing of petitions but this is
hardly a reason to reject it given the potential consequences of
the alternative interpretations.

The means of reducing real delay that jumps most readily to
mind is imposition by statute of strict time deadlines for agency
action on petitions. It is noteworthy in this regard that where

570 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Congress has imposed those with regard to the petition process the
grant of a petition is often considered to occur prior to the
commencement of the rulemaking. This avoids the problems caused
by requiring an agency to complete its disposition of often
complex factual and policy issues within an overly definite
timeframe. However, mandating only that a "first-cut" with
regard to petitions occur within a stated period presents various
difficulties of its own. In that case completion of the
rulemaking is arguably not subject to the APA's requirement of
reasonable promptness. Explanation of the reasons for ultimately
rejecting petitioner's proposal may also not be required.
Where these statutory deadlines exist, ttjey are often not met by
the agency because they are unrealistic but where an agency
takes the deadline more seriously than the need-to consider the
merits of the petition, apparently a rare case, the easiest
course of action may be to deny the petition, particularly where
judicial review or reversal is deemed unlikely. As other studies
have demonstrated, specific deadlines are effective as a
mana^gjaent tool but are of questionable value when enacted into
law.

The APA mandate that the grant or denial occur within a
reasonable time together with its treatment of a grant as
occurring at the time of issuance of a final rule appears to be
the optimal statutory solution in most cases. Congress should
seriously reconsider those petition statutes that do not adopt
that approach. At the same time, agencies should be
encouraged, or required if necessary, to establish on their own
uniform or individually set target deadlines for action on
petitions, such as dates for issuance of solicitation of comments
on a proposal, denial if the proposal lacks merit, and issuance of
notice of proposed rulemaking. Such deadlines are more likely to
be realistic than those established by Congress. While failure to
comply with self-imposed deadlines is hardly a rare phenomenon,
at least violation of agency targets for action undermines respect
for the authority of law less than frequent disregard of statutory
mandates .

Disposition of petitions can be expedited in a number of
other ways, including precise specification of the form of a
petition, keeping comment periods to a reasonably short time, and
delegation within the agency of decisionmaking authority with
regard to both the grant and denial of petitions. Clear
assignment of responsibility within the agency for determining
whether something qualifies as a petition and where a properly
filed petition should be referred for review on the merits may
also be important both to reduce delay as well as for other
reasons. Where an agency receives a substantial number of
petitions or the disposition of even one of the type of petition
generally received is resource intensive, the agency might
consider adoption of a classification system based on appropriate
criteria (such as degree of risk to the public) for determining
which among the proposals presented should be assigned priority

PETITIONS FOR RULEMAKING 571

over othersQin terms of commitment of agency money and
manpower .

Tracking systems for petitions vary from agency to agency.
They may be very extensive where the petition volume is
substantial and relatively informal where few petitions are filed.
The form of tracking is not as important a factor in reducing
delay as the effort to periodically ascertain the status of work
on a petition and require explanation for delays where they have
occurred.

With regard to delay in disposition of petitions, some
agencies routinely give status reports to petitioners at specific
intervals. Mandating these, at least where the petitioner can
easily consult an index of pending petitions which shows the
up-to-date status or take the initiative and call an agency
official for a report, may only create a routine of little value
either to the agency or the petitioner. Notification to the
petitioner early in the process of the name of a contract person
who can inform it of the status and generally serve as a liaison^-
between the agency and the petitioner has much to recommend it.
All of this is not to say that where the delay becomes very
substantial the agency should not make some effort on its own
initiative to notify the petitioner regarding the reason for the
delay and give some indication what action can be expected on the
petition in the near future.

One very significant issue is the extent of the agency
obligation to go outside of the information supplied by the
petitioner (and commentators) and that possessed at the time by
the agency to gather other relevant data that may support the
petitioner's contentions. Sometimes agencies do engage in this
practice, though how often is not clear. It may be that the
more a proposal appeals to those agency officials that are charged
with making the initial decision on the petition the more likely
the agency will go the extra mile in assisting the petitioner in
this regard. Conducting such an investigation in each case would
impose a substantial burden on already stretched agency resources
that could probably not be justified by the value of the
information which is likely to be discovered. Formulating
sufficiently specific criteria that could be of any assistance in
making the decision to go beyond the information supplied by
petitioner and commentators or already possessed by the agency
would seem to be impossible. Fortunately or unfortunately, the
only feasible solution would appear to be to leave it to the
agency to decide when further data gathering would be productive
and appropriate.

Personal notification to the petitioner of a denial (with
reasons ) of a petition appears to be standard practice with
federal agencies, though some petition statutes other than the
APA require only publication notice. Mandating publication of
notice of denial in every case is a questionable use of scarce
resources. Certainly the disposition of certain petitions may be

572 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

of general public importance by, for example, indicating the drift
of agency policy, and notification of them should be widely
disseminated, though thegFederal Register may not be the most
effective means to do this. The optimal approach would appear
to be to permit the agency in its discretion to notify persons
other than the petitioner of the denial of a petition and the
reasons therefor and by the method deemed most appropriate in the
circumstances. In cases where only the petitioner is notified, it
is not too much to ask that those persons who are aware of the
filing consult the public index of petitions in order to determine
the disposition and review the public file for the letter of
denial. If someone is not aware of the proceeding but has a
similar proposal, the agency will presumably notify the new
petitioner of the previous disposition when the new petition is
filed.

The APA does not require personal notification of the^arant
of a petition, though many agencies afford it on their own or
because other statutes require it. Sometimes a grant connotes
the issuance of a final regulation and in other instances merely
that the agency will commence a rulemaking proceeding. To the
extent the agency action to adopt a rule or begin a rulemaking
proceeding is traceable to the petition of a member of the public,
as a matter of courtesy it would seem appropriate to personally
inform the petitioner that its request has been favorably acted
upon.

One final issue with regard to grants and denials of
petitions must be addressed. Where the grant of a petition does
not occur until the final issuance of a rule, a denial may occur
at any one of various stages in the public process of
consideration. The agency must not neglect a formal disposition
of the petition. For example, the advance notice of proposed
rulemaking may mirror the petitioner's request but the notice of
proposed rulemaking may differ substantially from it.Q_In this
circumstance a denial has occurred and Section 555(e) requires
notification to the petitioner. It is particularly easy to
overlook the need for this when a petition has been folded into an
ongoing rulemaking as is often the case.

Agencies differ in their practices with regard to
reconsideration of decisions and this impacts on the petition
area. Some do not speak to the issue at all in the petition
context. Often there is a clear distinction between a request
for reconsideration of action on a petition and a request for
reconsideration of action in adopting a final rule. Where,
however, a grant of a petition connotes the adoption of a rule and
a denial occurs because the final rule differs from the
petitioner's request, a petition to reconsider may be both. For
simplicity it might be argued that whenever there is a request for
reconsideration (assuming the agency entertains such requests) it
be treated as a petition for rulemaking subject to procedures
applicable thereto and some agencies so provide. However the
procedures for considering petitions for rulemaking may not be at

PETITIONS FOR RULEMAKING 573

all appropriate in the case of reconsideration because, for
example, of the need for expeditious action, the minimal value of
some of the procedures applicable to rulemaking petitions if
applied at the reconsideration stage, and the existence of an
already compiled record for decision. Agencies should first of
all, therefore, be very clear in their regulations whether
reconsideration must be sought through the normal petition
procedures. Moreover, for simplicity, different procedures
applicable to reconsideration (if authorized) should be mandated
only when deemed absolutely necessary.

There remains the question regarding the applicability of the
foregoing recommendations to (1) matters and functions which have
been traditionally considered exempt from the APA §jght to
petition but which are not or should not be exempt and
(2) interpretative rules, general statements of policy and rules
of agency organization, procedure and practige which are without
doubt currently subject to Section 553(e).

As to the former, some of the aspects of the proposed
petition process, such as the suggested petition format, may be
equally appropriate for those agencies authorized to handle the
matters and functions described in Section 553(a). However,
public solicitation of views with regard to a petition and the
procedures required to effectuate that requirement, such as the
maintenance of a public docket, are the ones most likely to raise
objections. Without further investigation, mandating that
procedure in these cases would appear to be inappropriate at this
time.

With regard to the latter, the APA permits adoption of
interpretative rules, general statements of policy and procedural
rules by an agency on its own initiative without prior
solicitation of views. To require public solicitation
following adoption in response to a petition to amend or repeal as
well as in those cases where the idea is initially presented by
the petition and is not agency generated would not appear to
impose an unreasonable burden on the agency in most instances and
yet may elicit useful information. In fact existing
recommendations of the Administrative Conference suggest a
somewhat similar approach, except in cases where the agency finds
that solicitation "would serve no public interesfc29^ would be so
burdensome as to outweigh any foreseeable gain." Therefore,
agency practice with regard to these rules should be substantially
the same as that with respect to legislative rule-making.

Finally, the proliferation of special petition statutes is a
matter that should be reconsideredgby Congress. In addition to
the problems previously surveyed some of these statutes create
confusion, add little to existing agency power, or cause
administrative inefficiency without corresponding benefit. RCRA
is an example of the first given its rather opague mandate to
"take action" within a reasonable time. Authorization in the
TSCA to investigate the subject matter of a petition by various

574 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

930
methods is an instance of the second. Finally, the mandate to

publish notice of receipt in all cases or notice of denial

illustrates the third.

Accordingly, Congress should carefully review these statutes
to determine whether they are really needed. Aside from novel
approaches to judicial review, their most significant addition
to the APA is the imposition of specific time limits for agency
action, a difference of questionable value. To the extent
these are repealed, the APA will serve as the unifying benchmark
for agency petition practice. If necessary. Congress could
direct federal agencies to adopt minimal procedures such as those
suggested in Appendix D or the somewhat more modest
recommendations adopted by the Administrative Conference on the
basis of this study and leave further elaboration to the agency's
informed discretion.

PETITIONS FOR RULEMAKING 575

Postscript

On December 4, 1986 the Plenary Session of the Administrative
Conference adopted the following Recommendation.

1 CFR § 305.86-6

Recommendation 86-6

Petitions for Rulemaking

Adopted December 4, 1986

The Administrative Procedure Act (APA) requires each federal
agency to give interested persons the right to petition for the
issuance, amendment, or repeal of a rule, 5 U.S.C. § 553(e). The
APA also requires that agencies conclude matters presented to them
within a reasonable time, 5 U.S.C. § 555(b), and give prompt
notice of the denial of actions requested by interested persons, 5
U.S.C. § 555(e). The APA does not specify the procedures agencies
must follow in receiving, ^considering, or disposing of public
petitions for rulemaking. However, agencies are expected to
establish and piiblish such procedures in accordance with the
public information section of the APA. See ATTORNEY GENERAL'S
MANUAL ON THE ADMINISTRATIVE PROCEDURE ACT 38 (1947). An
Administrative Conference study of agency rulemaking petition
procedures and practices found that while most agencies with
rulemaking power have established some procedures governing
petitions for rulemaking, few agencies have established sound
practices in dealing with petitions or responded promptly to such
petitions .

This Recommendation sets forth the basic procedures that the
Conference believes should be incorporated into agency procedural
rules governing petitions for rulemaking. In addition, the
Conference encourages agencies to adopt certain other procedures
and policies where appropriate and feasible. The Conference feels
that, beyond this basic level, uniform specification of agency
petition procedures would be undesirable because there are
significant differences in the number and nature of petitions
received by agencies and in the degree of sophistication of each
agency's community of interested persons.

Agencies should review their rulemaking petition procedures
and practices and, in accordance with this Recommendation, adopt
measures that will ensure that the right to petition is a
meaningful one. The existence of the right to petition reflects
the value Congress has placed on public participation in the

But other statutes expressly create the right to petition
for rulemaking, and some of these statutes specify procedures to
be followed in the petitioning process.

576 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

agency rulemaking process. The Administrative Conference has
recognized, in past recommendations, the benefits flowing from
public participation in agency rulemaking and from publication of
the means for such participation. The cibsence of published
petition procedures, excessive or rigidly-enforced format
requirements, and the failure to act promptly on petitions for
rulemaking may undermine the public's right to file petitions for
rulemaking.

Some agencies currently have petition- for-rulemaking
procedures that are more elaborate than those recommended in this
Recommendation. This Recommendation is not intended to express a
judgment that such procedures are inappropriate or that the
statutes mandating particular procedures should be amended. Nor
is the Recommendation intended to alter the prior position of the
Conference recommending elimination of the categorical exemptions
of certain types of rulemaking from the APA's rulemaking
requirements. See Recommendations 69-8 and 73-5. To the extent
Congress or agencies adopt those recommendations, they should also
expressly apply the right to petition to those types of
rulemaking.

RECOMMENDATION

1. Agencies should establish by rule basic procedures for
the receipt, consideration, and prompt disposition of petitions
for rulemaking. These basic procedures should include: (a)
specification of the address (es) for the filing of petitions and
an outline of the recommended contents of the petition, such as
the name, address, and telephone number of the petitioner, the
statutory authority for the action requested, and a description of
the rule to be issued, amended, or repealed; (b) maintenance of a
publicly available petition file; and (c) provision for prompt
notification to the petitioner of the action taken on the
petition, with a summary explanatory statement.

2. In addition, agencies should, where appropriate and
feasible:

a. make their petition procedures expressly applicable
to all types of rules the agency has authority to adopt;

2 ...

See RECOMMENDATION 69-8, Elimination of Certain Exemptions

from the APA Rulemaking Requirements, 1 C.F.R. § 305.69-8;

RECOMMENDATION 71-6, Public Participation in Administrative

Hearings, 1 C.F.R. § 305.71-6; RECOMMENDATION 73-5, Elimination of

the "Military or Foreign Affairs Function" Exemption from APA

Rulemaking Requirements, 1 C.F.R. § 305.73-5; RECOMMENDATION 76-5,

Interpretive Rules of General Applicability and Statements of

General Policy, 1 C.F.R. § 305.76-5; and RECOMMENDATION 83-2, The

"Good Cause" Exemption from APA Rulemaking Requirements, 1 C.F.R.

§ 305.83-2.

PETITIONS FOR RULEMAKING 577

b. provide guidance on the type of data, argumentation,
or other information the agency needs to consider petitions;

c. develop effective methods for providing notice to
interested persons that a petition has been filed and identify the
agency office or official to whom inquiries and comments should be
made ; and ,

578 ADMINISTRATIVE CONFERENCE OF THE UNTTED STATES

Footnotes

1. Balanced Budget and Emergency Deficit Control Act of 1985,
Pub. L. 99-177, 99 Stat. 1038, 2 U.S.C.A. § 901 et seq.
(Supp. 1986), declared unconstitutional in part in Bowsher v.
Synar, 106 S. Ct. 3181 (1986).

2. See Administrative Conference of the United States, A GUIDE
TO FEDERAL AGENCY RULEMAKING 248-272 (1983) for a selected
bibliography of the administrative law literature produced
over the last fifteen years.

3. 5 U.S.C. § 551 et seq. (1982).

4. Id^ § 553(e).

5. See Appendix A infra.

6. See Appendix C infra.

7. See text accompanying notes 797-853 infra.

8. See 105 S. Ct. 1649 (1985).

9. See text accompanying notes 820-27 infra.

10. See Oil, Chemical & Atomic Workers International Union v.
Zegeer, 768 F.2d 1480 (D.C. Cir. 1985) (delay) (but noting
that issue presented was not refusal to initiate rulemaking).

11. See text accompanying note 181 infra.

12. See text accompanying notes 220-796 infra.

13. See text accompanying notes 854-934 and Appendix D infra.

14. Id.

15. But see, e.g., text at notes 733-40 infra.

16. See, e.g. , 10 C.F.R. § 430.27 (test procedure waiver).

17. See, e.g., 16 C.F.R. § 1.16 (exemption from trade regulation
rules ) .

18. See, e.g. , 40 C.F.R. § 260.30 (variance from solid waste
classifications ) .

19. 5 U.S.C. § 551(4) (1982). See, e.g. , 15 U.S.C. § 57a(g)(2).

20. See, e.g. , 16 U.S.C. § 824d(e) (1982) (rates for transmission
or sale of electric energy).

21. See, e.g. , 7 C.F.R. Part 900.

PETITIONS FOR RULEMAKING 579

22. See, e.g. , 50 U.S.C. App. § 2406(c) (1982).

23. See text preceding note 99 infra.

24. See text at note 102 infra.

25. See text accompanying note 103 infra.

26. Congressional Research Service, Library of Congress, THE
CONSTITUTION OF THE UNITED STATES OF AMERICA: ANALYSIS AND
INTERPRETATION 1030 (1973) (Jayson, et aJU eds . ) (hereinafter
THE CONSTITUTION: ANALYSIS).

27. Id^ at 1031.

28. 1 Wm. & Mary, Sess. 2, ch. 2. (1689).

29. See 1 B. SCHWARTZ, THE BILL OF RIGHTS— A DOCUMENTARY HISTORY
198 (1971).

30. U.S. CONST, amend. I.

31. THE CONSTITUTION: ANALYSIS 1032.

32. R. CUSHMAN, CASES IN CIVIL LIBERTIES 491 (1968).

33. See THE CONSTITUTION: ANALYSIS 1031.

34. See California Motor Transport Co. v. Trucking Unlim. , 404
U.S. 508, 510 (1972).

35. 5 U.S.C. § 553(e) (1982).

36. For a discussion regarding the meaning of the term,
"interested person," see text accompanying notes 81-87 infra.

37. See 1 K. DAVIS, ADMINISTRATIVE LAW TREATISE 586 (2d ed.
1978); Bonfield, Military and Foreign Affairs Rulemaking
Under the APA, 71 Mich. L. Rev. 221, 356 (1972); Bonfield,
Public Participation in Federal Rulemaking Relating to Public
Property, Loans, Grants , Benefits, or Contacts, 118 U. Pa. L.
Rev. 540, 600 (1970).

38. 5 U.S.C. § 553(a) (1982). See DAVIS, supra note 37, at 586
(referring to this as a "flaw of draftsmanship") and
Bonfield, supra note 37, 71 Mich. L. Rev. at 230-31 and 118
U. Pa. L. Rev. at 549-50.

39. 5 U.S.C. § 553(a)(1) (1982).

40. Id^ § 553 (a)(2).

41. Id. § 553(a) provides in part: "This section applies,
according to the provisions thereof, except to the extent

580 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

that there is involved — . ..." Since 553(e) is part of
Section 553, the import of this language is to suggest that
where the matters and functions listed in 553(a)(1) and
(a)(2) are involved, Section 553(e) has no application.

42. That such an interpretation may not be correct is discussed
in the text accompanying notes 104-20 infra.

43. See Senate Judiciary Committee Print, June 1945, reprinted in
Administrative Procedure Act, Legislative History, Sen. Doc.
No. 248, 79th Cong. 2d Sess . (hereinafter "Legislative
History") 21 (1946): "One agency objects to the statutory
statement of a right of petition on the ground that it would
'force' a 'tremendous' number of hearings. The alternative
implied is that no one should have a right of petition,
leaving action or inaction to the initiative of the agency
concerned. Even Congress, under the Bill of Rights, is
required to accord the right of petition to any citizen."

In explaining the House bill. Congressman Walter noted:
"The right of petition is written into the Constitution
itself. This subsection confirms that right where Congress
has delegated legislative powers to administrative agencies."
Id. at 359. See also id. at 78 (statement of Carl McFarland
before House Judiciary Committee).

44. 441 U.S. 463 (1979).

45. 465 U.S. 271 (1984).

46. 441 U.S. at 465; 465 U.S. at 286-7. The Court in Knight also
rejected the Due Process Clause as a source of an obligation
on the part of the government to listen to or hear the public
with regard to policymaking, id. at 283-5, and in doing so
relied on Bi-Metallic Investment Co. v. State Board of
Equalization, 239 U.S. 441 (1915). In her opinion for the
majority in Knight, Justice O'Connor added that disagreement
with public policy and disapproval of officials'
responsiveness is to be registered principally at the polls.
465 U.S. at 285.

47. For this descriptive phrase, I am indebted to a former
colleague, Tom Gerety, now Dean of the University of
Cincinnati College of Law.

48. See sources cited in note 43 supra.

49. U.S. CONST, amend. I.

50. See note 43 supra.

51. See text accompanying notes 44-47 supra.

PETITIONS FOR RULEMAKING 581

52. See Legislative History at 201, 260. See also id. at 21,
359, 409.

53. 5 U.S.C. § 555(b) (1982).

54. Id^ § 555(e).

55. See Legislative History at 201, 206, 260, 265, 268. The
notice and explanation obligations are, by the express terms
of Section 555(e), limited to petitions "made in connection
with any agency proceeding, " suggesting that they may not
apply unless a proceeding is pending at the time of the
filing of the petition. Cf . Beltone Electronics Corp. v.
FTC, 402 F. Supp. 590, 596-7 (N.D. 111. 1975). That
situation obviously does not exist in those instances where
no rule-making action has been commenced by the agency and a
petition is filed by a person to initiate agency action.
However, the legislative history of Section 553(e) indicates
that it was not Congress ' s intention to so limit the
requirement for notice and explanation of the grounds of a
denial. See Legislative History at 201, 260.

In 1981 Congress seriously considered amending the APA.
The Report of the Senate Committee on Governmental Affairs
noted that one of the proposed amendments to Section 553(e)
clarified the original intent of the drafters of the APA that
the requirements of Section 555(e) apply to petitions. See
Regulatory Reform Act, Sen. Rep. No. 97-305, 97th Cong., 1st
Sess. 31 (1981). The Committee noted that the clarification
was in response to instances in which petitions languished
for years awaiting an agency response. Id.

The legislative history of Section 555(e) seems to
suggest that the requirement of prompt decision on petitions,
as opposed to prompt notification of decisions made, was to
be found in that provision. See Legislative History at 206,
265. The Senate Committee in 1981 seemed to share this
understanding of Section 555(e). See Regulatory Reform Act,
Sen. Rep. No. 97-305, 9th Cong., 1st Sess. 31 (1981).
However, only in Section 555(b) is there express language
mandating decision in a timely fashion, though the committee
reports regarding that provision suggest a somewhat more
limited scope than the language adopted displays on its face.
See Legislative History at 204, 263 ("Agencies are to proceed
with reasonable dispatch to conclude any matter so presented
. . . .) (emphasis added). Regardless of whether the
requirement for prompt decision is found in subsection (b) or
(e) should not, however, be of great moment.

56. See text at note 52 supra.

57. 5 U.S.C. § 555(b) (1982).

58. Bonfield, supra note 37, 118 U. Pa. L. Rev. at 548.

582 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

59. 5 U.S.C. § 555(e) (1982).

60. 5 U.S.C. § 555(b) (1982): "With due regard for the
convenience and necessity of the parties or their
representatives and within a reasoncible time each agency
shall proceed to conclude a matter presented to it." See
text at note 590 infra.

61. Despite an opinion to the contrary expressed in the ATTORNEY
GENERAL'S MANUAL ON THE ADMINISTRATIVE PROCEDURE ACT
("ATTORNEY GENERAL'S MANUAL") 39 (194), the APA's legislative
history need not be construed to suggest that denial of
petitions for rulemaking cannot be judicially reviewed and
reversed. See Legislative History at 201 ("The refusal of an
agency to grant the petition or to hold rule making
proceedings, therefore, would not per se be subject to
judicial reversal. However, the facts or considerations
brought to the attention of an agency by such a petition
might be such as to require the agency to act to prevent the
rule from continuing or becoming vulnerable upon judicial
review, through declaratory judgment or other procedures
pursuant to section 10 . ) But see Regulatory Reform Act,
Report to the Committee on Governmental Affairs, S. Rep. No.
97-305, 97th Congress, 1st Sess. 31 (". . . an agency's
failure to grant a petition is not subject to judicial review
. . . .").

In light of this ambiguous history, the courts have
recently held that denial of petitions for rule-making are
presumptively subject to judicial review for procedural and
substantive errors, though the scope of review of the latter
may be very narrow. See text accompanying notes 815-27
infra.

Obviously there are many factors that may enter into a
decision not to issue a rule or even to engage in the
rulemaking process in response to a petition, including the
lack of agency resources, other agency priorities, and
inconsistency with agency policy. The scope of discretion
may generally be broad but still is not necessarily
unlimited. Since a denial must be accompanied by a "brief
statement of the grounds," and since the courts require
reasoned decision-making even here, some effort must be made
to give a thoughtful response. Failure to do so simply
invites judicial reversal.

Even aside from the possibility of judicial review, the
petition process of the APA is action- forcing since the
statute mandates receipt, consideration and prompt response
to a petition. However the possibility of judicial review
and reversal stands as a warning to the agency to be diligent
in undertaking its responsibilities here as in other areas of
administrative law.

PETITIONS FOR RULEMAKING 583

See Tomlinson, Report on the Experience of Various Agencies
with Statutory Time Limits Applicable to Licensing or
Clearance Functions and to Rulemaking, 1978 ACUS Recomm. &
Rep. 119, 145.

63. Without judicial review, consideration given to a denial may
be superficial at best. Therefore, to a large extent, the
practical difference between the interpretations depends on
the availability and scope of judicial review of the
substantive merits of a decision to deny a petition.

64. See 5 U.S.C. § 555(b) (1982).

65. This may not occur until after issuance of a notice of
proposed rulemaking.

See text preceding note 813 infra.

Both the Senate and House Reports indicate that agencies must
"fully" consider petitions. Legislative History at 201, 206;
that "[t]he agency may either grant the petition, undertake
public rule making proceedings ... or deny the petition, "
id. ; and that "[t]he mere filing of a petition does not
require an agency to grant it, or to hold a hearing, or
engage in any other public rulemaking proceedings." Id. The
latter two statements might be taken as supporting the
proposed interpretation since a "grant" is apparently seen as
distinct from the public procedures leading up to the
issuance of a final rule. In explaining the House version of
the bill. Congressman Walters noted with regard to Section
553(e) that "[n]o agency may receive such petitions in a
merely pro forma manner." Id. at 359.

In commenting on what is now Section 553(e), the
Attorney General's Manual noted that "[i]f the agency is
inclined to grant the petition, the nature of the proposed
rule would determine whether public rule making proceedings
under section 4(a) and (b) are required." ATTORNEY GENERAL'S
MANUAL 39 (1947). If a grant were considered to occur prior
to the issuance of a final rule, it would seem that the
reference would be to "grant", not "inclined to grant."
Moreover, it is somewhat difficult to understand why Congress
would have gone to the trouble of including a provision like
553(e) if the alternative interpretation is the correct one.
See also text at notes 123-27 infra.

In 1981, the Senate Committee on Governmental Affairs, in
proposing an amendment to Section 553 requiring a response to
a petition "with reasonable promptness," noted its
recognition "that agency action in response to petitions must
be consistent with other obligations and demands on agency
resources. A delayed response might well be justified where
the pressure of events requires the agency to devote its
scarce resources to other matters of greater urgency."

584 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Regulatory Reform Act, Sen. Rep. 97-305, 97th Cong., 1st
Sess. 31 (1981). It is submitted that the proposed
interpretation of the APA does not undercut this agency
flexibility. At the same time these committee comments are
consistent with a view of the priority which agencies should
as a general matter assign to the handling of petitions.

69. See, e.g. , text at notes 372-73, 433-38 infra.

70. See Legislative History at 260, 359. The former, though not
the latter reference, might be considered ambiguous in its
implications: it might be construed to mean that if there
are procedures, the agency must comply with them.

71. ATTORNEY GENERAL'S MANUAL at 38.

72. Section 559 of the Act gives each agency "the authority
necessary to comply with the requirements of this subchapter
through the issuance of rules." 5 U.S.C. § 559 (1982).

73. ATTORNEY GENERAL'S MANUAL at 38.

74. See Appendix C at notes 8-18 infra.

75. 5 U.S.C. § 552 (1982) .

76. Id. § 552(a)(1). Many federal agencies have failed to comply |
with the requirements of Section 552(a)(1)(A), (B) and (C) )
with regard to matters other than the petition process . See

1 K. DAVIS, ADMINISTRATIVE LAW TREATISE 340 (1978).

77. IdL § 552(a)(1)(A).

78. Id^

79. Id^ § 552(a)(1)(B).

80. IdL § 552(a)(1)(C).

81. Id_^ § 553(e) .

82. ATTORNEY GENERAL'S MANUAL at 38.

83. See Legislative History at 201, 260.

84. 5 U.S.C. § 553(c) (1982).

85. Id^ § 555(b).

86. Id^ § 555(e).

87. Id^ § 702.

88. See, e.g. , text at notes 224-26, 299-302 infra.

PETITIONS FOR RULEMAKING 585

88a. See text at note 302a infra,

89. Accord ATTORNEY GENERAL'S MANUAL at 38.

90. Section 555(b) requires in part that "[s]o far as the orderly
conduct of public business permits, an interested person may
appear before an agency or its responsible employees for the
presentation ... or determination of an issue, request, or
controversy ... in connection with an agency function." 5
U.S.C. § 555(b) (1982). This provision gives some right of
presentation and consideration outside the petition context
but it is qualified, by among other things, the introductory
clause. See generally Legislative History at 205, 264
(suggesting, however, a narrow compass for that clause) and
ATTORNEY GENERAL'S MANUAL at 63 (suggesting a broader scope
for it).

91. See, e.g. , National Org. for Reform of Marijuana Laws v.
Ingersoll, 497 F.2d 654, 659 (D.C. Cir. 1974). Where the
right to petition under Section 553(e) applies, there is no
need for the petitioner to rely on the obligation imposed by
Section 555(b), "[s]o far as orderly conduct of public
business permits," for an agency to allow interested persons
to present requests to it. The right to presentment exists
under Section 553(e), though qualified by the limited
discretion of the agency to define the manner [including
format and content] and place of presentment. As indicated
previously, the constitutional right to petition is in
essence a right to presentment only. See text at notes 44-47
supra. The APA right encompasses this as well as imposes
obligations of receipt, consideration and final disposition
on the merits, which obligations are subject to the limited
procedural discretion defined in the text to dismiss for
noncompliance with reasonable procedural guidelines defining
the manner and place of presentment. Such guidelines might
include requirements that the request be entitled "petition, "
make a clear statement of the type of action requested,
specify the interest of the petitioner in the matter, include
supporting arguments and data, and be filed with a particular
official at a particular address. See ATTORNEY GENERAL'S
MANUAL at 38.

92. 5 U.S.C. §. 555(b) (1982).

93. In fact, unless an agency has guidelines identifying both for
its own and the public's purposes what constitutes a petition
within the meaning of Section 553(e), the thrust of that
provision would seem to be that an agency must accept,
consider and dispose of on the merits any and all requests
from the outside that suggest in any way "the issuance,
amendment, or repeal of a rule." An agency may justifiably
not want to be under this type of obligation to the extent
that the APA petition process is both action- forcing and
priority-setting .

586 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

94. 5 U.S.C. § 555(e) (1982).

95. See, e.g. , Brock v. Cathedral Bluffs Shale Oil Co., F.2d

, 63 Ad. L. 2d 805 (D.C. Cir. 1986). See generally Note,

Violations by Agencies of Their Own Regulations, 87 Harv. L.
Rev. 629, 630 (1974).

96. 5 U.S.C. § 553(b) (A), (B) (1982).

97. By their terms, these are exceptions only to Section 553(b).
Id.

98. See, e.g. , Bonfield, supra note 37, 71 Mich. L. Rev. at 310;
118 U. Pa. L. Rev. at 600-01.

99. 5 U.S.C. sec. 701(a)(1), (2) (1982).

100. See text at notes 828-44 infra.

101. See text following notes 139 and 152 infra.

102. See text following note 147 infra.

103. See text at note 55 supra.

104. See text at notes 37-42 supra.

105. Legislative History at 257.

106. Id. ("But these exemptions are not to be taken as
encouraging agencies not to adopt voluntary public
rule-making procedures where useful to the agency or
beneficial to the public") (Emphasis added.)

107. Id^ at 199.

108. Id^ at 235, 283-290, 354, 422-23.

109. Cf . 1 K. DAVIS, ADMINISTRATIVE LAW TREATISE 312-14 (1978).

110. See Legislative History at 199, 257.

111. Id.

112. See note 43 supra.

113. See note 37 supra.

114. See Bonfield, supra note 37, 71 Mich. L. Rev. at 356; 118 U.
Pa. L. Rev. at 600. With respect to the military and
foreign affairs functions, he did suggest that in some
instances a statement of reasons under 555(e) might have to
be kept confidential. See 71 Mich. L. Rev. at 324. Nothing
in this report suggests that in some instances such treatment

PETITIONS FOR RULEMAKING 587

should not be deemed appropriate or that Congress should
restrict the exercise of reasoned discretion in that regard.

115. To the extent his conclusion regarding the lack of need for
exceptions to the right to petition was founded on his
perception of the minimal burden imposed on agencies by
Section 553(e) and 555(e), this latter assumption may have
been based on a view of 553(e) as not involving special
obligations on an agency to give some priority to the
handling of petitions.

116. Cf^ 1 K. DAVIS, ADMINISTRATIVE LAW TREATISE 586 (1978).

As originally enacted, what is now Section 553 of Title
5 was Section 4 of the Administrative Procedure Act. See
Pub. L. No. 404, 60 Stat. 237, Ch. 324, §§ 1-12, enacted
June 11, 1946. The exceptions for certain matters and
functions formed the introductory clause of the entire
section which clause was followed by a dash and then four
subsections (a) (notice), (b) (procedures ) , (c) (effective
dates) and (d) (petitions) . Section 4 provided:

Except to the extent that there is
involved (1) any military, naval, or foreign
affairs function of the United States or
(2) any matter relating to agency management
or personnel or to public property, loans,
grants, benefits, or contracts —

(a) NOTICE. — General notice of proposed
rule making shall be published in the Federal
Register (unless all persons subject thereto
are named and either personally served or
otherwise have actual notice thereof in
accordance with law) and shall include (1) a
statement of the time, place, and nature of
public rule making proceedings; (2) reference
to the 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. Except where notice or hearing is
required by statute, this subsection shall not
apply to interpretative rules, general
statements of policy, rules of agency
organization, procedure, or practice, or in
any situation in which the agency for good
cause finds (and incorporates the finding and
a brief statement of the reasons therefor in
the rules issued) that notice and public
procedure thereon are impracticable,
unnecessary, or contrary to the public
interest.

588 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

(b) PROCEDURES. — After notice required
by this section, the agency shall afford
interested persons an opportunity to
participate in the rule making through
submission of written data, views, or
arguments with or without opportunity to
present the same orally in any manner; and,
after consideration of all relevant matter
presented, the agency shall incorporate in any
rules adopted a concise general statement of
their basis and purpose. Where rules are
required by statute to be made on the record
after opportunity for an agency hearing, the
requirements of sections 7 and 8 shall apply
in place of the provisions of this subsection.

(c) EFFECTIVE DATES. --The required
publication or service of any substantive rule
(other than one granting or recognizing
exemption or relieving restriction or
interpretative rules and statements of policy)
shall be made not less than thirty days prior
to the effective date thereof except as
otherwise provided by the agency upon good
cause found and published with the rule.

(d) PETITIONS. — Every agency shall
accord any interested person the right to
petition for the issuance, amendment, or
repeal of a rule.

Pub. L. No. 404, 60 Stat. 237, 238-39, ch. 324, § 4. When
Title 5 was prepared for enactment into positive law in 1965,
see Pub. L. No. 89-554, 80 Stat. 381 (Sept. 6, 1966), the
revisers put the exceptions in a new subsection 553(a) and
added at the beginning of that the words, "This section
applies, according to the provisions thereof," id. 80 Stat.
383-4, thus accepting at face value what the structure of
Section 4 seemed to suggest.

However the content and arrangement of the first three
subsections of Section 4 was substantially different from the
last subsection, what is now Section 553(e). The former lay
down sequentially the steps that "the agency" must take in
adoption of non-exempt rules. When it came to subsection
(d), the direction was not to merely "the agency" but to
"every" (now "each") agency. See Pub. L. No. 404, 60 Stat.
237, 238-9. Moreover we move from the end of the rulemaking
process to the a point prior to the formal beginning of the
rulemaking process as regulated by the APA. These shifts,
though subtle, are some basis for assuming that when the
draftsman left subsection (c) behind, he or she meant to
create a provision separate and apart from all that proceeded
it but for one reason or another neglected to clearly do so.

PETITIONS FOR RULEMAKING 589

117. See Bonfield, supra note 37, 118 U. Pa. L. Rev. at 543.

118. See text preceding note 99 supra.

119. See, e.g. , 32 C.F.R. §§ 296.2(d)(1), 296.4(a), 296.6. See
also Letter from Robert L. Gilliat, Assistant General Counsel
(Personnel and Health Policy), Department of Defense to
author (May 23, 1986),

120. But see note 114 supra.

121. See, e.g. , 42 U.S.C. 7604 (1982) (citizen suits under Clean
Air Act) .

122. See text at notes 59-69 supra. For example, 49 U.S.C.

§ 10326(a) (1982) refers to an APA Section 553(e) petition
"to begin a rulemaking proceeding" and if the ICC grants it,
it must "begin an appropriate proceeding." Under 16 U.S.C.
§ 1533(b)(3) (1982) a petition under APA Section 553 to list
a species as endangered may result in one of three findings,
including that the "petitioned action is warranted, in which
case the Secretary shall . . . publish . . . the complete
text of a proposed regulation . . . ." [Emphasis added.]

123. See, e.g. , 15 U.S.C. § 1410a(a) (1982) (motor vehicle safety
standards ) .

124. 30 U.S.C. § 1211(g)(1) (1982) (surface mining and
reclamation) .

125. Id.

126. 5 U.S.C. § 553(e) (1982).

127. R. DICKERSON, THE INTERPRETATION AND APPLICATION OF STATUTES
224 (1975).

128. See, e.g. , 42 U.S.C. § 4905(f) (1982).

129. See, e.g. , 49 U.S.C. § 10326(a).

130. See text at notes 914-17 infra .

131. See, e.g. , 1 C.F.R. 305.71-6 (ACUS Recommendation E.).

132. See text at note 55 supra.

133. 5 U.S.C. §§ 601-612 (1982).

134. Exec. Order No. 12,291, 3 C.F.R. 127 (1981), reprinted in 5
U.S.C. app. § 601, at 136 (Supp. V 1981).

135. Exec. Order No. 12,498, 3 C.F.R. 323 (1986), reprinted in 21
Weekly Comp. Pres. Doc. 11 (Jan. 7, 1985).

590 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

136. 0MB, Interim Regulatory Impact Analysis Guidance (June 13,
1981) (hereinafter "Impact Guidance"); 0MB Bulletin No. 85-9,
The Administration's Regulatory Program — 1985 (Jan. 10, 1985)
(hereinafter "Bulletin No. 85-9"). Both of these are
reprinted in ACUS, FEDERAL ADMINISTRATIVE PROCEDURE
SOURCEBOOK 31, 43 (1985).

137. For example, the Environmental Protection Agency has no
general set of petition regulations or other statements
implementing section 553(e) of the APA. See text at note 774
infra.

138. See, e.g. , 7 C.F.R. § 1.28 (Department of Agriculture, APA
process); 30 C.F.R. § 700.12 (Surface Mining Reclamation and
Enforcement, implementing 30 U.S. C. § 1211(g)).

139. See, e.g. , 10 C.F.R. 2.801-.809 (Nuclear Regulatory
Commission, APA petition process); 10 C.F.R. §§ 430. 41-. 49
(Department of Energy regulations to implement 42 U.S.C.

§ 6297(b)); 47 C.F.R. §§ 1.46, 1.47-.48, 1.399-1.407 (Federal
Communications Commission, APA petition process).

140. See, e.g. , Appendix A at notes 12-14, 52-55 infra.

141. 5 U.S.C. § 552(a)(1) ("separately state and currently publish
in the Federal Register . . . descriptions . . . , statements

. . ., instructions."). See also text at notes 76-80 supra.

142. See, e.g. , text at notes 774-80 infra.

143. See text at note 95 supra .

144. See text at notes 828-30 infra.

145. See text at notes 70-72 supra.

146. Cf . , e.g. , 1 C.F.R. § 305.71-3 (ACUS Recommendation No. 71-3,
Articulation of Agency Policies).

147. See text preceeding note 99 supra.

148. See text at note 90 supra.

149. See text at note 734 infra.

150. See 1 K. DAVIS, ADMINISTRATIVE LAW TREATISE 206-09 (2d ed.
1978).

151. But see 16 U.S.C. § 1533(b) (1982).

152. See text at note 138 supra.

153. See, e.g. , text at notes 733-36 infra.

PETITIONS FOR RULEMAKING 591

154. See, e.g. , text following note 444 infra.

155. See text at notes 145-53 supra.

156. Where, for example, different parts of an agency administer
programs of different sorts.

157. See text at notes 145-53 supra.

158. See, e.g. , 21 C.F.R. § 10.30(k) (FDA).

159. See, e.g. , 16 C.F.R. § 1051.5(a). But here the petitioner is
required only to follow them "as closely as possible." Id.

§ 1051.1(b)

160. Id^ §§ 1051.5(b), (c).

161. In fact, the CPSC was at one time so "receptive" to petitions
that its power to control its regulatory agenda was seriously
undermined. See text at note 855 infra.

162. See, e.g. , 10 C.F.R. §§ 2.802-.803, 110.130-.132 (NRC); 43
C.F.R. §§ 14. -.4, 30 C.F.R. § 700.12 (Interior); 29 C.F.R.
§§ 511.19, 516.10, 523.10, 1910.3 (Labor).

163. Id.

164. See, e.g., 29 C.F.R. §§ 3511.19, 516.10, 523.10, 530.13,
531.8, 536.4, 541.6, 545.12, 547.3, 548.5, 549.4, 550.3,
552.7, 570.27, 695.11 (Wage and Hour, Labor).

165. See text preceding note 170 infra.

166. See text following notes 139, 152 supra.

167. See 24 C.F.R. § 10.20.

168. See 24 C.F.R. § 1720.5.

169. Id.

170. See text following notes 139, 152 supra .

171. See, e.g. , text at notes 728-91 (EPA) infra.

172. Id^

173. See, e.g., 16 C.F.R. § 1.21 (FTC).

174. See text at notes 96-98 infra. There are exceptions. See,
e.g. , 46 C.F.R. § 201.61 (Maritime Administration).

175. See 5 U.S.C. § 553(b)(A) (1982).

592 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

176. See text following note 150 supra.

177. See Appendix C infra.

178. See text at notes 180-796 infra.

179. See text at notes 854-934 infra.

180. It provided as follows:

QUESTIONNAIRE

Petitions for Rulemaking

[For the purpose of the following questions,
the terms "agency" and "rule" have the same
meanings given to them by § 551 of the APA. ]

1. Is your agency subject to any statutory
requirement [other than the Administrative
Procedure Act, §§ 553(e), 555(e)] that it
receive and consider petitions for the
issuance, amendment or repeal of a rule? If
so, please cite the applicable statutory
provision(s) .

2. Has your agency adopted any regulations
governing the receipt, consideration, and
disposition of petitions for rulemaking? If
so, please supply a citation to the
regulations. If not, why not?

3 . Does your agency have procedures for
dealing with petitions for rulemaking that are
described or elaborated in any other agency
decisions, staff manuals, memoranda or other
documents? If so, please supply a citation or
a copy.

4. As a matter of statute, regulation or
agency practice, does the process for the
receipt, consideration, grant or denial of
petitions vary depending on whether the
petition is related to the (a) issuance,

(b) amendment or (c) repeal of a rule? If so,
how and why.

5. On the average, how many petitions for
rulemaking are filed with your agency each
year? How many are granted? How many are
denied?

6. How many petitions for rulemaking are
currently pending with your agency?

PETITIONS FOR RULEMAKING 593

7. Does your agency have time limits
applicable to the consideration and response
to a petition? If so, what are they? Are
they imposed by statute, regulation, or
internal agency policy?

8. What is the average time for processing a
petition from its filing to its grant or
denial?

9. Does the agency publish petitions in the
Federal Register? If some or all petitions
are not piiblished in the Federal Register, why
not?

10. Does the agency compile a record in the
petition proceeding? If not, why not? If so,
what types of documents are included in the
record? Are docket numbers assigned? If the
petition is granted, do these materials become
part of the rulemaking record for the
rulemaking later commenced?

11. If a petition is denied, what steps does
the agency take to inform the petitioner,
other interested persons, and the public at
large of the agency action? If granted, what
steps are taken to inform them of the agency's
action.

12. Are there any attorneys, law firms,
persons or organizations that are particularly
active in filing petitions with your agency?
If so, what are their names and addresses, if
known?

13 . Please give the names and telephone
numbers of agency employees who are
particularly familiar with your petition
process .

181. Board of Governors of the Federal Reserve System

Office of Personnel Management

Postal Rate Commission

U.S. Postal Service

Department of Agriculture

Department of Housing and Urban Development

Immigration and Naturalization Service

594 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Bureau of Prisons

Department of Labor

Office of the Comptroller of the Currency

U.S. Customs Service

National Oceanic and Atmospheric Administration (Department
of Commerce)

Department of Defense

Department of Education

Health Care Financing and Human Development Services Division
(HSS)

Social Security Adminstration (HHS)

Federal Election Commission

Federal Home Loan Bank Board

Veterans Administration

Federal Labor Relations Authority

Nuclear Regulatory Commission

Department of Energy

National Aeronautics and Space Administration

Federal Aviation Administration (DOT)

International Trade Administration (Department of Commerce)

Federal Trade Commission

Consumer Product Safety Commission

Commodity Futures Trading Commission

Securities & Exchange Commission

Federal Energy Regulatory Commission

Food & Drug Administration (HHS)

Drug Enforcement Administration (Department of Justice)

Internal Revenue Service

PETITIONS FOR RULEMAKING 595

Foreign Service Labor Relations Board
Bureau of Alcohol, Tobacco and Firearms (Treasury)
National Mediation Board
Equal Employment Opportunity Commission
National Labor Relations Board
U.S. Coast Guard (DOT)
Environmental Protection Agency
Department of the Interior
Federal Emergency Management Agency
Maritime Administration (DOT)
Federal Maritime Commission
Federal Communications Commission
Research & Special Programs Administration (DOT)
Federal Railroad Administration
Federal Highway Administration (DOT)

National Highway Traffic Safety Administration (DOT)
Interstate Commerce Commission
National Credit Union Administration

182. Responses were not received from the Federal Reserve System,
Office of Personnel Management, Research & Special Programs
Administration, National Mediation Board, and the Drug
Enforcement Administration.

183. They included the following: U.S. Customs Service, U.S.
Postal Service, Social Security Administration, Comptroller
of the Currency, Federal Home Loan Bank Board (but cf . 12
C.F.R. § 508.13), Immigration and Naturalization Service,
Veterans Administration, Coast Guard (but cf . 33 C.F.R.
1.05-1), Health Care Financing, Federal Election Commission,
Department of Education, Federal Prison System, and the
Postal Rate Commission. NASA has none but is not a
"regulatory agency." Letter from, John E. O'Brien, General
Counsel, National Aeronautics and Space Administration to
author (July 23, 1986).

596 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Many agencies have implemented the Equal Access to
Justice Act by adopting rules which expressly provide for
petitions for rulemaking to increase the rate for attorney
fees. See, e.g. , 29 C.F.R. § 102.146 (NLRB). This study did
not focus on these rules or the practices thereunder.

184. 5 U.S.C. § 553(a) (1982).

185. See, e.g., Letter of Richard V. Fitzgerald, Chief Counsel,
Office of the Comptroller of the Currency to author (June 5,
1986) .

186. See, e.g.. Letter of Maurice C. Inman, Jr., General Counsel,
Immigration and Naturalization Service to author (June 6,
1986).

187. Id. See also questionnaire response under cover letter of
Ralph W. Christy, Deputy Chief Counsel, Federal Home Loan
Bank Board to author (June 5, 1986).

188. Questionnaire response under cover letter of Charles N.
Steele, General Counsel, Federal Election Commission to
author (June 3, 1986).

189. See, e.g. , 49 C.F.R. §§ 211.11, .3, .5, .7, .9, .11, .13
(FRA). The FRA reported few formal petition filings. See
Letter of Michael T. Haley, Deputy Chief Counsel, Federal
Railroad Administration to author (Sept. 11, 1986).

190. See 29 C.F.R. §§ 102 . 123- . 125 .

191. Letter of Rosemary M. Collyer, General Counsel, National
Labor Relations Board to author (June 10, 1986).

192. See, e.g. , 30 C.F.R. § 700.12 (Surface Mining Reclamation and
Enforcement) .

193. See, e.g. , FERC, Guide to Basic Rulemaking at the Federal
Energy Regulatory Commission § 5.1-5.2 (Spring 1986); Federal
Maritime Commission Order No. 99 (June 27, 1980); National
Oceanic and Atmosphere Administration Directives Manual,
Chapter 21-24, § 14 (June 1, 1979).

194. Id.

195. See, e.g. , Department of Agriculture, Food Safety and
Inspection Service Directive 1232.2 (May 14, 1986); National
Highway Traffic Safety Administration Orders 800-1 (Feb. 2,
1977), 800-2 (Nov. 20, 1978); 800-3 (July 26, 1983).

196. See, e.g., questionnaire response with cover letter from
Charles N. Steele, General Counsel, Federal Election
Commission to author (June 3, 1986); Letter of Timothy
Keener, Deputy General Counsel, National Oceanic and

PETITIONS FOR RULEMAKING 597

Atmospheric Administration to author (June 2, 1986)
(referring to NOAA Directives Manual, Chap. 21-24, § 14).

197. See text at notes 15-22 supra.

198. The FDA's records regarding citizen petitions do not separate
petitions for rulemaking from other types of citizen
petitions. See questionnaire response under cover letter
from Linda R. Horton, Deputy Chief Counsel for Regulations
and Hearings, FDA to author (Aug. 21, 1986). The total
quoted in the text includes 62 food additive petitions and
100 color additive petitions received by FDA in 1985. Letter
from Linda R. Horton, Deputy Chief Counsel for Regulations
and Hearings to Michael W. Bowers, ACUS (Oct. 28, 1986).

199. This number includes an average of 3 petitions under the
Toxic Substances Control Act, 100 petitions for tolerances
under the Federal Food, Drug, and Cosmetic Act, 2 petitions
under the Clean Water and Safe Drinking Water Acts and over
100 delisting petitions under the Resource Conservation and
Recovery Act. See questionnaire response under cover letter
from Gerald H. Yamada, Deputy General Counsel, U.S. EPA to
author (Aug. 29, 1986).

200. Letter from Jack D. Smith, General Counsel, Federal
Communications Commission to author (June 13, 1986). To an
unknown extent, some of these petitions are of a very
specialized variety. Interview with June Stewart, Office of
General Counsel, FCC on July 2, 1986.

201. Questionnaire response under cover letter from Erika Z.
Jones, Chief Counsel, National Highway Traffic Safety
Administration to author (June 6, 1986).

202. Letter from Jane F. Mackall, Director, Office of Proceedings,
Interstate Commerce Commission to author (May 23, 1986). The
figure represents the average number of rulemakings
instituted each year but available records do not disclose
how many of these are traceable to petitions. Id.

203. This number largely represents the average number of
petitions filed under 42 U.S.C. § 6297(b) (1982). See
Appendix A at notes 1-6 infra. See questionnaire response
under cover letter from Stanford O. Bardwell, Jr., Deputy
General Counsel, Legislation and Regulations, Department of
Energy to author (Sept. 26, 1986).

204. Letter from E. Tazewell Ellett, Chief Counsel, Federal
Aviation Administration to author (June 9, 1986).

205. Questionnaire response under cover letter from Ralph W. Tarr,
Solicitor, Department of the Interior to author (June 11,
1986).

598 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

206. Letter from Anthony J. McMahon, Chief Counsel, Federal
Highway Administration to author (June 5, 1986).

207. Letter from Marvin J. Dessler, Chief Counsel, Bureau of
Alcohol, Tobacco and Fireams, Department of the Treasury to
author (Oct. 27, 1986). This number represents 5 petitions
for designations of viticultural areas and seven petitions
related to tax matters, all filed in 1986.

208. Questionnaire response under cover letter from William H.
Satterfield, General Counsel, Federal Energy Regulatory
Commission to author (June 13, 1986).

209. Questionnaire response under cover letter from Donald L.
Ivers, General Counsel, Veterans Administration to author
(June 6, 1986). This number represents "informal
submissions," treated as correspondence, which suggest rule
changes . Id.

210. Questionnaire response under cover letter from Robert L.
Broussand, Office of the General Counsel, Department of
Agriculture to author (no date).

It should be noted that various parts of the Department
of Agriculture receive petitions for rulemaking, though they
may be of a specialized sort which were not the focus of this
study. Since the statistics quoted in the text with regard
to other agencies may include specialized rulemaking
petitions in some cases, for comparison purposes a more
accurate picture requires listing of at least some of the
other petition activity in the Department of Agriculture:

6 — Animal and Plant Health Inspection
Service--Veterinary Services

8 -- Animal and Plant Health Inspection
Service — Plant Quarantine

256 — Agricultural Marketing Service

150 — Federal Grain Inspection Service

211. Questionnaire response under cover letter from Stephen
Lemberg, Assistant General Counsel, Consumer Product Safety
Commission to author (June 4, 1986).

212. Questionnaire response under cover letter from Martin G.
Malsch, Acting General Counsel, Nuclear Regulatory Commission
to author (June 26, 1986).

PETITIONS FOR RULEMAKING 599

213. Questionnaire response transmitted under cover memorandum
from Marshall A. Deutsch, Department of Labor to author
(Sept. 17, 1986).

214. Questionnaire response under cover letter from Kenneth M.
Raisler, General Counsel, Commodity Futures Trading
Commission to author (June 6, 1986).

214a. A survey conducted by Friends of the Earth in 1978 indicated
a similar lack of significant petition activity. See Ortman,
A Report to the Committee on Rulemaking of the ACUS on
Procedures in Informal Rulemaking in Addition to Those Now
Required by 5 U.S.C. § 553 (1982).

215. Telephone interview with Mark Silbergeld, Consumers Union on
July 22, 1986.

216. Interview with Alan Stephens, Regional Airline Association on
August 12, 1986.

217. Id.

218. Telephone interview with Howard Fox, Sierra Club Legal
Defense Fund on July 21, 1986.

219. See text at notes 677-85 infra.

220. See Appendix A at notes 27-43 infra.

221. See, e.g. , 21 C.F.R. Part 171 (food additive petitions). The
discussion that follows does not include food additive, color
additive, or other specialized types of petition procedures.

222. See 21 C.F.R. § 10.30(a).

223. Id_^ §§ 10.20, 10.30, 10.33.

224. 21 C.F.R. § 10.25(a).

225. See 21 C.F.R. § 10.30(b).

226. Interview with Linda R. Horton, Deputy Chief Counsel for
Regulations" and Hearings and Catherine Lorraine, Associate
Chief Counsel for Enforcement, Food and Drug Administration,
Department of Health and Human Services, July 7, 1986
[hereinafter "Horton Interview"]; Interview with Robert
Spencer, Director, Division of Regulatory Policy, Food and
Administration on June 30, 1986 [hereinafter "Spencer
Interview"]. See also 21 C.F.R. § 10.3 ("interested person"
means a person who submits a petition).

227. Id_^ § 10.20(f).

228. Id. §§ 10.20, 10.30(b).

600

229.

Id.

230.

Id.

231.

Id.

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES
§ 10.30(b).

FDA officials interviewed have rarely seen unfavorable

information, designated as such, in a petition. Interview
with Philip B. White, Director, and Joseph Sheehan,
Regulations Staff, Office of Standards and Regulations,
Center for Devices and Radiological Health, FDA on June 30,
1986 [hereinafter "White Interview"]; Interview with L.
Robert Lake, Acting Director, Office of Compliance, Center
for Food Safety and Applied Nutrition on July 7, 1986)
[hereinafter "Lake Interview"].

232. 21 C.F.R. § 10.30(b).

233. Id^ § 10.20(b).

234. Id^ § 10.20(b).

235. Id^ § 10.20(c)(6). See also 21 C.F.R. § 20.44.

236. Id^ §§ 10.20(c)(6); 10.20(d); 10.30(c).

237. Id^ § 10.20(c)(6).

238. Interview with Albert Rothschild, Director, Division of
Regulatory Affairs, and Steven linger. Regulatory Counsel,
Center for Drugs & Biologies on July 1, 1986 [hereinafter
"Rothschild Interview"].

239. Interview with Linda Quinones, Chief, and Jennie Butler,
Deputy Chief, Dockets Management Branch Food and Drug
Administration on June 30, 1986 [hereinafter "Quinones
Interview"] (certification paragraph required by 21 C.F.R.
§ 10.30(b)).

240. 21 C.F.R. § 10.30(k).

241. 21 C.F.R. § 10.30(c).

242. Id.

243. Id. § 10.20(j). That regulation does not expressly open up
the remainder of the file to the public, though the file in
practice seems generally to be open.

244. Id^ § 10.30(c).

245. 21 C.F.R. § 10.30(1).

246. Quinones Interview.

247. Spencer Interview.

PETITIONS FOR RULEMAKING 601

248. Spencer Interview; White Interview; Rothschild Interview;
Lake Interview; Interview with Robert Brigham, Chief,
Petitions and Regulations Branch, Center for Veterinary
Medicine on July 1, 1986 [hereinafter "Brigham Interview"].

249. White Interview; Brigham Interview.

250. See, e.g. , Appendix A at notes 29-31 infra.

251. 21 C.F.R. § 10.30(e)(2).

252. IdL (e)(2)(iii).

253. See also 21 C.F.R. § 5.31(e). See also Spencer Interview.

254. Brigham Interview.

255. White Interview.

256. Rothschild, Brigham and Lake Interviews.

257. 21 C.F.R. § 10.30(d).

258. Id.

259. Quinones Interview.

260. See 21 C.F.R. § 10.30(h)(3). See also id. § 10.40(a)(4).

261. Horton, Spencer, Lake, White and Brigham Interviews.

262. Telephone Interview with Linda R. Horton, Deputy Chief
Counsel for Regulations and Hearings, FDA, on October 31,
1986 (hereinafter "Horton Telephone Interview").

263. See 5 U.S.C. § 553(c), 553(e) (1982).

264. White and Brigham Interviews.

265. White Interview. See, e.g. , 51 F.R. 11266 (April 1, 1986)
(notice of filing citizen petition).

266. Id.

267. Brigham Interview.

268. See 21 C.F.R. § 10.30(h).

269. 21 C.F.R. § 10.30(h)(1).

270. Spencer Interview. See 21 C.F.R. § 5.20(b) (Deputy
Commissioner and Associate Commissioner for Regulatory
Affairs are authorized to perform all the functions of the
FDA Commissioner).

602 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

271. 21 C.F.R. § 10.30(e)(2)(i) . The regulations specify
generally the pre-conditions for issuing a notice of proposed
rule-making reflecting a proposal of a petitioner. See 21
C.F.R. § 10.40(a)(2) .

272. Spencer Interview. See also 21 C.F.R. §§ 10 . 30(e) (2 ) ( ii ) ,
(e)(3). But see 21 C.F.R. § 5.31(f).

273. Id^ § 10.30(e)(l)(i).

274. Id^ § 10.30(e)(l)(ii) .

275. Id^ § 10.30(e)(l)(iii).

276. Id^ § 10.30( j ).

277. Id^ § 10.30(i) .

278. Id^ § 10.30(i)(5).

279. White, Brigham, and Lake Interviews.

280. Lake, White, Rothschild Interviews.

281. 21 C.F.R. § 10.40(g)(1).

282. 21 C.F.R. § 10.30(e)(3).

283. Rothschild Interview.

284. 21 C.F.R. § 10.30(e)(3).

285. Id^ § 10.33(b).

286. Id^ § 10.33(e).

287. Id_^ (b), (c).

288. See note 198 supra.

289. Questionnaire response under cover letter from Linda R.
Horton, Deputy Chief Counsel for Regulations and Hearings,
FDA to author (Aug. 21, 1986).

290. Brigham, Lake and Rothschild Interviews.

291. Rothschild Interview.

292. Spencer and Lake Interviews.

293. White Interview.

294. Id.

PETITIONS FOR RULEMAKING 603

295. Brigham Interview.

296. Horton Interview.

297. Horton Telephone Interview, Spencer, White and Brigham
Interviews.

298. 5 U.S.C. § 553(e) (1982).

299. 47 C.F.R. § 1.401(a). FCC officials suggested that these
petition regulations apply to both legislative and procedural
rules as well as general statements of policy. See Interview
with Jack D. Smith, General Counsel, Federal Communications
Commission on July 2, 1986 [hereinafter "Smith Interview"];
Interview with Martin Blumenthal, Assitant General Counsel,
FCC on July 3, 1986 [hereinafter "Blumenthal Interview"].

300. See text at notes 224-26 supra.

301. Interview with Charles G. Schott, Chief; Ralph Haller, Deputy
Chief and Robert Ratcliffe, Assistant Chief, Policy and Rules
Division, Mass Media Bureau, FCC on July 2, 1986 [hereinafter
"Schott Interview"].

302. Letter from Susan H. Steinman, Associate General Counsel, FCC
to author (Nov. 5, 1986). See also text at note 88a supra.

303. 49 C.F.R. § 1.401(b).

304. Id^ § 1.49.

305. Id^ § 1.52.

306. Id^ § 1.419(b).

307. Id^ § 1.401(b).

308. Id. § 1.401(c). Certain petitions must be served on
licensees or permittees whose channel assignments would be
affected by rule changes. Id. (d).

310. Interview with William Tricarico, Secretary of the
Commission, Office of Managing Director, FCC on July 3, 1986
[hereinafter "Tricarico Interview"]. A stamped "receipted"
copy of the petition may be given if requested by the
petitioner.

311. See 47 C.F.R. § 0.5(b)(4).

312. See generally id. §§ 0.61, 0.91, 0.131 for a description of
their specific functions.

313. Schott Interview.

604 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

314. Id. ; Interview with Robert Unger, Attorney Advisor, Office of
Engineering and Technology, FCC on July 3, 1986 [hereinafter
"Unger Interview"].

315. 47 C.F.R. § 1.401(e). See also id. § 0.251(d) (authority to
so dismiss delegated to General Counsel).

316. Blumenthal Interview; Interview with Frederick Day, Chief,
Rules Branch, Private Radio Bureau, FCC on July 3, 1986
[hereinafter "Day Interview"].

317. Interview with Joyce Butler, Chief, Dockets Branch, Office of
Managing Director, FCC on July 3, 1986 [hereinafter "Butler
Interview" ] .

318. 47 C.F.R. § 1.429(a).

319. Id. § 1.429. See text at notes 377-84 infra.

320. Tricarico Interview.

321. Butler Interview.

322. Id^

323. Id.

324. Tricarico Interview.

325. Id^

326. Id.

327. Butler and Tricarico Interviews.

328. See 47 C.F.R. § 1.403.

329. Tricarico Interview.

330. Id^

331. Id.

332. Butler Interview.

333. 47 C.F.R. § 1.403 (not applicable to petitions to amend the
FM, Television and Air-Ground Tables of Assignments).

334. Id^ § 1.403.

335. See 47 C.F.R. § 0.443.

336. $134.00 per typewritten page. Blumenthal Interview;
Interview with Ron Jackson, Public Relations Liaison for the

PETITIONS FOR RULEMAKING 605

Federal Register, Office of Managing Director, FCC on July 2,
1986.

337. 47 C.F.R. § 1.405(a).

338. Tricarico Interview.

339. 47 C.F.R. § 1.405(a), which proof must comply with id.
§ 1.47.

340. Id^ § 1.405(a).

341. Id^ § 1.405(b).

342. Id^ § 1.405(b).

344. Unger Interview. Of course, even where the comment process
is one-stage, there could be a provision for extension of the
comment period to take care of this problem.

345. Day and Unger Interviews.

346. Id.

347. Unger Interview.

348. Unger Interview.

349. See text at notes 304-08 supra ♦

350. Schott Interview.

351. See text at notes 159-61 supra.

352. Schott Interview.

353. Unger Interview; Day Interview. See generally 47 C.F.R.
§ 1.1.

354. See 47 C.F.R. § 1.430.

355. Unger and Day Interviews.

356. 47 C.F.R. § 1.405(d).

357. See 47 U.S. C. § 157(b) (1982) (petitions for proposed new
technologies or services).

358. Letter from Jack D. Smith, General Counsel, FCC to author
(June 13, 1986) [hereinafter "Smith Letter"].

359. Id. ; Schott Interview.

360. Id.

606 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

360a. Telephone Interview with William Tricarico Secretarv of i-h«
Commission on November 5, 1986. ^*^ico, becretary of the

361. Unger and Day Interviews.

362. Schott and Unger Interviews.

363. Tricarico Interview.

364. Tricarico Interview.

365. Smith Letter.

366. Id. See also 47 C.F.R. § 1.407.

367. Butler Interview.

368. Smith Letter.

369. Butler Interview.

370. 47 C.F.R. § 1.407.

371. Unger Interview.

372. See, e.g., text at notes 501-04 infra.

373. Smith Letter. ♦

374. Schott Interview.

375. Id^

376. Smith Letter.

377. 47 C.F.R. § 1.429(a).

378. Id^

379. Id^ § 1.429(b).

380. Id^ § 1.429(e).

381. Id^ § 1.429(f).

382. Id_^ § 1.429(g).

383. Id_^ § 1.429(i).

384. Id^ § 1.429(a).

385. Smith Letter.

386. Id.

PETITIONS FOR RULEMAKING 607

387. Id.

388. Unger Interview..

389. Unger and Day Interviews.

390. Unger Interview.

391. Blumenthal Interview.

392. Unger and Day Interviews.

393. See text at notes 360-61 supra.

394. 18 C.F.R. § 2.1a(a).

395. Id^ Part 385. See also id. § 385.101.

396. Id^ § 385.207(a)(4).

397. Id^ § 385.202.

398. See id^ § 385.203. See also id. § 385.201.

399. Id^ §§ 385.203(a) (2), (3), (6), (b)(1).

400. Id^ § 385.2001(a).

401. Id^ § 385.2002(d).

402. Id^ § 385.2003(a).

403. Id^ § 385.2003(b).

404. Id^ § 385.2003(c).

405. Id_^ § 385.2004.

406. Id^ § 385.2005(a).

407. Id^ § 385.2001(b)(1).

408. Id^ § 385.2001(b)(3).

409. Id_L § 385.2006(a).

410. Questionnaire response under cover letter from William H.
Satterfield, General Counsel, Federal Energy Regulatory
Commission to author (June 13, 1986) (hereinafter "FERC Ques.
Response" ) .

411. M^

412. Id.

608 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

413. Id.

414. Interview with Joseph Hartsoe, Attorney, Rulemaking and
Legislative Analysis Division, Office of General Counsel,
FERC on July 11, 1986 (hereinafter "Hartsoe Interview.").

415. FERC Ques. Response.

416. Hartsoe Interview.

417. 18 C.F.R. § 385.213(a)(3).

418. Id^ § 385.213(c) .

419. Id^ § 385.2003(a). See also id. § 385.2001(a)(1).

420. Id^ § 385.2003(b).

421. Id^ § 385.2003(c).

422. Id^ § 385.2004.

423. Id^ § 385.2005(a).

424. Id^ § 385.2010(a), (c).

425. Hartsoe Interview.

426. 18 C.F.R. § 385.213(d)(2)(ii).

427. Id^ § 388.105(a)(l)(i), (ii).

428. Division of Rulemaking and Legislative Analysis (Office of
General Counsel, FERC), Guide to Basic Rulemaking at the
Federal Energy Regulation Commission (Spring 1986)
(hereinafter "FERC Guide") at § 5.1.

429. FERC Ques. Response.

430. Id^

431. Id^ See 15 U.S.C. § 717r; 16 U.S.C. § 8251(b) (1982).

432. FERC Ques. Response.

433. Id. ; Hartsoe Interview.

434. FERC Ques. Response. This assumes that the proposed rule is
not within 5 U.S.C. § 553 (b) (A) , (B) (1982) and the FERC
decides not to go through the NPRM stage. Id.

435. Telephone interview with Joseph Hartsoe, FERC Attorney, on
Sept. 29, 1986.

PETITIONS FOR RULEMAKING 609

436. Hartsoe Interview.

437. FERC Ques. Response; FERC Guide.

438. Hartsoe Interview.

439. FERC Ques. Response.

440. Id.

441. Telephone interview with Joseph Hartsoe, FERC Attorney, on
Sept. 29, 1986.

442. See text at note 219 supra .

443. Hartsoe Interview.

444. Id.

445. Id.

446. FERC Ques. Response.

447. Hartsoe Interview.

448. 18 C.F.R. § 385.2001(b)(3).

449. See, e.g. , 18 C.F.R. § 385.217 (summary disposition).

450. See 18 C.F.R. § 385.1901(1).

451. See id^ § 385.1404.

452. Id. (no reply to petition may be filed).

453. Questionnaire response under cover letter from Marcy J.K.
Tiffany, Acting General Counsel, Federal Trade Commission to
author (July 3, 1986) (hereinafter "FTC Response"). But cf .
15 U.S.C. 57a(g) (petitions for exemption treated as
rulemaking) .

454. Interview with Benjamin I. Berman, Attorney Advisor, Office
of the Secretary; Teresa Hennessy, Office of General Counsel;
John Nash, Assistant Director for Rulemaking, Division of
Policy and Evaluation, Bureau of Consumer Protection; Reid
Horwitz, Assistant to the Director, Bureau of Consumer
Protection; Lawrence Demi lie- Wagman, Attorney, Office of
General Counsel, Federal Trade Commission on July 8, 1986
(hereinafter "Berman Interview"). The views expressed in
this interview were "solely those of the participants and not
those of the Commission or any of the Commissioners." Letter
of Teresa A. Hennessy, Attorney, Office of General Counsel,
FTC to author (Nov. 6, 1986) (hereinafter "Hennessy Letter").

610 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

455. Id^

456. Id.

457. See 15 U.S.C. § 57a(a)(l)(B) (1982).

458. 16 C.F.R. § 1.9.

459. Id. ; Berman Interview.

460. 16 C.F.R. § 1.9.

461. Berman Interview. See 16 C.F.R. §§ 4.2-4.4.

462. Berman Interview.

463. FTC Response.

464. Berman Interview; FTC Response. See also 16 C.F.R.
§ 4.9(b)(3).

465. Berman Interview. It is, of course, the Bureau Director that
must ultimately sign off on recommendations to the full
Commission.

466. FTC Response.

467. Id. ; FTC Response.

468. Berman Interview

469. FTC Operating Manual 7.3.3. See also FTC Response; Berman
Interview; Letter from Teresa Hennessy, Attorney, Office of
General Counsel, FTC to author (Sept. 17, 1986).

470. FTC Operating Manual 7.3.3:

(1) Whether the determination to issue the
rule sought as the ultimate result of the
petition would be within the Commission's
jurisdiction.

(2) Whether issuance of the rule sought
appears likely, insofar as can be
determined before conducting a rulemaking
proceeding, to have more or greater
beneficial than detrimental effects, and
otherwise to be in the public interest.

(3) Whether the rule sought could, if issued,
be enforced to the extent necessary to
realize its intended benefits, taking
into consideration the Commission's

PETITIONS FOR RULEMAKING 611

resources and other duties and
commitments .

(4) Whether the effort required to conduct
the requested rulemaking proceeding would
be consistent with the Commission's
resources and other duties and
commitments .

(5) Whether the investigation and analytical
effort required to answer questions (1)
through (4) would be consistent with the
Commission's resources and other duties
and commitments, and the necessity for an
expeditious response to the petition.

471. Berman Interview.

472. Id^

473. Id.

474. See text at notes 323-26 supra.

475. Berman Interview.

476. See text at notes 313-20 supra .

477. Berman Interview.

478. Berman Interview.

479. Berman Interview.

480. Berman Interview.

481. See 15 U.S.C. § 57a(b)(2)(A) (1982).

482. Id^ § 57a(b)(2)(A)(i), (ii).

483. Berman Interview.

484. 15 U.S.C. .57(b)(2)(B).

485. 16 C.F.R. § 1.9.

486. Berman Interview.

487. Id^

488. Id^

489. Id.

612 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

490. FTC Operating Manual § 7.3.2.

491. Id^

492. 16 C.F.R. § 1.11(a).

493. Id^ § 1-12.

494. Id^ § 1.14.

495. Id_^ § 1.9.

496. FTC Response.

497. IdL § 1.9.

498. Id. § 1.9; Berman Interview.

499. Berman Interview.

500. Id.

501. Hennessy Letter.

502. See 5 U.S.C. § 555(b) (1982).

503. See id^ § 555(e) .

504. Id^ (b).

505. See 15 U.S.C. § 57a(b ) (2 ) (B) . See also 15 C.F.R. § 1.10(d).

506. See 16 C.F.R. § 1.20.

507. Id^ § 1.9.

508. See 15 U.S.C. § 57a(a)(2), (b). See also FTC Operating
Manual at 7.2.3.1.

509. By its terms § 57a(b) applies only to trade regulation rules
described in § 57a(a) (1 ) (B) , not interpretative rules and
general statements of policy referred to in § 57a(a) (1 ) (A) .

510. See 16 C.F.R. §§ 1.7, 1.21; Berman Interview.

511. Berman Interview.

513. FTC Operating Manual at 7.33; Berman Interview.

514. 16 C.F.R. § 1.21, 1.25.

515. A copy of the notice of proposed rulemaking must be given to
the petitioner. See 16 C.F.R. § 1.26(b).

PETITIONS FOR RULEMAKING 613

516. Id. § 1.25.

517. See text at notes 481-84 supra.

518. Id^ § 1.21.

519. Id^ § 1.25.

520. See text at notes 96-98 supra.

521. See 15 U.S.C. § 1681 et seq. (1982).

522. See 16 C.F.R. § 1.73(a)(2), (c).

523. IdL § 1.73(b).

524. See note 526 infra.

525. See text at notes 514-16 supra.

526. See, e.g. , text following note 179 supra. It should be noted
that 16 C.F.R. § 1.21 does not expressly exempt
interpretative rules from the coverage of § 1.25. If no
exemption was intended, a clearer statement of inclusion
would be desirable. If exemption was intended, clarity of
statement is still lacking here.

527. FTC Response.

528. Id^

529. Id.

530. See, e.g. , 15 U.S.C. § 57a(i) (1982) (children's
advertising) .

531. See text at notes 298-384 supra .

532. See, e.g. , NHTSA Order 800-2, Attachment 1, p. 2 (Nov. 20,
1978).

533. Interview with Barry Felrice, Associate Administrator for
Rulemaking, National Highway Traffic Safety Administration on
July 9, 1986 (hereinafter "Felrice Interview). See also
NHTSA Order 800-1 (Rulemaking Procedures) (Feb. 2, 1977).

534. Felrice Interview.

535. Id^

536. Id. See NHTSA Order 800-2 (Nov. 20, 1978).

537. Felrice Interview. See NHTSA Order 800-3 (July 26, 1983).

614 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

538. See 15 U.S.C. § 1381 et seq. (1982).

539. Id^ § 1410a.

540. Id.

541. Id_^ (d) (120 days).

542. The regulations and some of the internal orders also apply to
petitions submitted under other statutes, including the Motor
Vehicle Information and Cost Savings Act, 15 U.S.C. 1901 et
seq. (1982). See 49 C.F.R. § 552.1 and NHTSA Order 800-2
(Nov. 20, 1978). The focus in the text, however, is on
petitions to establish motor vehicle safety standards.

543. See Appendix A at notes 68-73 infra.

544. 49 C.F.R. § 551.31.

545. IcL § 551.33.

546. Id^ § 551.35.

547. IdL § 551.37.

548. Id_^ § 551.1.

549. See id^ §§ 552.1-552.10.

550. IcL § 552.4.

551. Id.

552. Id^ § 552.5(a).

553. Id^ (b).

554. NHTSA Order 800-2 at p. 4.

555. Id. Attachment 1 at p. 1.

556. Id^

557. NHTSA Order 800-2 at p . 4.

558. Id.

559. Id. Attachment 1 at p. 1.

560. Questionnaire Response order cover letter from Erika Z.
Jones, Chief Counsel, NHTSA to author, June 6, 1986
(hereinafter "NHTSA Response"). See also 49 C.F.R.

§ 553.5(a).

PETITIONS FOR RULEMAKING 615

561. NHTSA Order 800-3 at pp. 1-2.

562. Id. at 2.

563. NHTSA Order 800-2, Attachment 1 at p. 1. See also 49 C.F.R.
§ 552.6.

564. NHTSA Response.

565. Felrice Interview.

566. Id^

567. Id^

568. Id.

569.

Id.

570.

Id.

571.

Id.

572.

Id.

573.

Id.

574. NHSTA Response.

575. Felrice Interview.

576. See 49 C.F.R. § 552.7.

577. NHTSA Order 800-2, Attachment 1 at p. 1.

578. 49 C.F.R. § 552.7.

579. Id.

580. NHTSA Order 800-2, Attachment 1 at p. 1.

581. Id.

582. Id. , Attachment 1 at p. 2.

583. IdL

584. See 15 U.S.C. § 1410a(a) (1982).

585. Id^ § 1410a(d).

586. See text at notes 59-69 supra.

587. Felrice Interview.

616 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

588. See 49 C.F.R. § 552.8.

589. See 15 U.S.C. § 1410a(d) (1982).

590. APA Section 555(b) provides in part that "within a reasoncible
time, each agency shall proceed to conclude a matter
presented to it." 5 U.S.C. § 555(b) (1982) (emphasis added).
If, for example, an agency initiates a rule-making on its
own, it is arguable that this provision is inapplicable since
no one outside the agency has "presented it" with a matter
for disposition. While reviewing courts are directed to
"compel agency action unlawfully withheld or unreasonably
delayed," id. § 706(1), arguably this power attaches only in
those cases covered by § 555(b) or other statutes imposing
duties to act or act within a designated time frame. One
court noted that Section 706(1) "complements" Section 555(b),
which language can be taken to support this position. See
Public Citizen Health Research Group v. Auchter, 702 F.2d
1150, 1153-54 (D.C. Cir. 1983). But cf . In re Center for

Auto Safety, F.2d , 63 Ad. L. 2d 680, 689 (D.C. Cir.

1986) (where the court seemed to view § 555(b) as applicable
even to rulemaking not commenced in response to a petition
though there was an express statutory deadline involved
there); Oil, Chemical & Atomic Workers International Union v.
Zeygeer, 768 F.2d 1480 (D.C. Cir. 1985) (where court reviewed
alleged unreasonable delay in a rulemaking commenced in part
on the initiative of the agency). See generally LEGISLATIVE
HISTORY at 205 264; ATTORNEY GENERAL'S MANUAL at 157.

If in fact the courts' power under APA Section 706(1) is
limited to enforcing time limits for agency action under
Section 555(b) and other statutes and if a "grant" of a
petition for a motor vehicle standard is considered to
"conclude" the "matter presented to the agency, " delay in any
rulemaking started by the agency is not subject to judicial
correction, at least under Section 706(1), though perhaps it
might be considered "arbitrary, capricious" or an "abuse of
discretion" under Section 706(2) (A).

Where a statutory "grant" of a petition precedes the
rulemaking, as in the case of 15 U.S.C. § 1410a (1982), it
might be argued that this affirmative disposition does not
really "conclude" the matter presented since it suggests that
the agency will take steps in the direction of adopting a
rule. If correct, of course, this argument means that the
agency is arguably under the duty imposed by Section 555(b)
to act with reasonable promptitude, though it is still
doubtful that a termination of the rulemaking without the
adoption of petitioner's proposed rule triggers Section
555(e).

APA Section 553(e), interpreted in the manner proposed
by this report, see text at notes 59-69 supra, obviates the
need to grapple with these interpretative problems and, in

PETITIONS FOR RULEMAKING 617

part, this is one of the strongest practical reasons in favor
of considering the grant of an APA petition to occur only at
the point when a rule is finally issued, amended or repealed.

591. See 49 C.F.R. § 552.9(a).

592. NHTSA Order 800-3 at p. 3.

593. Id. Exhibit 1.

594. NHTSA Order 800-3 at p. 3. See also id. Exhibit 2.

595. Id^

596. 15 U.S.C. § 1410a(d) (1982).

597. Id^

598. 49 C.F.R. § 552.9.

599. Id^ § 552.10.

600. NHTSA Response.

601. Felrice Interview.

602. See 49 C.F.R. §§ 553. 35-. 39 and Appendix thereto.

603. Felrice Interview.

604. Id^

605. NHTSA Order 800-3 at p. 6.

606. IcL_

607. Id.

608. Felrice Interview.

609. IdL

610. Id^ See NHTSA Order 800-3 at p. 5 (disagreements can justify
delay in time period).

611. Felrice Interview.

612. Id.

613. NHTSA Response.

614. Felrice Interview.

615. Id.

618 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

616. Id_^

617. Id.

618. NHTSA Response.

619. Id^

620. Id^

621. Id.

622. Questionnaire Response under cover letter from Martin G.
Malsch, Acting General Counsel, United States Nuclear
Regulatory Commission to author, dated June 26, 1986
(hereinafter "NRC Response").

623. See, e.g. , 10 C.F.R. §§ 2.801-.803.

624. See, e.g.. Memorandum from Victor Stello, Jr., Executive
Director for Operations, NRC regarding Timely Resolution of
Petitions for Rulemaking (PRM) (Aug. 13, 1986) (hereinafter
"Stello Memorandum").

625. See NRC Regulations Handbook (NUREG/BR 0053, Part 11) (Sept.
1985) (hereinafter "NRC Handbook"). See also Commission
Paper SECY-77-526 (Oct. 7, 1977).

625a. 42 U.S.C. § 4331 et seq. (1982).

626. 10 C.F.R. Part 2, Subpart H.

627. See also 10 C.F.R. §§ 110.130-.132 (regulations with respect
to petitions for rulemaking with regard to export and import
of nuclear equipment and material).

628. 10 C.F.R. § 2.802(b).

629. NRC Handbook at p. 201.

630. 10 C.F.R. § 2.802(a).

631. NCR Handbook at p. 201.

632. 10 C.F.R. § 2.802(c).

633. See 10 C.F.R. §§ 51.22, .40, .41, .45, .68, .74, .93, .94,
.102, .103.

634. Id^ § 51.41.

635. Id^ § 51.45.

636. Id. §§ 51.74, 51.93

PETITIONS FOR RULEMAKING 619

637. Id^ § 51.94.

638. NCR Handbook at 202.

639. Id. at p. 204.

640. Id. See also 10 C.F.R. 2.802(f).

641. NRC Handbook at p. 204.

642. Id^

643. Id^ See also 10 C.F.R. § 2.802(f).

644. NRC Handbook at p. 204; 10 C.F.R. § 2.802(f).

645. NRC Handbook at p. 204.

646. Id^ at p. 203.

647. See 10 C.F.R. § 2.802(e).

648. NRC Handbook at p. 203.

649. Id^ at p. 205.

650. Id.

651. To the extent an NPRM is published for these, the agency is
affording more than APA Section 553 mandates. See 5 U.S.C.
§ 553(b)(A) (1982).

652. NRC Handbook at pp. 205-6.

653. Id. at pp. 206-7.

654. Id^ at pp. 205, 207.

655. Id^ at p. 208.

656. Id^

657. Id^ at p. 210.

658. Interview with John Philips, Chief, Rules and Procedures
Branch, and Michael Lesar, Regulations Specialist, Division
of Rules and Records, Office of Administration, U.S. Nuclear
Regulatory Commission on July 11, 1986 (hereinafter "Philips
Interview" ) .

659. Letter from John Philips, Chief, Rules and Procedures Branch,
Division of Rules and Records, Office of Administration, NRC,
to author (October 15, 1986) (hereinafter "Philips Letter").

620 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

660. NRC Handbook at p. 209.

661. Id^

662. See 10 C.F.R. § 2.802(e).

663. NRC Handbook at p. 209. Philips Interview.

664. See note 697 infra.

665. NRC Handbook at p. 209.

666. Id. at p. 209.

667. Philips Letter.

668. Id. at p. 210.

669. Id. at p. 211.

670. Philips Letter.

671. Id^

672. Id.

673. Id. at 213.

674. Id,

675. Philips Letter.

676. Id. See also 10 C.F.R. § 2.803.

677. 10 C.F.R. § 1.40(o) .

678. NRC Handbook at pp. 214-15.

679. See text at note 433 supra.

690. NRC Handbook at p. 215; Philips Interview.

681. See, e.g. , text at notes 501-04 supra (FTC).

682. See 5 U.S.C. § 555(e) (1982).

683. See text at notes 59-69 supra.

684. Philips Interview.

685. NRC Response. This statistic was calculated on the basis of
processing time for petitions received since 1980 (41 in
all).

PETITIONS FOR RULEMAKING 621

686. See Conunission Paper SECY-77-526 (Oct. 1977).

687. Id^

688. Id.

689. See 10 C.F.R. § 1.40(o).

690. Commission Paper SECY-77-526 (Oct. 1977)

691. Id^

692. Id.

693. Id.

i 694. See text following note 98 supra.

695. Philips Interview. Meeting the early deadlines relating to
distribution and classification of documents is generally
accomplished. Id.

696. Stello Memorandum, Philips Letter.
696a. Philips Letter.
696b. Stello Memorandum.

696c. Id. See text at notes 711-12 infra.
696d. Stello Memorandum.

697. On one occasion since 1980 a notice of receipt was not
published and a petition denied summarily on the basis of
lack of legal authority to grant the request. NRC Response.
On another occasion, a petition was summarily denied because
it raised an issue resolved by a recent rulemaking and
presented no new information to justify reopening the matter.
Philips Letter.

Recently the NRC has published a policy statement and
staff implementation plan regarding the expeditious handling
of petitions for rulemaking to exempt specific radioactive
waste streams from disposal in a licensed low-level waste
disposal facility. The agency describes the kind of
information petitioners should file to allow timely review of
the petition, the criteria for decision, and the procedures
to be followed in considering the petition. The documents
allegedly respond to the mandate of the Low-Level Radioactive
Waste Policy Amendments Act of 1985, 42 U.S. C. § 2021b et
seq. See 51 F.R. 30839-30847 (Aug. 29, 1986).

698. NRC Handbook at pp. 215-16.

622 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

699. See text at note 685 supra.

700. IdL at p. 216.

701. Philips Interview.

702. Id^

703. Handbook at p. 217.

704. Id.

705. NRC Response; Memorandum from William J. Dircks, Executive
Director for Operations to Robert B. Minogue, Director,
Office of Nuclear Regulatory Research et al . (April 5, 1985)
(hereinafter "Dircks Memorandum").

706. Dircks Memorandum.

707. Dircks Memorandum.

708. Philips Interview.

709. Dircks Memorandum.

710. Philips Interview. See also 10 C.F.R. § 2.802(g).

711. See, e.g. , NRC Regulatory Agenda, Quarterly Report, Oct. -Dec
1985, NUREG-0936, Vol. 4, No. 4 (1986).

712. Philips Interview.

713. NCR Response.

714. M^

715. Id.

716. Id

717. Id.

718. Interview with Mark Greenwood, Assistant General Counsel,

Solid Waste and Emergency Management Division, Environmental
Protection Agency on July 10, 1986 (hereinafter "Greenwood
Interview"); Interview with Susan Lepow, Acting Associate
General Counsel for Water, and Lee Schroer and Margaret
Silver, Attorneys, Water Division, Office of General Counsel,
Environmental Protection Agency on July 10, 1986 (hereinafter
"Lepow Interview" ) .

720. Questionnaire Response under cover letter from Gerald Yamada,
Deputy General Counsel, EPA to author (Aug. 29, 1986)
(hereinafter "EPA Response").

PETITIONS FOR RULEMAKING 623

721. Interview with Alan Carpien and Andrew Gordan, Staff
Attorneys, Office of General Counsel, EPA on July 10, 1986
(hereinafter "Carpien Interview"); Lepow Interview.

722. See 7 U.S.C. § 136 et seq. (1982).

723. Id^ § 136a(d)(3). See also id. § 136n(a).

724. See 21 U.S.C. §§ 346a(d), 348 (1982).

725. EPA Response.

726. See 21 U.S.C. § 346a(d) (1982). EPA has both regulations and
internal staff directives relating to pesticide tolerances.
See 40 C.F.R. §§ 180.7, 180.29, 180.32; Memorandum from
Douglas D. Campt, Director, Registration Division, Regarding
Standard Operating Procedure 3041.1; Procedure for Processing
Tolerance Petitions (Jan. 4, 1985). To the extent the
existence and elaborateness of these regulations is
accompanied by a substantial number of petition filings, the
conclusion following note 196 supra finds support in EPA
practice.

727. See 7 U.S.C. § 136a(d)(3) (1982).

728. See 15 U.S.C. § 2601 et seq. (1982).

729. See Appendix A at notes 18-26 infra.

730. See 15 U.S.C. § 2620.

731. EPA Response.

732. Carpien Interview.

733. See 50 F.R. 46825-828 (Nov. 13, 1985).

734. Id^ at 46825-826. '

735. Id^ at 46826-827.

736. Id.

737. Id^ at 46826.

738. See 10 C.F.R. § 2.802(b).

739. 50 F.R. at 46827.

740. Id.

741. EPA Response.

742. 50 F.R. at 46826.

624 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

743. Carpien Interview.

744. Id.

745.

Id.

746.

Id.

747.

Id.

748. See text at note 730 supra.

749. Carpien Interview; EPA Response.

750. EPA Response.

751. See 15 U.S.C. § 2620(b)(3) (1982).

752. See text at notes 59-69 supra.

753. 15 U.S.C. § 2620(b)(3) (1982).

754. 5 U.S.C. § 555(b). If the grant is considered the
"conclusion" of the matter presented to the agency, the duty
of the agency under § 555(b) to act promptly has arguably
been discharged.

755. See text and accompanying note 590 supra.

756. Id. Under TSCA the denial occurs prior to commencement of
the rulemaking. Arguably APA Section 555(e) is inapplicable
to petitions governed by TSCA.

757. EPA Response.

758. 42 U.S.C. § 6921 et seq. (1982).

759. Id^ § 6974(a).

760. See text at notes 59-69 supra,

761. See 40 C.F.R. Part 260.

762. Greenwood Interview.

763. See 40 C.F.R. §§ 260.21 (petitions for equivalent testing or
analytical methods); 260.22 (excluding waste produced at a
particular facility from lists of hazardous wastes).

764. EPA Response.

765. See 40 C.F.R. § 260.20.

766. Id. § 260.20(a).

PETITIONS FOR RULEMAKING 625

767. Id^ § 260.20(b).

768. Greenwood Interview; EPA Response.

769. 40 C.F.R. § 260.20(c).

770. Id^

771. Id^ (d).

772. Id^ (e).

773. Greenwood Interview.

774. EPA Response. But see 33 U.S.C. § 1251(e) (EPA to encourage
and assist public participation in development and revision
of rules and to publish regulations specifying minimum
guidelines for public participation). The regulations
implementing § 1251(e), see 40 C.F.R. Part 25, cover
rulemaking activities without mention of the petition
process. Id. § 25.10.

775. 42 U.S.C. § 7401 et seq. (1982).

776. 33 U.S.C. § 1251 et seq. (1982).

777. 42 U.S.C. §§ 300f et seq. (1982).

778. EPA Response; Lepow Interview.

779. EPA Response.

780. Lepow Interview.

781. EPA Response.

782. Id^

783. Id.

784. See, e.g. , Luneburg, Federal-State Interaction Under the
Clean Air Amendments of 1970, 14 B.C. Ind. & Com. L. Rev.
637, 640 (1973).

785. EPA Response.

786. Id^

787. Id^

788. Id.

789. Lepow Interview.

626 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

790. Id.

790a. Id. ; EPA Response.

791. EPA Response.

792. Lepow Interview.

793. Carpien Interview.

794. See text at notes 733-40 supra.

795. But see 42 U.S. C. § 6974(b)(1) (mandate to the agency to
encourage public participation).

796. Greenwood Interview.

797. 5 U.S.C. § 553(e).

798. See, e.g. , 15 U.S.C. § 2620 (1982).

799. See, e.g. , text at notes 225-26, 299-302, 454 infra.

800. Compare text with, e.g. , Simon v. Eastern Kentucky Welfare
Rights Organization, 426 U.S. 26 (1976) (no standing).

801. See text at note 810 infra.

802. See, e.g. , Natural Resources Defense Council, Inc. v. SEC,
606 F.2d 1031, 1042 (D.C. Cir. 1979); National Association of
Concerned Veterans v. Secretary of Defense, 487 F. Supp . 192,
195-6 (D.C. 1979). It might be argued that while the APA
does not mandate the granting of petitions, congressional
creation of the right to petition implies congressional
intent that persons only "abstractly interested" be permitted
to obtain judicial review of the denial of their petitions.
Cf . note 806 infra.

803. 15 U.S. § 2620(a) (1982).

804. Id. § b(4)(A).

805. In the case of a denial, the statute provides that "the
petitioner may commence a civil action . . . . " Id.

806. See, e.g. , Linda R. S. v. Richard D., 410 U.S. 614, 617 n.3
(1973).

807. See, e.g. , 42 U.S.C. § 6976(a) (1982 ) . See also Oljato
Chapter of Navajo Tribe v. Train, 515 F.2d. 654, 664-5 (D.C.
Cir. 1975).

808. See, e.g. , 15 U.S.C. § 2620(b)(4)(A).

PETITIONS FOR RULEMAKING 627

809. See, e.g. , text following note 64 supra.

810. See ACUS, A GUIDE TO FEDERAL AGENCY RULEMAKING 239-40 (1983).

811. Telecommunications Research & Action Center v. FCC, 750 F.2d
70 (D.C. Cir. 1984).

812. IdL at 75-77.

813. The classic treatment is, of course, Abbott Laboratories v.
Gardner, 387 U.S. 136 (1967). See also FTC v. Standard Oil
Co. of Calif., 449 U.S. 232 (1980).

814. See, e.g. , Public Citizen Health Research Group v.
Commissioner, 740 F.2d 21, 30-34 (D.C. Cir. 1984) (applying
the Abbott Laboratories test but noting that it does "not
accommodate the interests of those whom regulations are meant
to benefit or protect.").

815. See, e.g. , id. ; Wisconsin Electric Power Co. v. Costle, 715
F.2d 323 (7th Cir. 1983); Professional Drivers Council v.
Bureau of Motor Carrier Safety, 706 F.2d 1216 (D.C. Cir.
1983); ITT World Communications, Inc. v. FCC, 699 F.2d 1219
(D.C. Cir. 1983); WWHT, Inc. v. FCC, 656 F.2d 807 (D.C. Cir.
1981); National Organization for the Reform of Marijuana Laws
V. Ingersoll, 497 F.2d 654 (D.C. Cir. 1974); National
Association of Concerned Veterans v. Secretary of Defense,
487 F. Supp. 192 (D.C. 1979).

816. 5 U.S.C. § 701(a)(2)(1982). See, e.g. , WWHT, Inc. v. FCC,
656 F.2d 807, 814 (D.C. Cir. 1981). But see New York Racing
Ass'n, Inc. v. NLRB, 708 F.2d 46 (2d Cir. 1983).

817. See, e.g. , International Union, United Automobile, Aerospace,
and Agricultural Implement Workers of America v. Donovan, 590
F. Supp. 747 (D.C. 1984).

818. See, e.g. , text at note 804 supra.

819. See also Abbott Laboratories v. Gardner, 387 U.S. 136, 144
(1967).

820. 105 S. Ct.. 1649 (1985).

821. Id^ 1656.

822. See, e.g. , Sunstein, Reviewing Agency Inaction After Heckler
V. Cheney, 52 U. Chi. L. Rev. 653, 680-81 (1985).

823. See text at notes 51-5 supra.

824. See, e.g. , 42 U.S.C. § 6297(b) (1982 ) .

825. See, e.g. , 16 U.S.C. § 1533(a).

628 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

826. See Sunstein, supra note 822, at 681-82.

827. 105 S. Ct. at 1652 n. 2.

828. See, e.g. , ITT World Communications, Inc. v. FCC, 699 F.2d
1219, 1245-6 (D.C. Cir. 1983).

829. See, e.g. , id. See also, e.g. , WWHT, Inc. v. FCC, 656 F.2d
807, 817; International Union v. Donovan, 590 F. Supp. 747,
750 (D.C. 1984).

830. See, e.g. , 15 U.S.C. § 2620b(4)(B) (de novo review).

831. See, e.g., Vermont Yankee Nuclear Power Corp. v. Natural
Resources Defense Council, Inc., 435 U.S. 519, 542 (1978).

832. See, e.g. , Public Citizen Health Research Group v.
Commissioner, 740 F.2d 21 (D.C. Cir. 1984).

833. See, e.g. ^ Telecommunications Research and Action Center v.

FCC, 750 F.2d 70, 80 (D.C. Cir. 1984).

834. National Org. for Reform of Marijuana Laws v. Ingersoll, 497
F.2d 654, 659 (D.C. Cir. 1974) (citing Municipal Light Boards
V. FPC, 450 F.2d 1341, 1345 (D.C. Cir. 1971)). See also text
at notes 89-95 supra.

835. 435 U.S. 519 (1978).

836. Wisconsin Electric Power Co. v. Costle, 715 F.2d 323 (7th
Cir. 1983). The court stated that "[t]he APA does not detail
procedures for petitions made pursuant to § 553(e).
Therefore the EPA does not violate the APA by not having
detailed procedures governing petitions to begin
rulemakings." Id. at 328. While technically the court may
be correct, the legislative history of the APA demonstrates
the assumption of the drafters that such procedures would be
adopted. See text at notes 69-72 supra.

837. 715 F.2d at 328.

838. See ACUS, A GUIDE TO FEDERAL AGENCY RULEMAKING 202 (1983).

839. Id.

840. See, e.g. , WWHT, Inc. v. FCC, 656 F.2d at 817.

841. See ITT World Communications, Inc. v. FCC; 699 F.2d at 1264
(compliance with "substantive norms" requires "exacting
scrutiny"); Bargmann v. Helms, 715 F.2d 638, 640 (D.C. Cir.
1983); National Association for the Advancement of Colored
People V. FPC, 520 F.2d 432 (D.C. Cir. 1975).

PETITIONS FOR RULEMAKING 629

842. Cf. Natural Resources Defense Council, Inc. v. SEC, 606 F.2d
at 1046-7.

843. SEC V. Chenery Corp., 332 U.S. 194, 202-3 (1947) (lack of
experience with a problem, need for specialized treatment).

844. See Arkansas Power and Light Co. v. ICC, 725 F.2d 716, 723
(D.C. Cir. 1984).

845. 401 U.S. 402, 419-20 (1971).

846. See, e.g. , Florida Power & Light Co. v. Lorion, 105 S. Ct.
1598, 1607 (1985).

847. See, e.g. , United States v. Nova Scotia Food Products Corp.,
568 F.2d 240, 249 (2d Cir. 1977).

848. See International Union v. Donovan, 590 F.Supp. 747, 752
(D.C. 1984). See also Oljato Chapter of Navajo Tribe v.
Train, 515 F.2d 654, 666 (D.C. Cir. 1975).

849. International Union v. Donovan, 590 F.Supp. at 751 n.2.

850. See WWHT v. FCC, 656 F.2d at 817-18.

851. 5 U.S.C. § 552(b) (1982).

852. See generally 1 C.F.R. § 305.74-4 (ACUS Recommendation 74-4)
(1983).

853. See generally ACUS, A GUIDE TO FEDERAL AGENCY RULEMAKING,
151-53 (1983).

854. See text at notes 198-214 supra. The observation in the text
is obviously limited to the agencies and programs which were
surveyed as part of this study.

855. See Merrill, CPSC Regulation of Cancer Risks in Consumer
Products, 1972-81, 67 Vir. L. Rev. 1261 (1981); Swartz, The
Consumer Product Safety Commission: A Flawed Product of the
Consumer Decade, 51 George Wash. L. Rev. 32 (1982).

856. See text p-receding note 99 supra.

857. 5 U.S.C. § 553(c). But see id_^ 553(b)(A), (B).

858. See, e.g. , 15 U.S.C. § 57a(b) (2 ) (A) .

859. See, e.g. , 16 C.F.R. § 1.11 (initial notice of proposed
rulemaking with regard to trade regulation rules).

860. See Appendix A at notes 2, 9, 29, 40 infra.

861. Cf. J. O'REILLY, ADMINISTRATIVE RULEMAKING at 332 (1983).

630 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

862. See text at notes 59-69 supra.

863. See, e.g., text at note 569 supra.

864. See, e.g., text at note 425 supra.

865. Notice to statutorily established advisory committees may be
particularly appropriate. See Letter from David C. Vladeck,
Staff Attorney, Public Citizen Litigation Group to author
(Aug. 27, 1986). Mr. Vladeck also raised the idea of
agencies' establishing "standing advisory committees to
assist [them] in considering petitions." Id.

866. See text at notes 571-73 supra.

867. Reevaluation of the merits may be appropriate after a lapse
of time.

868. See text at note 315 supra.

869. See Appendix A at notes 2, 8, 29, 40 infra.

870. The required publication of receipt of a petition functions
in some instances as a notice of proposed rule-making. See,
e.g. , Appendix A at notes 29 and 40 supra. This is not
always the case. See Appendix A at note 8 supra.

871. See text at 337-44 supra.

872. Cf . e.g. , text at note 235 supra.

873. See, e.g. , text at notes 845-49 supra.

874. See, e.g. , text at notes 276-80 supra.

875. See Appendix C at notes 83-85 infra.

876. See, e.g. , text at note 710 supra.

877. See, e.g. , text at notes 323-32 supra.

878. See text at notes 147-50 supra.

879. See, e.g. , text at notes 733-36 supra.

880. See text following note 150 supra.

881. See, e.g., text at note 780 supra.

882. See text at notes 69-72 supra.

883. See 1 C.F.R. § 305.71-3 (Recommendation No. 71-3,
Articulation of Agency Policies). See also ACUS, A GUIDE TO
FEDERAL AGENCY RULEMAKING 45 (1983).

PETITIONS FOR RULEMAKING 631

884. See text following note 100 supra.

885. See text following note 393 supra.

886. See text at notes 75-80 supra.

887. 5 U.S.C. § 552(a)(1)(A), (B), (C) (1982).

888. See Appendix C at notes 13-16 infra.

889. See text at notes 628-29, 738-40 supra.

890. See, e.g. , text at notes 349-51 supra.

891. Id.

892. See Appendix C at note 25 infra.

893. Compare , e.g. , 21 C.F.R. § 10.30(b) (FDA) (explicit
cross-reference) with 10 C.F.R. § 205.9 (DOE) (no explicit
cross-reference). See also text at notes 395, 447-48 supra.

894. See text at notes 162-72 supra .

895. See, e.g. , text at note 388 supra.

896. See text at notes 59-69 supra .

897. See text at note 684 supra.

898. See text following note 685 supra ♦

899. See Appendix C at notes 72-75 infra.

900. These difficulties perhaps did not occur to the
Administrative Conference in its issuance of Recommendation
78-3, 1 C.F.R. § 305.78-3 (No. 5).

901. See note 590 supra.

902. See, e.g. , text at notes 608-09 supra. But see text at note
749 supra .

903. See Tomlinson, Report on the Experience of Various Agencies
with Statutory Time Limits Applicable to Licensing or
Clearance Functions and to Rulemaking, reprinted in ACUS,
1978 RECOMMENDATIONS AND REPORTS 130.

904. See, e.g. , id. at 122-23.

905. 5 U.S.C. §§ 555(b) (1982).

906. See, e.g., 15 U.S.C. § 2620 (1982).

632 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

907. See, e.g. , text at note 695 supra.

908. See also text at notes 588-94 supra.

909. See Appendix C at note 54 infra.

910. See generally Garner, Management Control in Regulatory
Agencies : A Modest Proposal for Reform, 34 Ad. L. Rev. 465
(1982).

911. See Appendix C at notes 63-64 infra.

912. See text at notes 669-72 supra.

913. See, e.g., Swartz, note 855 supra, at 52.

914. See Appendix C at notes 88-91 infra.

915. See Appendix A at notes 4, 22 infra.

916. One person who has had experience with the petition process
of several agencies noted that an agency may make a mistake
where it fails to clearly explain in a public fashion the
denial of certain petitions:

First, the agency passes up an opportunity to
educate the public about what it is and is not
doing — which can be valuable. Agency
decisions not to act are as much a reflection
of agency policy as affirmative decisions.
Second, to the extent the agency wants to
steer public participation in a particular
direction, a denial statement that explains
that the FTC, for instance, wants to
de-emphasize deceptive price advertising cases
to mount a campaign against health fraud would
be particularly valuable to that segment of
the public that was interested in assisting
the FTC.

Letter from David C. Vladeck, Staff Attorney, Public Citizen
Litigation Group, to author (July 27, 1986).

917. See 1 C.F.R. § 305.71-6 (ACUS Recommendation No. 71-6, Public
Participation in Administrative Hearings, Recommd. E).

918. See Appendix C at note 76 infra.

919. See, e.g. , Appendix A at note 33 infra.

920. 5 U.S.C. § 555(e) (1982).

921. See, e.g. , text at notes 698-700 supra.

PETITIONS FOR RULEMAKING 633

922. See, e.g. , text at note 701 supra.

923. See Appendix C at notes 97-98 infra.

924. See text at notes 104-20 supra.

925. See text at notes 96-98 supra.

926. See 5 U.S.C. § 553(b)(A) (1982).

927. See 1 C.F.R. § 305.76-5 (ACUS Recommendation 76-5, Recommd.
2).

928. See, e.g. , text at notes 899-907 supra.

929. See text following note 758 supra.

930. See text at note 730 supra .

931. See, e.g. , Appendix A at notes 7-9 infra.

932. This study does not address the advisability of special
provisions for judicial review of action on petitions such as
found in 15 U.S.C. § 2620 (1982) (TSCA) nor should it be
taken as suggesting that the substantive conditions found in
statutes which relate to the grant or denial of petitions
should be eliminated or modified.

933. See text at notes 899-907 supra.

934. The APA definition of "person" found in 5 U.S.C. § 551(2)
(1982) might be amended to ensure that states can utilize
Section 553(e) where, for example, statutes specifically
giving such entities the right to petition are repealed.
See, e.g. , Appendix A at notes 1-6 supra.

634 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Appendix A

Selected Special Statutory Petition Provisions
(arranged by agency)

1 . Department of Energy

Any state and any person subject to particular state
regulations may file a petition with the Secretary of Energy for a
rule regarding the supersession of a state regulation which
establishes an energy efficiency standard or other requirement
respecting energy use or energy efficiency. Notice of the filing
of the petition must be given (how or to whom is not specified)
and interested persons must be afforded a reasonable opportunity
to make written comments (suggesting that the notice must be to
the public generally). The Secretary must consider the petition,
views of the affected state, and any comments. Within six months
of the filing, the Secretary must deny the petition or "prescribe"
the requested rule, though that time period can be extended if
notice and reasons for the delay are published in the Federal
Register. Where a petition is denied, notice of the denial with
reasons must be published in the Register. The statute lays down
the substantive considerations to be taken into account in
considering petitions. If the Secretary prescribes the requested
rule, he must publish his findings.

2 . Environmental Protection Agency

a. Noise Pollution. States may petition the
Administrator to revise noise emission standards for products on
the ground that more stringent.,standards are necessary to protect
the public health and welfare. Receipt of the petition must be
published in the Federal Register. Within ninety days of
receipt, EPA must publish in the Register a proposed revised
regulation or a decision not to propose revisions along with a
"detailed" explanation for that decision.

b. Hazardous Waste. Any person may petition the
Administrator for the promulgation, amendment or repeal of any
regulation under the Resource Conservation and Recovery Act of
1976. Within a reasonable time following receipt of the
petition, the Administrator must "take action with respect to such
petition" (what type of action is not specified) and publish ^^
notice of such action in the Register along with the reasons.

Public participation in the development and revision of
regulations must be provided for, encouraged and assisted by the
Administrator. EPA is further required to^develop and publish
minimum guidelines for public participation. (These mandates
would seem to apply to the petition process itself. ) Judicial^,
review of denial of these petitions is expressly contemplated.

PETITIONS FOR RULEMAKING 635

c. Toxic Substances

1) Testing of Chemicals and Mixtures. Persons
intending to manufacture or process certain chemical substances
may petition the Administrator to prescribe standards for the
development of test data. Grant or denial must occur within 60
days of receipt of the petition and, if the petition is granted,
the Administrator must "prescribe" such standards within 75 days
of the date of the grant. If the petition is denied, the
reasons must be published in the Federal Register.

2) Rules Relating to Testing, Regulation and
Reporting Regarding Hazardous Chemical Substances and Mixtures.
Any person may petition the Administrator "to initiate a
proceeding for the issuance, amendment, or repeal" of various
rules. The petition must be filed in the "principal office of
the Administrator" (wherever that is) and set forth facts
supporting the request. The Administrator may hold a public
hearing or conduct such investigation or proceeding as he or she
deems appropriate to determine whether or not to grant the
petition. Within 90 days of the filing of the petition, the
Administrator must grant or deny it. If he grants it, he must
"promptly commence an appropriate-proceeding" in accordance with
other provisions of the statute. If he denies a petition, the
Administrator must publish in the Register his reasons. Denial
or inaction with regard to a petition is subject to judicial
review in a de novo proceeding. Where EPA is engaging in
regulation of more significant chemical risks, the court may on
the basis of the lack of agency resources refuse to order that the
rulemaking be initiated immediately. The 9Purt may award costs
and fees for attorneys and expert witnesses .

3. Food and Drug Administration

a. Food Additives. Any person may file a petition
proposing the issuance of a regulation prescribing the conditions
under which a food additive may be safely used. The petition
must contain certain^designated information along with explanatory
and supporting data. Notice of the proposed regulation must be
published "in general terms" within 30 days of^its filing.
Within 90, or in some cases up to 180, days of the filing of
the petition, the Secretary must issue a regulation (whether or
not identical to. that requested) or deny the petition. In
either case he must notify the petitioner of his action and the
reasons for it. Orders establishing regulations or denying
petitions must be published.

Within 30 days of the publication of an order, any person
adversely affected may file objections and request a hearing, ^^
after which hearing the Secretary must act on the objections.
Substantive^criteria for the Secretary's action on petitions is
set forth. Judicial^review of orders entered after hearing is
expressly authorized.

636 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

b. Certification of Certain Drugs. Any interested
person may file a petition proposing the issuance, amendment or
repeal of certain regulations applicable to antibiotic drugs.
The petition must set forth the proposal in general terms along
with the grounds for the request. The Secretary must give
public notice of the^proposal and opportunity for all interested
persons to comment. As soon as practicable thereafter he must
"make public his action" on the proposal. Within thirty days of
that, any^ interested person may file objections and request a
hearing. The Secretary must, after due notice, hold a public
hearing and, as soon as practicable after the completion of the
hearing, he or she must by order make public his or her action on
the objections. Judicial review of orders after hearing is
expressly provided for.

4. Department of the Interior.

:ies to or remove it from the endangered or threatened species
:s, the Secretary must make a finding "whether the petition

a. Endangered Species . To the extent practicable,
within 90 days of receipt of a Section 553(e) petition to add a
spec:
lists

presents substantial scientific or commercial information
indicating that the petitioned action may be warranted", and
promptly publish that finding in the Federal Register. If the
petition does make that showing, the Secretary must "promptly
commence a review of the status of the species." Within twelve
months of receiving a petition presenting the requisite
information, the Secretary must find (1) that the petitioned
action is not warranted and promptly publish that finding in the
Register; (2) that the petitioned action is warranted in which
case he or she must promptly publish in the Federal Register a
notice and text of a proposed regulation; or (3) that the
petitioned action is warranted but certain conditions obtain in
which case he or she must promptly publish such finding in the
Register along with a descriptionj-and evaluation of the reasons
and data underlying that finding. ^.^ Judicial review of various
findings is expressly provided for.

The Secretary is directed to establish and publish in the
Register agency guidelines "to insure that the purposes of this
section are achieved efficiently and effectively" including
"procedures for recording the receipt and the disposition of
petitions" and "criteria for making the findings required . . .
with respect to petitions." The Secretary must provide public
notice of and opportunity to comment on proposed guidelines of
this nature.

b. Surface Coal Mining and Reclamation. Any person
may petition the Director of the Office of Surface Mining
Reclamation and Enforcement "to initiate a proceeding for the
issuance, amendment, or repeal" of rules relating to surface
mining and reclamation. A petition must be filed "in the
principal office of the Director" and set forth the facts which
serve as its basis. The Director may hold a public hearing or

PETITIONS FOR RULEMAKING 637

conduct such investigation or proceeding as he deems appropriate
in determining whether to grant the petition. Within 90 days of
the filing of the petition, the Director must grant or deny it.
If granted the agency must "promptly commence an appropriate _q
proceeding in accordance with the provisions" of the statute.
If the petition is denied, the petitioner must be notified in
writing of the reasons for the denial.

5. Interstate Commerce Commission

When an APA Section 553 petition is filed for a rulemaking
related to rail carrier transportation, the Commission must grant
or deny the petition within 120 days of its receipt. If the
petition is granted, the Commissiongmust "begin an appropriate
proceeding as soon as practicable." If the petition is denied,
the reasons must be published in the Register.

64
Judicial view of denials and inaction is provided for. The

reviewing court is directed to order the agency to begin the

action requested if it finds that action is "necessary and failure

to take [it] will result in the continuation of practices that are

not consistent with the public interest or are not in accordance"

with applicable statutes. The judicial proceeding is de novo to

an extent. Relief is limited to an order directing the

Commission to begin a rulemaking proceeding.

6. National Highway Traffic Safety Administration

Any interested person may file with the Secretary of
Transportation a petition "requesting him ... to commence a
proceeding respecting the issuance of ag_order" establishing
federal motor vehicle safety standards. Such a petition must
set forth facts supporting the action requested and a brief
description of the substance of the standard requested. The
Secretary may hold a public hearing or conduct such investigation
or proceeding he deems appropriate in order to determine whether
or not such petition should be granted. Within 120 days of _ the
filing of the petition, the Secretary must grant or deny it. If
he or she grants it, she must "promptly commence the proceeding
requested in the petition." If the Secretary denies the
petition, „he or she must publish reasons in the Federal
Register.

638 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Appendix A Footnotes

U.S.C. § 6297(b)(1), (b)

Id.

(b)(4).

Id.

(b)(4).

Id.

(b)(1)(A), (B); b(2); b

Id.

(b)(1), (b)(3).

Id.

§ 4905(f) (1982).

Id.

10.

Id.

§ 6974(a) (1982).

11.

Id.

12.

Id.

(b).

13.

Id.

14.

Id.

§ 6976 (1982).

15.

U.S.C. § 2603(g) (1982).

16.

Id.

17.

Id.

18.

Id.

2620(a) (1982).

19.

Id.

(b)(1).

20.

Id.

§ 2620(b)(2).

21.

Id.

§ 2620(b)(3).

22.

Id.

23.

Id.

§ 2620(b)(4)(A).

24.

Id.

(b)(4)(B).

25.

Id.

26.

Id.

(b)(4)(C).

PETITIONS FOR RULEMAKING

27.

21 1

[J.S.C. § 348(b)(1) (1982).

28.

Id.

(b)(2).

29.

Id.

(b)(5).

30.

Id.

(c)(2).

31.

Id.

32.

Id.

(c)(1).

33.

Id.

(c)(1)(A), (B).

34.

Id.

(e).

35.

Id.

(f).

36.

Id.

(c)(3), (5).

37.

Id.

(g).

38.

Id.

§ 357(f) (1982).

39.

Id.

40.

Id.

41.

Id.

42.

Id.

43.

Id.

See also 21 U.S.C. § 371(e) (petitic

639

types of FDA rulemaking subject to procedures similar to
those found in §§ 348 and 357).

44. 16 U.S.C. § 1533(c) (1982).

45. Id^ § 1533(b)(3)(A).

46. IdL

47. Id^

48. Id^ § 1533(b)(3)(B)(i).

49. Id^ (B)(ii).

50. Id. (B)(iii). Somewhat similar procedures apply to petitions
applicable to "critical habitats." See id. (D)(i), (ii).

51. Id^ (C)(ii).

52. Id^ § 1533(g).

640 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

53. id^ (g)(1).

54. Id^ (g)(2).

55. Id^ (g).

56. 30 U.S.C. § 1211(g)(1) (1982).

57. Id^ (g)(2).

58. Id^ (g)(3).

59. Id^ (g)(4).

60. Id. See also 30 U.S.C. § 1272(c) (1982) (petition to have
area designated as unsuitable for surface coal mining).

61. 49 U.S.C. § 10326(a) (1982).

62. Id^

63. Id.

64. IdL (b)(1).

65. Id_^ (b)(2).

66. Id^

67. Id.

68. 15 U.S.C. § 1410a(a) (1982)

69. Id^ (b).

70. Id^ (c).

71. Id^ (d).

72. Id^

73. Id.

PETITIONS FOR RULEMAKING 641

Appendix B

Regulatory Flexibility/Impact Analysis and
the Regulatory Planning Process

With respect to the RFA, the regulatory agendas published in
October and April each year have to list some agency actions to
be taken in response to petitions. Each agenda must contain,
among other things, "a brief description of the subject matter
area of any rule which the agency expects to propose or promulgate
which is likely to have a significant economic impact on a
substantial number of small entities." Notices of proposed
rule-making and final rules to be issued in response to petitions
must, therefore, be include^ in the agendas while denials of
petitions, as such, do not. Similarly whether a grant of a
petition is deemed to occur when a notice of proposed rule-making
is issued or when a final rule is adopted,, regulatory flexibility
analyses must be prepared at those stages, though they need not
be for a denial as such or if a "grant" suggests merely that the
agency thinks the idea is a good one but the agency does not issue
a notice of proposed rule-making in response to the petition.

To the extent that denial of petitions for rule-making,
particularly petitions to amend or revise existing rules, are not
covered by the RFA, the purposes of that statute in focusing
agency concern ongthe burdens of regulation imposed on small
business entities may not be fully achieved in some instances.
Certainly there are cases where a petition from a small business
may suggest alternative types of regulation (or deregulation)
which may reduce the aggregate cost of the regulatory program for
the public and the government. An agency might reasonably be
required to undertake an analysis similar to that mandated prior
to its proposing to regulate in the first place.

The requirements of Executive Order 12,291 for the
preparation of preliminary and final regulatory impact analyses,
transmittal to and review of rules by 0MB, and consultation with
the 0MB Director apply by their terms only at the notice of
proposed rule-making and final rule stages. The requirements do
not vary depending on whether the notice of proposed rulemaking or
final rule have their origins in the petitions process . At the
same time these requirements do not appear to apply if a petition
"grant" connotes no more than "thank you for your good idea, we
will consider it" unless the agency intends also to issue a notice
of proposed rule-making. Denials of petitions for rule-making are
not, as such, expressly subject to the requirements of this
Executive Order though a notice of proposed rule-making or final
rule may in fact constitute a denial of a petition to the extent
they differ from the petitioner's request. As in the case of
the RfA/ the underlying purposes and approach of this Executive
Order suggest that the failure to include all denials should be
remedied. Finally, the regulatory agendas called^for by the Order
include regulations the agency "expects to issue" and thus
encompasses rules whose initial impetus was a petition.

642 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

When it comes to Executive Order 12,498 and its establishment
of a "regulatory planning process," the scope of coverage of the
petition-process is far more encompassing than that of the RFA and
Executive Order 12,291. The head of each agency must annually
submit to the 0MB Director "such information concerning all
significant regulatory actions of the agency, planned or underway,
including actions taken to consider whether to initiate
rule-making; requests for public comment; and the development of
documents that may influence, anticipate, or could lead to the
commencement of rulemaking proceedings at a later date, as the
Director deems necessary . . . ." Therefore, it would seem that
the publication of a petition for comments is an action concerning
which 0MB could require information if the subject matter of the
petition were deemed "significant." Even the mere filing of such
a petition, to the extent it inevitably triggers some intra-agency
consideration of the merits, seems to be within the Order's
purview.

The obligation to advise 0MB and submit an action to its
review is not, however, limited to the time when an agency's
yearly regulatory plan is prepared. It continues following
submission of that plan where the agency head proposes to take
regulatory action not previously submitted for review or one "that
is materially different from the action described in the agency's
Final Regulatory Program." In that instance, unless, for
example, a statute imposes a deadline for action, the agency ipust
refrain from taking the action until 0MB review is completed.
The head of each executive agency is, furthermore, directed to
ensure that all regulatory actions are consistent with both the
goals of the agency and of the Administration.

18
0MB Bulletin 85-9 elaborates on this Executive Order. It

defines a "prerulemaking action" in part as "any important action

taken to consider whether to initiate, or in contemplation of,

rulemaking; publication of advance notices of proposed rulemaking

and all similar notices, publications, and requests for public

comment ....," a definition obviously broad enough to

encompass much of the petition process. A prerulemaking action is

considered a "significant regulatory action" if it would be a step

toward adoption of a rule that is or would be, inter alia, a

"major rule" as defined by Executive Order No. 12,291, a priority

of the agency head, subject to a statutory deadline, of unusual __

public interest, or likely to establish an important new policy.

Each agency must submit to 0MB a draft and final annual regulatory

program, including specified information for each "significant

regulatory action [which includes pre-rulemaking actions] that the

agency proposes to pursue" during the year. These requirements

attempt both to involve agency heads earlier in the_regulatory

management process when policy options are broadest and to

insure that "agency resources will not be expended on regulatory

actions that are not consistent with the regulatory goals of the

agency head and of the President." Once the Administration's

Regulatory Program is in place, agency heads must submit to 0MB

for review proposed significant regulatory actions (including

PETITIONS FOR RULEMAKING 643

pre-rulemaking activity) not previously submitted or materially
different from those described in the agency's final regulatory
program. Except in the case where a statutory deadline prevents
it, an agency must refrain from taking the proposed action pending
0MB review. OMB^gay return such actions to the agency for
"reconsideration. "

In sum agency investigation of the merits of certain
petitions along with issuance of notices soliciting comments are
within the purview of this "regulatory planning process," though
0MB has the authority to provide for exemptions from coverage.
0MB comments may be influential (or crucial) in the decision to
grant a petition and in the determination whether or not to take a
particular step in consideration of a petition. Regardless of its
effect on the disposition of the merits of a petition, its review
can introduce delay into the proceeding.

644 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Appendix B Footnotes

1. See 5 U.S.C. § 602(a) (1982).

2. Id_^ § 602(a)(l)-(3).

3. Id^ (a)(1).

4. To the extent the proposed or final rule mirrors an APA
Section 553(e) petition in some particulars but departs from
it in others, there is a denial which OMB is at least de
facto informed of.

5. See main text at notes 59-66 supra.

6. 5 U.S.C. § 603, 604 (1982).

7. But see note 4 supra.

8. See Pub. L. No. 96-354, 94 Stat. 1164, § 2 (Sept. 19, 1980).

9. Exec. Order No. 12,291, § 3, 3 C.F.R. 127 (1981), reprinted
in 5 U.S.C. app. § 601, at 136 ( Supp . V 1981).

10. See note 4 supra.

11. Exec. Order No. 12,291 § 2.

12. Id^ § 5(a).

13. Exec. Order No. 12,498, § 2(a), 3 C.F.R. 323 (1986),
reprinted in 21 Weekly Comp. Pres . Doc. 11 (Jan. 7, 1985).

14. Id^ § 3.

15. Id^ § 3(c) .

16. Id^

17. Id^ § 1(b).

18. OMB Bulletin No. 85-9, The Administration's Regulatory
Program — 1985 (Jan. 10, 1985), reprinted in ACUS, FEDERAL
ADMINISTRATIVE SOURCE BOOK 31, 43 (1985).

19. Id^ § 5(a).

20. IdL § 5(c).

21. Id^ § 6(b), 9(d).

22. Id^ § 7.

23. Id.

PETITIONS FOR RULEMAKING 645

24. Id^ § 10(a).

25. Exec. Order No. 12,498, § 3(c); 0MB Bulletin No. 85-9,
§ 10(b).

26. Exec. Order No. 12,498, § 3(d); 0MB Bulletin No. 85-9,
§ 10(e).

27. Exec. Order. No. 12,498, § 1(a), 2(c); 0MB Bulletin No. 85-9,
§ 11.

646 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Appendix C

A Narrative Overview of Rulemaking Petition Regulations

The petition process can be divided into four main phases:
filing, agency consideration of the petition, final action to deny
or take other action with regard to the request, and
reconsideration of decisions with regard to petitions.

1 . Filing of the Petition

Some of the most common aspects of petition regulations
include identification of the address where petitions must be
filed along with the name of the addressee. and provision for
opening of a public file in a docket room. That file generally
includes a copy of the petition and associated documents and
may be assigned a docket or other control number.

As to form of submission, in some cases the document must be
designated expressly as a petition and conform to various
requirements such^as number of copies, paper size, signature,
and verification. Invariably a written document is expected.
It generally must state, at a minimum, the nature of the
petitioner's interest in the subject matter of the requested
action, the terms or substance of the regulatory^ change
sought, and supporting arguments and/or information. Several
agencies, in addition, require the submission of information
relating to the prospective economic impact of the regulation
sought and/or information necessary to assist the agency in
carrying outfits obligations under the National Environmental
Policy Act. Where the agency must make specific findings before
promulgating a rule, the procedural regulations may be
particularly specific in terms of the type of data required or
suggested to be furnished. Some agencies mandate that the
petitioner keep information provided up-to date and even supply
information undercutting its position. Special provisions may
set out the way in which the petitioner or others may^claim
confidential treatment for part of their submissions.

In a few cases, a written acknowledgment of receipt or filing
of the petition is given by the agency to the petitioner. Where
the agency prescribes in some detail the contents of a petition,
agency review-to determine whether the requirements are met may be
provided for, along with a self-imposed time limit for making
this determination and notification_to the petitioner of any
procedural rejection and the reasons. Some regulations Wgke
provision for the withdrawal of or amendment to petitions.

2 . Consideration of Petitions

Some agencies have expressly delegated the responsibility to
act on certain petitions to designated agency officials. In at
least one case this is coupled with authority to screen out

PETITIONS FOR RULEMAKING 647

petitions which are either meritless or, for one reason or
another, do not warrant further agency consideration.

In some instances, s tatu to ry^ requirements mandate Federal
Register or other public notice^ of the receipt of petitions
and the regulations mirror this, though even in the absence of
statutory command some agencies on their own may provide for
public notice via the Register or otherwise of the receipt of
petitions. Such notice serves as a mechanism primarily for
soliciting comments from interested persons regarding what action
the agency should take with regard to the petition. Where
statutes do not mandate notice^^the regulations usually retain
agency discretion to issue it, but not always. The content of
the notice may be described and time limits for its publication
and/or submittal of comments may be established. Where the
petition seeks the amendment or repeal of a rule, regulated
entities may have to be specifically served with a copy of the
petition. In some cases submissions in support of or in
opposition to a petition will be accepted even though publication
notice of the filing is not issued.

If the agency uses a comment process for involving outsiders
in the decisionmaking, there may be requirements that comments be
served on the petitioner and filed within a specific period of
time as well as provision of a separate time period for filing
comments in reply to comments.

44 45

Some -agencies provide for meetings, conferences, or

hearings, the conduct of which proceedings is most likely to be

relatively informal. Generally utilization of these methods of

more intensive solicitation of^the views of outsiders are

discretionarVgWith the agency. Transcripts of these may be

provided for and at times expressly made part of the record of

the proceedings. In making decisions on petitions, ex parte

communication restrictions usually do not apply.

In most instances the regulations do not expressly limit the
agency with regard to where it2niay look for data and arguments for
its decision on the petition, though the regulations may purport
to specify the content of the record for decision. In a few
cases an agency may specify the criteria for granting petitions,
generally stated in broad terms which boil down to the need for
the regulation and the availability of agency time and resources
to embark on rulemaking. In one case, the standard for granting
a petition is expressly phrased ip^terms of the likelihood of
ultimately adopting the proposal. In another instance, the
briefing package provided by staff to the agency decisionmaker is
made available to the petitioner so that the petitioner may
comment on it in advance of the decision.

57 58

There may be relatively strict, orgmore vaguoug^

timeframes for action on petitions, with or without a

statutory mandate to that effect. There may be a pro^^sion for

extension, perhaps noticed in the Federal Register. To keep

648 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

the petitioner advised, status reports on the agency's progress,
with regard to the disposition of the petition may be required
and these may be tied to strict timetables.

3 . Decision on the Petition

Many regulations talk of both denials ^7and grants of
petitions. Others avoid using these terms. Where the APA is
the only applicable petition statute, some agencies consider, the
grant of a petition to connote the issuance of a final rule;
others view it as signifying no more than the obligation to issue
a notice of proposed rule-making. Another type of disposition
which is considered by some agencies as a "grant" is issuance of
an advance notice of proposed rule-making, whose purpose may be
largely the same as that achieved by the publication of notice of
receipt of a petition, that is, solicitation of outside coinments
with regard to what further action the agency should take. In
this instance, a "grant" appears to be little more than agency
acknowledgment that the idea is a good one and worth further
study.

Of course, short of promulgation of a rule in "final" form,
any formal agency action on a petition, other than a denial,
signifies merely continuing agency consideration of the subject
matter accompanied usually, though not always, by some degree of
favorable aaency disposition toward the merits. As indicated
previously, considering a grant of an APA petition to occur only
with issuance of a final rule makes some sense because it requires
the agency to complete its entire consideration of the merits of a
proposal within a "reasonable time," a time standard that
imposes some pressure on the agency but generally not so much as
to terribly distort the agency's statutory or self-initiated
regulatory agenda. In_this connection it is important to note
that in many instances where Congress has imposed strict time
limits on agency action on petitions, the grant is deemed to occur
prior to formal commencement of rulemaking, thus obviating the
problems that would be created for an agency if it had to complete
the rulemaking within the specified time frame.

The regulations may require the agency to personally inform
the petitioner of a favorable decision on the petition. This
may be accompanied by a variety of actions including public notice
of this finding, issuance of an advance notice^of proposed
rule-making, a notice of proposed rule-making or, in some
cases, promulgation of the final rule without solicitation of
comment. The regulations may in fact detail the types of
actions the agency may take on disposition of a petition. In
some cases the petitioner may be personally^served with a copy of
any notice of proposed rule-making issued.

Where a notice of proposed rule-making is issued in response
to a petition, some^rules fold the petition file into the
rule-making record. Given judicial interpretation of agency
responsibilities at this stage of rule-making, the public must

PETITIONS FOR RULEMAKING 649

be informed of at least the factual materials in the petition file
that formed the basis for the proposal. This record
incorporation, therefore, makes good sense. The agency can in the
Federal Register notice of proposed rule-making made reference to
the existence and location of the supporting documents in the
file. Submissions with regard to the petition which argued
against its grant will inevitably in many instances be resubmitted
during the rule-making so incorporation saves this expense*. Of
course the agency may wish to reorganize the documents in the
petition file to isolate those most directly relevant to the
issues presented in the rule-making. Finally where grant of a
petition is not considered to occur prior to rule adoption, the
petition file would have to be considered part and parcel of the
rulemaking record anyway.

Denial, in whole or part, of a petition signifies that the
agency does not wish to pursue consideration of the matter
proposed^,- While notice of denial may be published in the
Registerg- and the regulations may set forth the general contents
of that, the petitioner is assured personal notification of the
denial along with a written statement of reasons. The APA and
some other petitions statutes require this. There are some
instances, however, where "public" notice of denial, along with
the reasons, published in the Register^ appears to be all the
petitioner is by statute entitled to, though even here the -^
regulations may provide for personal notice to the petitioner.
Regulations, in accordance with the APA may provide that notice of
denial be "promptly" given." In some instances there is a more
specific time frame laid down for notification of a decision.
Finally^-^some agencies maintain public lists^pf petitions filed or
pending and their status or disposition.

4. Reconsideration

At times petitions for reconsideration of a decision on a
rulemaking petition (or even the decision adopting a final
rule) are treated as petitions for rulemaking and the procedures
applicable to those apply. In other instances petitions for
reconsideration of decisions on petitions, as well as of
adoption of final rules, are governed by procedures distinct
from those applicable to the initial filing of a petition for
rulemakina^- procedures which mandate, inter alia, form of
petition^^ manner of soliciting comments from^outside the
agency, and time limits for agency action. A petition for
reconsideration may be available in instances where new
information is discovered or where the agency allegedly^^c
incorrectly evaluated the original materials for decision.
While in some instances these reconsideration procedures largely
mirror the petition procedures, special procedures for
petitions for reconsideration of decisions on petitions as well^as
petitions for reconsideration of rules finally adopted do exist
and are presumably justified in many instances by, for example,
the need to quickly dispose of these, the existence of an already

650 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

compiled, though perhaps incomplete, record for decision and the
need to explore only certain limited issues.

PETITIONS FOR RULEMAKING 651

Appendix C Footnotes

1. See, e.g. , 15 C.F.R. § 303.13(b) (International Trade
Administration); 16 C.F.R. § 1051.3 (Consumer Product Safety
Commission); 17 C.F.R. § 13.2 (Commodity Futures Trading
Commission); 21 C.F.R. § 10.20(f) (Food and Drug
Administration); 26 C.F.R. § 601.601(c) (Internal Revenue
Service); 24 C.F.R. § 10.20(a)(1) (Housing and Urban
Development); 49 C.F.R. § 552.4 (National Highway Traffic
Safety Administration); 12 C.F.R. § 790.10(b) (National
Credit Union Administration); 14 C.F.R. § 11.25(b) (Federal
Aviation Administration); 10 C.F.R. § 2.802(a) (Nuclear
Regulatory Commission); id. § 205 . 12(a) (10 ) (Department of
Energy); 12 C.F.R. § 508.13 (Federal Home Loan Bank Board);
49 C.F.R. § 5.11(b)(1) (Department of Transportation); 10
C.F.R. 430.42(a) (Department of Energy).

2. See, e.g., 10 C.F.R. § 2.802(a) (NRC); id^ § 205 . 12(a) (10)
(DOE); 10 C.F.R. § 430.42(a) (DOE); 15 C.F.R. § 303.13(b)
(ITA); 49 C.F.R. § 1110.2(c)(1) (Interstate Commerce
Commission); 21 C.F.R. § 10.30(b) (FDA).

3. See, e.g. , 10 C.F.R. § 2.802(e) (NRC); 10 C.F.R. § 430.44(d)
(DOE); 21 C.F.R. § 10.20(j) (FDA); 24 C.F.R. § 10.4(b) (HUD).

4. See, e.g. , 10 C.F.R. § 2.802(e) (NRC); 10 C.F.R. § 205.15
(DOE); 14 C.F.R. § 11.11 (FAA).

5. See, e.g. , 10 C.F.R. § 2.802(e) (NRC); 24 C.F.R. § 10.4(a)
(HUD).

6. See, e.g., 21 C.F.R. § 10.30(d) (FDA).

7. See, e.g. , 10 C.F.R. §§ 2.802(e), 110.131(d) (NRC); 14 C.F.R.
§ 11.27(b)(1) (FAA); 21 C.F.R. § 10.30(c) (FDA).

8. See, e.g. , 10 C.F.R. 205 . 12(a) (10 ) (DOE); 24 C.F.R.

§ 1720.5(b)(1) (HUD); 49 C.F.R § 552.4(b) (NHTSA) . Cf^ 16
C.F.R. § 1051.5(c)(2) (CPSC) (recommendation, not
requirement) .

9. 5 C.F.R. §§ 2429.24, .25 (Federal Labor Relations Authority);
10 C.F.R. § 430.42(a) (DOE); 14 C.F.R. § 11.25(b)(2) (FAA);
15 C.F.R. § 303.13(b) (ITA); 21 C.F.R. § 10.20(a) (FDA).

10. See, e.g. , 5 C.F.R. §§ 2429.24, .25 (FLRA).

11. See, e.g. , 21 C.F.R. § 1308.44(b) (Drug Enforcement
Administration) .

12. See, e.g. , 46 C.F.R. § 502.51 (Federal Maritime Commission).

13. See, e.g. , 5 C.F.R. § 2429.28 (FLRA); 7 C.F.R. § 2901.5
(Department of Agriculture, Office of Energy); 12 C.F.R.

652 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

§ 790.10(b) (NCUA); 16 C.F.R. § 1.9 (Federal Trade
Commission); 16 C.F.R. § 1000.5 (CPSC); 29 C.F.R. § 516.10(a)
(Wage & Hour Division, Labor Department); 29 C.F.R. § 102.124
(NLRB) .

14. See, e.g. , 10 C.F.R. § 2.802(c)(2) (NRC); 12 C.F.R.

§ 790.10(b) (NCUA); 49 C.F.R. § 5.11(b)(3) (DOT); 14 C.F.R.
§ 11.25(b)(4) (FAA); 15 C.F.R. § 303.13(b)(2) (ITA); 17
C.F.R. § 13.2 (CFTC); 17 C.F.R. § 201.4(a) (Securities
Exchange Commission); 24 C.F.R. 10.20(a)(3) (HUD). See also
21 C.F.R. § 10.3(a) (FDA) ("interested person" defined as "a
person who submits a petition" ) .

15. See, e.g. , 5 C.F.R. § 2429.28 (FLRA); 10 C.F.R. § 2.802(c)(1)
(NRC); 49 C.F.R. § 5.11(b)(2) (DOT); 14 C.F.R. § 11.25(b)(3)
(FAA); 15 C.F.R. § 303.13(b)(5) (ITA); 16 C.F.R.

§ 1051.5(a)(5) (CPSC); 17 C.F.R. § 13.2 (CFTC); 17 C.F.R.
§ 201.4 (SEC); 21 C.F.R. § 10.30(b) (FDA); 21 C.F.R.
§ 1308.44(b) (DEA); 22 C.F.R. § 1429.28 (FSLRB); 24 C.F.R.
§ 10.20(a)(2) (HUD); 29 C.F.R. § 516.10(a) (W&H Div.); 49
C.F.R. § 1110.2(c)(2) (ICC).

16. See, e.g. , 5 C.F.R. § 2429.28 (FLRA); 7 C.F.R. § 2901.5(a)
(DOA, Energy); 10 C.F.R. §§ 2.802(c), (1), (2), 110.131(b)
(NRC); 12 C.F.R. § 790.10(b) (NCUA); 49 C.F.R. § 5.11(b)(4)
(DOT); 14 C.F.R. § 11.25(b)(5) (FAA); 15 C.F.R.

§§ 303.13(b)(3), (4) (ITA); 16 C.F.R. § 1.9 (FTC); 16 C.F.R.
§ 1051.5(a)(4) (CPSC); 17 C.F.R. § 13.2 (CFTC) (optional); 17
C.F.R. § 201.4(a) (SEC); 21 C.F.R. § 10.30(b) (FDA); 21
C.F.R. § 1308.44(b) (DEA); 26 C.F.R. § 601.601(c) (IRS); 49
C.F.R. § 1110.2(c)(4) (ICC); 22 C.F.R. § 1429.28 (FSLRB); 24
C.F.R. § 10.20(a)(4) (HUD); 29 C.F.R. § 516.10(a) (W&H Div.);
29 C.F.R. § 102.124 (National Labor Relations Board).

17. See, e.g. , 10 C.F.R. §§ 51.22, .40, .41, .45, .68, .74, .93.
.94, .102 (NRC); 21 C.F.R. § 10.30(b) (FDA).

18. See, e^_g, 10 C.F.R. § 430.44 (DOE); 16 C.F.R. § 1051.5(b)
(CPSC) (recommendation).

19. See, e.g. , 10 C.F.R. § 205.9(d) (DOE).

20. See 21 C.F.R. § 10.30(b) (FDA).

21. See, e.g, 7 C.F.R. 2901.5(2) (DOA, Energy); 10 C.F.R.

§§ 205.9(f), 430.42(d) (DOE); 21 C.F.R. §§ 10.20(c)(6), 20.44
(FDA).

22. See, e.g. , 17 C.F.R. § 13.2 (CFTC); 17 C.F.R. § 201.4 (SEC);
21 C.F.R. §§ 10.20(g)(2), 10.30(c) (FDA).

23. See, e.g. , 10 C.F.R. §§ 2.802(e), (f) (NRC); 21 C.F.R.
§ 10.20(d) (FDA); 21 C.F.R. § 1308.44(c) (DEA).

PETITIONS FOR RULEMAKING 653

24. See, e.g. , 21 C.F.R. § 1308.44(c) (DEA, "reasonable time");
49 C.F.R. § 211.7(b) (Federal Railroad Administration).

25. See, e.g., 10 C.F.R. § 2.802(f) (NRC); 16 C.F.R. § 1051.6(b)
(CPSC); 21 C.F.R. § 10.20(c)(6) (FDA); 21 C.F.R. § 1308.44(c)
(DEA); 29 C.F.R. §§ 1905.14(2), (3) (Occupational Safety and
Health Administration).

26. See, e.g. , 21 C.F.R. § 10.30(g) (FDA).

27. See, e.g., 10 C.F.R. §§ 1.40(o), (p) (NRC).

28. See 47 C.F.R. §§ 0.251(c), 1.401(e) (FCC).

29. See, e.g., 42 U.S.C. § 4905(f) (1982).

30. See, e.g., 42 U.S.C. § 6297(b) (1982).

31. See, e.g., 10 C.F.R. § 430.43 (DOE).

32. See, e.g., 10 C.F.R. §§ 2.802(e), 110.131(d) (NRC); 14 C.F.R.
§ 11.27(b) (FAA) (summary).

33. See, e.g. , 47 C.F.R. § 1.403 (FCC). See main text at notes
333-336 supra.

34. See, e.g., 29 C.F.R. § 1905.14(b)(2) (OSHA).

35. See, e.g. , 21 C.F.R. § 10.30(h)(3) (FDA); 43 C.F.R. § 14.4
(Interior); 49 C.F.R. § 211.11(a) (FRA).

36. See, e.g. , 14 C.F.R. § 11.27(b) (FAA).

37. See, e.g. , 10 C.F.R. § 430.43 (DOE); 14 C.F.R. § 11.27(b)
(FAA); 29 C.F.R. § 1905.14(b)(2) (OSHA); 47 C.F.R. § 1.403
(FCC).

38. See, e.g. , 14 C.F.R. § 11.27(b) (FAA) (extensions permitted).

39. See, e.g. , 46 C.F.R. § 201.61 (Maritime Administration).

40. See, e.g., 16 C.F.R. § 1051.7(a) (CPSC); 21 C.F.R. § 10.30(d)
(FDA).

41. See, e.g. , 47 C.F.R. § 1.405(a) (FCC).

42. Id. (30 days after notice issued).

43. Id^ (b). See also 16 C.F.R. § 1051.7(a) (CPSC) (service of
comments on petitioner encouraged).

44. See, e.g. , 16 C.F.R. 1051.8 (CPSC); 21 C.F.R. § 10.30(h)(1)
(FDA); 49 C.F.R. § 552.7 (NHTSA) .

654 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

45. See, e.g. , 21 C.F.R. § 10.30(h)(1) (FDA).

46. See, e.g. , 10 C.F.R. § 2.803 (NRC); 10 C.F.R. §§ 205.170,
.172, 430.46 (DOE); 15 C.F.R. § 303.13(c) (ITA); 16 C.F.R.

§ 1051.8(a) (CPSC); 21 C.F.R. § 10.30(h)(2) (FDA); 24 C.F.R.
§ 1720.5(c) (HUD). But see 49 C.F.R. § 5.13 (DOT) (no public
hearing prior to disposition).

47. See, e.g. , 10 C.F.R. § 430.46 (DOE); 16 C.F.R. § 1051.8(b)
(CPSC); 49 C.F.R. § 552.7 (NHTSA).

48. See, e.g. , 10 C.F.R. § 2.803 (NRC); 10 C.F.R. §§ 205.170,
.172 (DOE); 15 C.F.R. § 303.13(c) (ITA); 16 C.F.R.

§ 1051.8(a) (CPSC); 49 C.F.R. § 552.7 (NHTSA). But see 10
C.F.R. § 430.46.

49. See, e.g. , 10 C.F.R. § 430.46(a) (DOE); 49 C.F.R. § 552.7
(NHTSA) .

50. See, e.g. , 21 C.F.R. § 10.30(i)(4) (FDA).

51. See, e.g. , 14 C.F.R. § 300 . 2 (b) (4 ) (v) (DOT).

52. See, e.g. , 7 C.F.R. § 2901.5(b) (DOA, Energy); 49 C.F.R.
§ 552.6 (NHTSA).

53. See, e.g. , 21 C.F.R. § 10.30(i), (j) (FDA).

54. See, e.g. , 16 C.F.R. § 1051.9 (CPSC).

55. See 49 C.F.R. § 552.8 (NHTSA).

56. See 16 C.F.R. § 1051.7(c) (CPSC).

57. See, e.g. , 21 C.F.R. § 10.30(e)(2) (FDA, 120 days); 24 C.F.R.
§ 1720.5(c) (HUD) (180 days); 49 C.F.R. § 211.11 (FRA) (six
months); 49 C.F.R. § 552.8 (NHTSA) (120 days).

58. See, e.g. , 16 C.F.R. § 1051.10(a) (CPSC) ("reasonable time").

59. See, e.g. , 49 C.F.R. § 552.8 (NHTSA).

60. See, e.g. , 21 C.F.R. § 10.30(e)(2) (FDA).

61. See, e.g. , 24 C.F.R. 1720.5(c) (HUD).

62. See, e.g. , 10 C.F.R. § 430.48(a) (DOE).

63. See, e.g. , 14 C.F.R. § 11.27(k) (FAA); 21 C.F.R.
§ 10.30(e)(2)(iii) (FDA).

64. Id.

PETITIONS FOR RULEMAKING 655

65. See, e.g. , 21 C.F.R. § 10.30(e)(3) (FDA); 24 C.F.R.
§ 1720.5(c) (HUD).

66. Id.

67. See, e.g., 10 C.F.R. § 205.161(b)(2) (DOE).

68. See main text at note 433 supra.

69. See, e.g., 24 C.F.R. § 1720.5(c) (HUD); 47 C.F.R. § 1.407
(FCC). In some cases the regulations merely provide that the
agency "institutes rulemaking procedures," see, e.g. , 14
C.F.R. § 11.27(d) (FAA); 49 C.F.R. § 5.13 (DOT), or "open[s]
a rulemaking." See 49 C.F.R. § 1110.2(e) (ICC).

70. See, e.g. , 16 C.F.R. § 1051.10(a) (CPSC); 49 C.F.R.
^ § 211.11(b) (FRA).

71. Compare 14 C.F.R. § 11.27 (FAA) with 24 C.F.R. § 3282.104
(HUD) and 10 C.F.R. § 430.43 (DOE).

72. See main text at notes 59-69 supra.

73. See 5 U.S.C. § 555(b) (1982).

74. But see, e.g. , 42 U.S.C. § 6297(b)(4) (1982) (Secretary must
prescibe final rule or deny petition in 6 months from date of
filing, though there are provisions for extension of time).

75. See, e.g., 15 U.S.C. § 1410a(d) (1982).

76. See, e.g., 10 C.F.R. § 430.48(b) (DOE); 16 C.F.R. § 1.9
(FTC); 21 C.F.R. § 10.30(e)(3) (FDA); 49 C.F.R. § 552.8
(NHTSA).

77. See, e.g. , main text at note 369 supra (FCC).

78. See, e.g. , 49 C.F.R. § 211.11(b) (FRA).

79. See, e.g. , 24 C.F.R. § 1720.5(c) (HUD).

80. See, e.g., 24 C.F.R. § 10.20(b) (HUD).

81. See, e.g., 21 C.F.R. § 10.30(e)(2) (FDA).

82. See, e.g. , 16 C.F.R. § 1.9 (FTC).

83. See, e.g. , 21 C.F.R. 10.40(g)(1) (FDA).

84. See, e.g. , United States v. Nova Scotia Food Products Corp.,
568 F.2d 240 (2d Cir. 1977). See also R. PIERCE, S. SHAPIRO,
& P. VERKUIL, ADMINISTRATIVE LAW AND PROCESS 324-25 (1985)
(suggesting this approach survives Vermont Yankee ) .

656 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

85. United States v. Nova Scotia Food Products Corp., 568 F.2d at
251.

86. See, e^, 10 C.F.R. § 430.48(b); 14 C.F.R. § 11.27(f) (FAA);
49 C.F.R. § 552.10 (NHTSA) .

87. See, e.g. , 14 C.F.R. § 11.27(h) (FAA).

88. See, e.g, 7 C.F.R. § 2901.5 (DOA, Energy); 10 C.F.R.

§§ 2.803, 110.132(c) (NRC); 10 C.F.R. § 205 . 161 (b ) (2 ) ( ii )
(DOE); 14 C.F.R. § 11.27(f) (FAA); 15 C.F.R. § 303.13(d)
(ITA); 16 C.F.R. § 1051.11(a); 21 C.F.R. § 10.30(e)(3) (FDA);
49 C.F.R. § 211.11(d) (FRA); 49 C.F.R. § 552.8 (NHTSA).

89. See main text at note 55 and Appendix A at note 60 supra.

90. See, e.g. , 42 U.S.C. § 6297(b)(4) (1982).

91. See 10 C.F.R. § 430.48(b) (DOE).

92. See, e.g. , 7 C.F.R. § 1.28 (DOA).

93. See, e.g. , 24 C.F.R. § 1720.5(c) (HUD) (7 days); 49 C.F.R.
§ 552.8 (NHTSA) (120 days of receipt of petition).

94. See, e.g. , 10 C.F.R. § 2.802(g) (NRC); 21 C.F.R. § 10.30(1)
(FDA).

95. See, e.g. , 10 C.F.R. § 2.802(g) (NRC).

96. See, e.g. , 21 C.F.R. § 10.30(1)(5) (FDA).

97. See, e.g. , 16 C.F.R. § 1051.11(b) (CPSC).

98. See, e.g. , 24 C.F.R. § 10.18 (HUD) (final rule); 44 C.F.R.
§ 1.17 (Federal Emergency Management Agency); 49 C.F.R.

§ 553.35(a) (NHTSA).

99. See, e.g. , 21 C.F.R. § 10.33(b) (FDA); 47 C.F.R. § 1.429
( FCC ) .

100. See, e.g. , 49 C.F.R. §§ 211.29, .31 (FRA); 49 C.F.R. § 553.35
(NHTSA).

101. See, e.g. , 21 C.F.R. § 10.33(b) (FDA); 47 C.F.R. § 1.429(h)
(FCC); 49 C.F.R. § 211.29(a) (FRA).

102. See, e.g. , 47 C.F.R. § 1.429(e) (FCC) (notice of receipt
published in Federal Register).

103. See, e.g. , 49 C.F.R. § 211.31(a) (FRA).

104. See, e.g. , 47 C.F.R. § 1.429(b) (FCC).

PETITIONS FOR RULEMAKING 657

105. See, e.g., 21 C.F.R. §§ 10.33(b), (d) (FDA).

106. Compare 21 C.F.R. § 10.33 with idL § 10.30 (FDA).

107. See 49 C.F.R. §§ 1.429(e), (f), (g) (FCC); 49 C.F.R.
§§ 553.35, .37 (NHTSA) and Appendix thereto.

658 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Appendix D

(Proposed Recommendations to ACUS Committee on
Rulemaking, September 15, 1986)

1. Congress should review those statutes [other than the
Administrative Procedure Act itself] which specify procedures for
the receipt, consideration, and disposition of petitions for
rulemaking in order to determine whether they improve
substantially on the procedures already mandated by the APA and
those recommended below to implement its provisions.

2. Congress should amend Section 553(a) of the Administrative
Procedure Act to insure that the matters and functions specified
therein are subject to Section 553(e). The procedures described
below with regard to public solicitation of views should be
utilized where appropriate by agencies engaged in rule-making of
this nature.

3 . Except to the extent that statutes otherwise require or
provide, each federal agency should formally establish and publish
a procedure for the receipt, consideration and disposition of
petitions for rulemaking that includes, at a minimum, the
following:

a. Specification of the address (es) at which petitions can
be filed and the appropriate addressee(s ) .

b. Specification of the format of a petition, to require at
least the name, address, and telephone number of the petitioner,
the statutory authority for the action requested, a description in
as precise terms as possible of the rule to be issued or repealed,
and the arguments of law and policy and factual information deemed
to support the action requested.

c. Except as provided in 4d and 4e below, solicitation of
comments from the public both in support and opposition to the
petition by means calculated to reach at least a representative
cross-section of those persons likely to possess information that
may aid the agency in its decision to grant or deny the petition.

d. Maintenance of a publicly available file with regard to
the proceeding, which file should be assigned a docket or other
control number and at the least contain the following: a copy of
the petition; any comments and reply comments received; Federal
Register and other public agency notices of relevance;
correspondence to the petitioner from the agency which notifies it
of the grant or denial of its request; correspondence between
agency employees and others outside the agency with regard to the
petition; hearing and meeting transcripts; and any documents,
whether generated by the agency or others , which contain factual
data which may be relied upon in the decision on the petition.

PETITIONS FOR RULEMAKING 659

e. Timely personal notification to the petitioner of the
grant or denial of the petition with reasons for the latter and
public notification where it would serve a valuable purpose.

4. In drafting the requirements for the petition process, each
agency :

a. should be as specific as possible with regard to both the
type of information required by the agency in order to assess the
merits of petitions and the issues that should be considered by
petitioners in framing their requests;

b. should indicate its willingness to confer with petitioners
prior to the filing of petitions regarding the requirements
applicable to the content of petitions and otherwise, where
feasible, provide assistance in preparing petitions;

c. should provide that if a petition does not comply with
agency requirements for petition format, the petitioner will be
clearly notified in a timely fashion of the nature of any
deficiencies;

d. should specify that it will not engage in public
solicitation of comments prior to a denial in cases where the
matter raised in the petition has been mooted by other
developments, subject to a recent denial of a petition for
rulemaking filed with the agency, is clearly beyond the statutory
jurisdiction of the agency, or is clearly frivolous; and

e. should indicate that it may omit the prior solicitation
of comments and issue a final rule conforming to the petitioner's
request where the agency favors the proposal and the APA or other
applicable statute permits omission of the solicitation stage or
that, alternately, the agency may issue a notice of proposed
rule-making which conforms to the petitioner ' s request as the
means of satisfying the requirement of solicitation of views.

5. Documents should be included in the petition file as soon as
practicable after they become available to the agency. Where
necessary, presubmission review by the agency of material included
in petitions or other documents in the petition file should be
authorized where claims of confidentiality are timely raised. The
petition file should become part of the record for any rulemaking
proceeding commenced in response to the petition.

6. An up-to-date public index of petitions should be compiled by
each agency which lists, at a minimum, the name of petitioners,
docket or control numbers, dates of filing, subject matters of
petitions, and status and disposition of petitions.

7. In drafting regulations and internal staff directives
applicable to the petition process, there should be clear
cross-references to related material, coverage (in terms of type
of rules) should be clear, and the multiplication of similar

660 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

statements should be minimized. The petition procedures should be
comprehensive enough to cover all types of rules the agency has
authority to adopt. In particular, petition procedures should be
made expressly applicable to not only substantive rules but also
general statements of policy, interpretative rules, and rules of
agency organization, practice and procedure.

8. Agencies should interpret Section 553(e) of the Administrative
Procedure Act as marking the grant of a petition at the time of
issuance, amendment or repeal of a rule conforming to the request
of the petitioner.

9. Agencies should establish time deadlines for the various
aspects of the process for the receipt, consideration and
disposition of petitions; tracking systems which disclose at the
earliest possible time failures or prospective failures to meet
those deadlines; and incentives to encourage staff to meet such
targets. Congress should reconsider the desirability of those
statutory provisions that impose strict time limits with regard to
agency action on petitions .

10 . Agencies should attempt to dispose of petitions as
expeditiously as practicable consistent with their other statutory
responsibilities and without undue sacrifice of agency-initiated
rule-makings. Agencies should explore means to reduce delay in
disposition of petitions, including delegation of decisionmaking
authority with regard to both the grant and denial and
streamlining the decision-making process to eliminate repetitive
internal reviews and to provide for concurrent rather than
sequential reviews.

11. Where feasible, one agency staff member should be designated
as the contact person whom the petitioner and interested parties
can contact for information relating to the status of the petition
as well as other matters.

12. Where appropriate and feasible, agencies should consider
collection of information in support of petitions where that
information is not already possessed by the agency or furnished by
the petitioner or the commentators .

13. Agencies should assure that final disposition of petitions by
grant or denial occurs even when petitions have been folded into
other rule-making proceedings .

14. Agencies should expressly indicate what procedural
regulations apply to requests for reconsideration of decisions
made with regard to petitions. They should structure those
procedures in such a way as to minimize, as much as possible, the
differences between the procedures governing petitions for
rulemaking and requests for reconsideration.

15. Procedures in addition to those specified above should be
adopted by an agency when there are special needs therefor. Any

PETITIONS FOR RULEMAKING 661

further specification with respect to the format of a petition
should take into account that persons lacking sophistication with
regard to the agency and its procedures may at times file
petitions. Overly detailed specifications may, therefore, be
inappropriate. In short any format requirements should be
strictly necessary in order to facilitate decision on the merits
of a petition.

BACKGROUND REPORT FOR RECOMMENDATION 86-7

MODEL FOR CASE MANAGEMENT: THE GRANT APPEALS BOARD

Richard B. Cappalli

Professor of Law

Temple University

Report to the Administrative Conference of the United States

664 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

ACKNOWLEDGEMENTS

This study was financed by the Administrative Conference of
the United States and Temple University School of Law. I am
grateful for the assistance provided by both institutions. The
study represents my personal findings and views and has not been
reviewed or approved by the Administrative Conference.

My warm thanks to the two Temple University law students,
Gina Maisto and Tom McCormack, who labored long hours in the
dark and dusty file rooms of the Grant Appeals Board gathering
the data upon which this study is erected, to Dr. Larry Rosen of
Temple University who was my advisor on empirical methodology, to
Ira Goldstein, also of Temple, who assisted me in processing the
data, to the Members of the Grant Appeals Board for their willing
cooperation, to Susan Lauscher who was my liaison to the Board,
to the Board's Chair, John Settle, who invested considerable
time, energy, and thought in helping me, and to Charlie Pou of
the Administrative Conference, for his cheerful and patient
understanding during the project's many months.

CASE MANAGEMENT 665

MODEL FOR CASE MANAGEMENT: THE GRANT APPEALS BOARD

I. RESEARCH GOALS

II. DELAY AND INACCESSIBILITY: PROBLEMS OF
AMERICAN CIVIL LITIGATION

III. CASE MANAGEMENT AS A SOLUTION

IV. GRANT APPEALS BOARD

A. THE NATURE OF GRANT DISPUTES

B. ROLE OF GRANT APPEALS BOARD

C. BOARD PROCEDURES

D. PORTRAIT OF BOARD'S WORK

V. THE PACE OF LITIGATION

A. OVERALL RECORD

B. PACE, PROCESS, AND OTHER CORRELATIONS

C. THE PACE OF STEPS IN THE PROCESS

D. TIME EXTENSIONS

E. STAYS

F. JOINT CONSIDERATION

VI. CASE MANAGEMENT AT THE BOARD

A. INTRODUCTION

B. REVIEW OF BOARD MANAGEMENT TECHNIQUES

C. ATTORNEYS' VIEWS OF CASE MANAGEMENT

VII. BOARD EFFECTIVENESS

VIII. PERCEPTIONS OF PROCESS

A. ATTORNEY QUESTIONNAIRE

B. COMPOSITE VIEWS OF ATTORNEYS

C. PERCEPTIONS BY PARTY REPRESENTED

IX. OPPORTUNITIES TO BE HEARD

X. CONCLUSIONS AND LIMITS THEREON

A. SYNOPSIS OF THE BOARD'S RECORD

B. PEOPLE FACTORS

C. PROCESS FACTORS

D. LIMITING FACTORS

E. CONCLUSIONS

APPENDICES

A. JURISDICTION AND PROCEDURES OF THE GRANT APPEALS
BOARD, DEPARTMENT OF HEALTH AND HUMAN SERVICES

B. PROJECT METHODOLOGY

C. GAB CASE FILE DATA FORM

D. GAB DOCKETS IN SAMPLE

E. QUESTIONNAIRES AND COVER LETTERS

F. STANDARDS FOR GAB MEMBERS' PERFORMANCE

666 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

I. RESEARCH GOALS

This project was inspired by a trio of articles which came to
my attention in 1985. In that year I was ending two decades of
teaching and practicing civil and administrative litigation. Over
this span I had become increasingly disillusioned about the
condition of our litigation systems. For me the "modern" Federal
Rules of Civil Procedure had been amended into a hopeless and
often meaningless series of pratfalls and pitfalls totally
divorced from their opening hope, by now ironic, for the "just,
speedy and inexpensive determination of every action. "[1].
Indeed, this opening rule is one of the very few which by 1985
had not been amended into frustrating complexity.

I had come over the years to think of the Federal Rules as a
productive fee factory for downtown lawyers and an esoteric
playground for government and public interest lawyers. My
extended travels in federal case law [2] strongly confirmed my
sad impression that the Federal Rules, and their technical kin
like standing, mootness and ripeness, were advancing the cause of
gamesmanship with little public benefit besides challenging the
intellects of some federal court lawyers and judges. The event of
the states' unreflective adoption of the Federal Rules and of
their by now biennial amendments exacerbated my concern [3]. No
amount of "happy talk" from rule reformers [4] or the bench [5]
could allay my concerns. My perception of reality had become
quite different from theirs.

The domain of administrative procedure hardly offered a
comforting refuge. The Administrative Procedure Act of 1946 is as
unfathomable today as four decades ago, perhaps even more so
given the innumerable judicial glosses [6]. Any one with a
contrary view is cordially invited to teach my students, in one
class period, the meaning and application of any one of the
following, which are merely illustrative: "rule"; "substantial
evidence"; "administrative record"; "ex parte contact"; or "clear
error of judgment."

To be sure, thoughtful people were aware of the widespread
and deep deficiencies in our procedural systems and began
devising and testing alternatives long ago. Two of my mentors at
ColumJaia Law School, Professors Maurice Rosenberg [7] and Walter
Gellhorn[8], were at the forefront of reform efforts. Professor
Mashaw offered a new, management-oriented view of adjudicatory
"fairness" for the enormous administrative task of processing
social welfare entitlements [9]. But those efforts, opposed by
the natural conservatism and ingrained practices of bench and
bar, had led to no more than tinkering [10] and substantial
procedural reform seemed to be dying in the last ten years,
possibly another victim of the national "status quo" thinking
which swept our country after Watergate and Vietnam.

In 1985 Judge Jon Newman of the Second Circuit chose to
analyze our civil litigation system in the Cardozo lecture he
delivered to the Bar of the City of New York. In reading the

CASE MANAGEMENT 667

version printed in the Yale Law Journal r 11] I could hardly
believe my eyes. Here they were, validated, the critiques,
sometimes outbursts, I had been visiting upon my students for
years! At last someone from above was yanking at the blindfolds
of Lady Justice.

I felt similar exhilaration when reading President Bok's
piece which was published earlier, though it was not widely
publicized until 1985, and may have inspired Judge Newman [12].
Bok's analysis of the defects in our legal system was brilliant.
But his piece did not have the focus and analytic
power of Newman's. Bok gave me faint pulse but Newman set my
still heart pounding.

Fittingly, the third inspiration came from another
once-upon-a-time mentor at Columbia Law School: Professor Marvin
Frankel. Always a scholar, he could not step from the trial bench
into private practice without sharing his experiences with the
legal world [13]. His explosive critique of our adversarial
system, to him more aimed at hiding than revealing truth, further
validated my thinking about the fundamental flaws in our
adjudicatory way of life.

My opportunities to contribute to this marvelous movement
were narrow, though my enthusiasm and energy boundless. I could
join the exploding "Alternatives" movement by teaching
Alternative Dispute Resolution ("ADR") , which I started to do in
the spring of 1986. I could also take some information from my
arcane specialty — federal grant law — and put it to use. While
constructing the "law of federal grants," I came into close
contact with an administrative court in the U.S. Department of
Health and Human Services ("DHHS," "HHS," or "Department") called
the Grant Appeals Board ("GAB" or "Board") . This Board was
deciding cases, ranging in size from 29 dollars to over one
hundred million dollars, with what seemed to me remarkable
speed and accuracy. In 1981 the Board adopted a set of procedures
aimed at processing cases in an efficient yet fair way. Here,
perhaps, was an object of study, in a field where I possessed
some expertise, which might offer valuable insights and
information for the new wave of reformers.

Judge Newman and others had called for empirical studies [14].
While the Board was not an experiment but, rather, an ongoing
adjudicatory system, and while scientific controls were absent
[15], there had to be ways of gathering empirical data from Board
cases which would enable me to make a systematic, fact-based
appraisal whether the expectations underlying the 1981 procedural
reform were being realized. With great help from the Board's
leadership and from empiricists around the country, I designed a
fact-based study of the Board's effectiveness and efficiency.
Appendix B describes our project methodology.

Before plunging into the results of this study, I should try to
place it in a broader context. Where does it fit amidst the court
improvement efforts sweeping the country from coast to coast?

668 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

In general, the Board is an example of an adjudicatory
system [16]. At the outset of each case, the Board offers
litigants a mediation alternative. Once the parties reject the
mediation alternative, as they normally do [17], the dispute gets
resolved in the traditional adjudicatory manner. Facts are found
in "on the record" proceedings, law is ascertained through briefs
and argument, and a written, reasoned decision is rendered by a
panel of three Board judges ("Member") . Relief is spelled "B 0 A
R D" for grantees suffering financial disallowances or penalties;
hence, the system does not have the voluntary choice
characteristics of negotiation, arbitration and mediation. The
Board is an imposed third-party intervener with exclusive
decisional power; consequently, the process differs from
mediation and arbitration where parties pick the third person
facilitator and decisionmaker, respectively. Nor do parties
choose their own rules for deciding a grant dispute at GAB, or
determine whether the Board decision will be final, which further
distinguishes the Board's mode from arbitration, negotiation,
mediation, or combinations thereof.

It is now clear that the Board has the classic
characteristics of a court. And despite its "appeal," it is
essentially a trial court which creates a factual record and
decides thereon, the one exception being when it reviews small
cases coming from other boards in HHS on a clearly erroneous
standard [18]. GAB applies federal statutes, regulations and case
law to disputed facts ascertained in a formal proceeding governed
by a Board-fixed set of procedures. It has been vested with the
exclusive power to make final decisions, reasoned in the judicial
style, in certain categories of disputes arising under financial
agreements between the Department and its customers.

Where the Board does distinguish itself from the typical
court or administrative board is in the planned use of special
procedures aimed at enhancing both efficiency and accuracy in the
decisional process. These special procedures will be fully
described and measured in later pages. For now it is enough to
know that the Board uses a simplified process falling somewhere
between the informality of small claims courts [19] and the
formality of federal and state court practice. Its action-forcing
deadlines, combined with firm judges firmly managed, keep cases
moving swiftly towards resolution, although flexibility is
retained to afford the process necessary for the correct decision
of complex cases. While it will hear witnesses when necessary,
the Board emphasizes documentary evidence over live witnesses,
which partakes of the growing administrative practice of
substituting depositions and affidavits for oral testimony
whenever possible, an idea which has been proposed for mid-sized
civil claims [20] . In its promptness of adjudication and
simplicity of process the Board's dispute resolution strongly
resembles court-ordered arbitration [21], but its tailoring of
process to meet the varying complexity and stakes of its caseload
weakens this comparison. Because the Board judges the
distribution between public and quasi-public bodies of "public"

CASE MANAGEMENT 669

dollars, one might be tempted to see in it a form of ombudsman
[22]. But while the ombudsman merely recommends, the Board
decides and, interestingly, the disputants before the Board fight
as fiercely for "their" dollars as any corporate counsel in
federal court. Finally, in the tight management of a case by the
board member chosen to preside ("Presiding Member") , the Board
resembles federal district judges and magistrates effectively
using their pre-trial management powers under Federal Rule of
Civil Procedure 16. This is the perspective we have chosen to
emphasize and elucidate herein.

Judge Newman has called for empirical studies of fundamental
ways to improve the administration of justice. This project is a
small, humble answer to that call. In the tiny Grant Appeals
Board, buried somewhere within a colossus Department and but a
speck in America's justice machinery, may be found clues to help
in the refashioning of our civil justice system.

670 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

II. DELAY AND INACCESSIBILITY: PROBLEMS OF AMERICAN CIVIL
LITIGATION

Professor Geoffrey Hazard has constructed an ingenious
argument which concludes, most surprisingly, that our American
civil litigation system "can be considered very efficient." [23]
That certainly is important news for court watchers. Given the
large and ever-increasing volume of outcries from bench, bar, and
the academy about the troubles of our court systems [ 24],
Professor Hazard's is a lonely voice.

A tricky argument takes him to his surprising conclusion.
First, he sees American civil litigation to be mostly "compulsory
bargaining," which he characterizes as a positive implementation
of the American value of individual autonomy and the American
anti-authority ethos [25]. The problem is, of course, that
court steps bargaining is a forced regimen, forced by the costs,
delays, and uncertainties of the dreaded trial list. Where is
free choice in any of this? [26] Are these legitimate
outcomes? [27] And is there "efficiency" in a system where, after
interminable positioning, posturing, threatening, and
"discovering," the lawyers settle in a rush before entering the
courtroom [28]?

Second, for those cases which reach bargaining impasse.
Professor Hazard sees the American ideal of the rule of law and
the achievement of justice being implemented inside the
courtroom [29]. But which courtrooms? Certainly not those where
most private citizens in America intersect with legal machinery.
Not in major urban areas where the quest for justice is quixotic
and often terrifying [30].

The flaws in Professor Hazard's reasoning are illustrated by
the following. We could achieve the same result by imposing a
high, arbitrary courthouse fee for the privilege of having an
officer, vested with the court's authority, flip a coin and
declare a winner. That too would force private bargaining and
produce the same psychic satisfactions [31] currently offered
by American civil courts, without the agonizing tribulations of
trial. What is needed, of course, is a system of civil justice
where, when invoked, the rule of law truly reigns and where
parties are glad to enter as a true alternative to bargaining,
mediation, arbitration, self-help, or claim abandonment.

Derisively labeling the literature concerning court
overutilization as "hyperlexology, " [32] and challenging the
data of the hyperlexologists as "naive speculation and
undocumented assertion," [33], Professor Marc Galanter
challenges the idea that there is too much law and litigation,
the value judgment underlying hyperlexology ( "floods,"
"explosions," etc.). Yet it is important to understand that his
point is not that our court systems are healthy; indeed, he says
nothing about that. Rather, his data indicate that while
litigation rates have not increased appreciably over time, the
type of litigation has changed [34], bringing, in combination

CASE MANAGEMENT 671

with legal developments, an increase in pre-trial, trial, and
post-trial complexity [35]. Professor Galanter sees the types
of litigation and the changes in substantive and pro;:edural law
for judging and processing them as simply reflecting the new
American community — "multiple, partial, ... emergent ...
urban." [36]

Thus, there is congruence between Galanter 's data and the
crescendo of voices warning of a "crisis in the courts." Most of
the "crisis" literature is based upon personal experience. But
what the writers may lack in empiricism they fulfill with
reputation and experience. Accounts of unnecessary delays, costs,
and access barriers, and of a decreasing quality of justice, have
been voiced by renowned federal judges at all levels. Baclc in the
Sputnilc era Chief Justice Warren spoke of the "interminable" and
"unjustificible" delays in our courts [37]. Years later Chief
Justice Burger characterized civil judgments, even when
acceptable in result, as being "drained of much of [their] value
because of the time lapse, the expense, and the emotional
stress." [38]. In what will undoubtedly be an important platform
in the legal reform agenda for the coming decades. Judge Newman
of the Second Circuit used the prestigious Cardozo lectures to
call for a fundamental "rethinking" of the American civil
litigation process [39]. He scolded the reformers for
"bemoan [ing] the delays and costs of courtroom encounters while
working mightily to refine the system in ways that make it even
slower and more expensive." [40]. According to Judge Newman, we
must abandon our customized procedural systems aimed at achieving
an unattainable ( because unknowable) fairness and move toward
some type of efficient mass processing which will attain a higher
quantity of justice from a global perspective.

Predictably, the strongest laments have come from the
trenches: the trial bench. Judge Marvin Frankel stepped away from
the federal bench, after a decade of trying cases, with many
doubts about the validity of adversary procedures which often
seemed to shroud rather than reveal truth: "But the play alone
cannot be sufficient when the question is the doing of justice in
real life." [41]. Other respected federal district judges have
noted the adverse impact which lawyer control of litigation — the
hallmark of adversary systems — has, not only on achieving
correct outcomes, but also on the achievement of efficiency in
civil court [42]". The state trial bar has spoken too. In a
moving account of the systemic injustices she observed in her
years as a trial judge in the Philadelphia Court of Common Pleas,
Judge Lois Forer sadly concluded that the key to "justice" was
money. Only the rich could afford a decent trial of their
cause. [43]

National attention on the "crisis in the courts" theme was
achieved by a widely publicized writing from the academy. The
prestige of the university was thrown into the fray when the
President of Harvard University, formerly dean of their law
school, attacked the fundamental flaws in our legal system which
looked "grossly inequitable and inefficient" in offering "far too

672 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

much law for those who can afford it and far too little for those
who cannot ."[44] .

The experiential data of the judges, lawyers, and academics
are being broadened now by empirical studies conducted by
organizations like the National Center for State Courts, the
Federal Judicial Center, and the Rand Institute for Civil
Justice. Thus far, this research has focused primarily on the
problems of delay and congestion [45]. We have learned for
sure that there are many very slow and congested courts and that
we are, indeed, in a worse position than in the past. This
research is beginning to create necessary definitions, to
understand the phenomena of court process, and to identify the
determinants of delay and congestion. For example, research has
uncovered the powerful role played by bench and bar attitudes —
the "local legal culture" — in producing delay and in resisting
change [46]. It has taught us that action-forcing, enforced
procedures have had positive results in some courts [47],
that the individual calendar system offers considerably faster
paced litigation than the master calendar system [48], and
that the desire of some trial judges to advance the law through
scholarly opinion-writing has conflicted with their duty to
decide cases promptly [49]. This research is also casting
doubt on some traditional explanations of court delay, such as
court size [50] and caseload [51], as well as on the
effectiveness of traditional cures, like

settlement-prodding [ 52 ] , adding judges [53], and restricting
cont inuances [54].

CASE MANAGEMENT 673

III. CASE MANAGEMENT AS A SOLUTION

Perhaps three decades ago a "relatively new concept" [55]
emerged as a means of unclogging courts and speeding up civil
litigation: aggressive case management by judges. Judge Kaufman
of the Second Circuit, then a trial judge on the Southern
District of New York, offered the following rationale for this
departure from the traditional view leaving case management in
the hands of the lawyers:

Primarily we seek means of ensuring justice and it has
been the conclusion of all who have studied the problem
that the best means to this end is an able and active
judiciary. Contrary to what most of us have accepted as
gospel, a purely adversarial system, uncontrolled by the
judiciary, is not an automatic guarantee that justice
will be done. . . . [J]udicial intervention into the
pre-trial preparatory procedures is built into the rules
themselves and as such is now a recognized and accepted
part of our legal traditions. Thus our "adversary system"
is not pure adversity. To call it an "adversary sustem"
alone is to misstate. It is an "adversary judicial
system" ; the Judge too has a function. [56]

Judge Kaufman perceived an "inexorable progress towards

greater and greater judicial supervision" as the solution to the

"crush" of litigation [57].

The federal bench produced many converts and zealots [58].
While new management techniques varied in details from courthouse
to courthouse, an interventionist custom began to build up in
certain chambers [59]. Judges started intervening of their own
volition as managers of cases assigned to them under the federal
"individual calendar system." [60]. They intervened early in
the litigation and periodically thereafter, either in person or,
increasingly, by means of telephone conferences [61]. They
informed themselves about a case by studying its file and by
questioning the lawyers. Their goal was to interject their
informed judgment and experience to move a case along as quickly
as was consistent with justice. They intervened with the
following objectives in mind, each of which was backed, actually
or potentially, with rulings: forcing early attorney
preparation [62 J; identifying areas of factual and legal
agreement; sharpening of issues and elimination of doubtful
claims and defenses; curtailment of unnecessary discovery or
unreasonable blocking of legitimate discovery; discouraging
futile motions and focusing legitimate ones; encouraging and
guiding settlement discussions; and careful preparation for trial
of those disputes which reached negotiation impasse.

The above is not to imply that strong judicial intervention
is the invariable rule in federal court, only that some
pioneering judges have seized upon this alternative as their way
of coping, if not with the "crisis in the courts," at least with
the one in their own courtrooms. Interviews with federal judges

674 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

indicated strong disagreements about the degree to which it was
appropriate for judges to manage a case [63]. For every
activist, interventionist district judge, one could find another
who preferred the patient germination of a case at the lawyers'
discretion, or who perceived the attorneys as knowing far better
than the judge how to try "their" case, or who thought cases,
like wine, had to mature to settlement, or who thought pushy
judges had a negative effect on settlement possibilities, or who
thought his job was simply to try cases. These differing views
were reflected in empirical studies which showed a wide variation
among federal districts in case processing time and
productivity. [64]

It is also important to note that active judicial management,
either in person or through clerks and magistrates, must be
combined with automatic, action-forcing procedures for optimum
management results. It is intervention in the entire civil docket
in a systematic way which decongests and speeds case flow, not
impromptu management. Indeed, the Federal Judicial Center has
concluded that it is the automatic action-forcing procedures
which are the key producers of efficiency [65], On the other
hand. Judge Rubin believes that courts cannot rely on procedures
alone. He states:

Some highly productive courts set time schedules
without conferences in each case. However, the
conference procedure is more flexible, permits
greater allowance for the needs of counsel in each
case and requires little more court time [66].
IV. THE GRANT APPEALS BOARD

A. THE NATURE OF GRANT DISPUTES

We have warned elsewhere that the legal nature of the federal
"grant" or "grant-in-aid" defies easy characterization, whether
as a contract, as a trust, as a partnership, or as a gift [67].
For the purpose of identifying the nature of legal disputes which
arise under grants, however, the most appropriate analogy is the
enforceable agreement. The United States offers financial aid for
defined purposes and under detailed conditions to states, local
governments, universities, and non-profit organizations. The
ultimate goal of grants is to support or stimulate these
subnational and quasi-public units in the provision of a wide
range of public services. In formally accepting such financial
aid the recipient becomes a "grantee" and commits itself to honor
all conditions of the grant, while the United States becomes
obliged to pay the amounts promised in the way promised [68].

The United States Supreme Court has recently emphasized the
quid pro quo nature of the federal grant in holding that only its
direct recipient can normally be held responsible to honor the
conditions of aid and not those who might indirectly benefit from
an aided project [69]. The high court earlier had announced a
doctrine of strict construction, against the United States, of
the statutory terms of aid [70]. The Administrative Conference of

CASE MANAGEMENT 675

the United States concurs in emphasizing the contractual nature
of grants. In Recommendation 82-2, "Resolving Disputes Under
Federal Grant Programs," the Conference asserted that "grants
represent an understanding on the part of the federal government
and the grantee that is in the nature of a contractual
commitment ."[71]

Most federal grants carry with them a vast array of
"strings": conditions which must be met by the grantee. In
another work we have characterized these conditions either as
"programmatic," or "primary cross-cut," or "secondary
cross-cut. " [72 ] . We shall offer brief explanations of these
technicalities because such definitions may help us understand
the types of disputes which arise under grants and make their way
to the Grant Appeals Board.

Each federal "program" has its unique set of rules defining
how the particular aid may be spent. These are "program specific"
or, more concisely, "programmatic" conditions. All grants but
revenue-sharing are "categorical" — available only for defined
types of programs and projects — and rules are needed to
establish the parameters of the categories. This is accomplished
by statements of purpose in grant statutes and regulations along
with detailed specifications of ways in which the money may be
spent .

Typically, the rules will define the categories of persons
who may be helped by the program receiving federal aid. These
will be the "eligible beneficiaries." For example, the United
States asserted without success in a recent case at the Board
that Louisiana had improperly used federal funds by serving 931
children in foster care who, the federal government claimed, were
ineligible because OHDS had not given prior or simultaneous
authorization of such care. [73] Grant rules will further specify
the types of services which may be provided to the beneficiaries.
These will be the "eligible services." To illustrate, does a
child support program authorize the expense of sending sheriffs
to bring non-supporting parents to court? The Board thought not
in a case whose reasoning we have criticized [74]. Similarly,
grant rules will define the operational activities which are
supportable with federal aid. As an illustration, the United
States would pay for efforts to collect money from third parties
liable to provide for people who were medicaid-supported, but not
for people who received medical care in programs wholly funded by
the state. [75]

Dozens of additional programmatic conditions will serve to
establish a program operation which accomplishes the
objectives of the particular grant program. States and other
recipients, for example, usually must have a "state plan" which
is sometimes a boilerplate recital of assurance of compliance
with assorted program conditions. One of these assurances might
involve the development of a case plan for each beneficiary and
periodic review of the individual's progress. Auditors would then
use sampling techniques to determine the grantee's rate of

676 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

compliance in the thousands of individual cases on its roles.
This type of condition was involved in GAB Decision No. 706 in
which the Board reviewed several specific cases in the sample and
ruled that the State of Maryland had satisfied program conditions
in three of eight contested cases. [76]

A "primary cross-cut" is a type of grant condition which
serves to achieve a program's primary objective but which is
found in many other programs. It is a "cross cut" because the
condition cuts across many programs.

The financial rules attending federal grants are good
examples of primary cross-cuts. One is the condition that the
grantee share with the United States the financial burden of
running the program. This is the "matching" rule, expressed in
many programs as a percentage of "Federal financial
participation" ("FFP") . Congress often uses variable matching
rates to induce grantees toward certain activities by offering a
higher FFP rate. States will then claim reimbursement under the
higher rate for activities which are close to the line, leading
to disputes which end up at the Grant Appeals Board. Some cases
will illustrate. In one case Congress reimbursed ordinary
administrative costs in the medicaid program at a 50% rate but
then tried to get states to adopt computerized management systems
by offering to pay three-fourths of the cost "attributable to the
operation of" a Medicaid Management Information System. HCFA
challenged New Jersey's allocation of certain indirect costs to
MMIS and the state brought a winning appeal to the Board. [77] In
a second case, also involving the medicaid program. Congress
sought to induce "skilled professional medical personnel" into
the program's management by increasing matching for their
salaries from 50% to 75%. New York claimed the higher
reimbursement rate for its health care fiscal analysts and
auditors, who set compensation standards for medicaid providers,
performed desk audits of claims, and did field investigations for
rate appeals. The case was close, but the Board upheld HCFA's
disallowance. [78] A third case involved a question "purely ...
of documentation": In how many of 66 cases the California
Department of Health Services had proved that abortions were for
family planning, as opposed to miscarriages and medical
necessity, thereby qualifying for 90% instead of 50% federal
reimbursement. [79]

Disputes over matching, like those above, require the Board
to ascertain the types of activities performed by the grantee and
the types of personnel performing them and then to determine
whether such people and activities "fit" under the statutory
reimbursement standards. This is a typical kind of Board
adjudication, as are disputes about whether the grantee in fact
incurred claimed expenses, about whether outlays were countable
as matching, and aibout other such budget matters. A great number
of cases before the Board involve, in whole or part, review of
the grantee's documentation of claimed expenses to determine
whether the grantee has met its burden of proving its right to
reimbursement .

CASE MANAGEMENT 677

Another set of primary cross-cuts is the cost principles.
These are vast, detailed, and complex accounting standards which
probably produce more disputes which reach the Board than any
other type of grant condition [80]. The cost principles are too
technical to be reviewed here, but some simple examples might
help the reader understand the nature of a "cost principle" and
the types of disputes arising under them.

For an outlay to be federally compensated, the grantee must
demonstrate not only that it was actually made [81], but also
that it helped achieve the purposes of the grant-aided program.
In the language of cost accounting, the expense must be
"allocaJDle" to the program. Many cases at the Board involve
fights about whether or not particular outlays carried out a
prograun's objective. A clear example of an impermissible use is
where a grantee "loaned" part of its Head Start grant funds to
its other programs. [82]

Over the years the United States has developed dozens of
detailed rules of "allowability" for categories of costs.
Disputes involving these "selected items of cost" frequently make
their way to the Board. [83]

Often the cost principle involved is whether a grantee's
outlay was reasonable in amount. A humorous instance involved the
purchase of 620 trash receptacles for $527 each by the Head Start
Program in Puerto Rico, with no demonstration of what was wrong
with the $55 model [84]. A dramatic dispute involving the
reasonableness of cost arose from New York's retroactive
adjustment of the fee schedule for certain medicaid providers.
The state reexamined its reimbursement levels for 1974-1978,
determined they were below true costs, recalculated them, and
claimed $123 million in additional federal financial
participation for the period. The HHS Grant Appeals Board
rejected the arg\iment of the United States that the original fee
schedules were nonadjustable. Assuming that the final costs were
reasonable, it held that the relevant statutes and regulations
did not prevent a retroactive fee schedule adjustment. [85]

Should an aided program have certain income or rebates, such
as tax refunds [86] or federal overpayments [87] or interest
on undistributed collections [88] , the question becomes one of
allocating "credits" between the financial partners. Similarly,
interest earned on advanced grant funds must normally be returned
to the United States, except if the grantee is a state. This rule
has been the subject of a number of disallowances appealed to the
Board. [89]

GAB also has jurisdiction over indirect cost disputes. Most
grantees are now able to develop and negotiate with the United
States a "cost allocation plan." This is a master plan for the
measurement of indirect costs and their distribution cunong
different programs run by the grantee. When the "cognizant"
federal agency disagrees with elements of a cost plan, the

678 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

dispute is properly brought to the Board. [90]

The third class of program conditions is the "secondary cross
cut." These are grant rules which are usually attached to all or
many grant programs and which have ends in themselves, ends which
are sometimes in conflict with a program's primary purposes.
Examples would be the nondiscrimination rules which cross-cutting
statutes tag onto all "federal financial assistance." These
prohibit discrimination in aided programs on the basis of
race[91], handicap[92] , sex[93], or age[94]. The Board does
not enforce such secondary cross-cuts; jurisdiction lies in other
offices such as the Office of Civil Rights in the various
departments .

The Agency decision which will typically come to the Board is
a fiscal disallowance. [95] An audit will have revealed, in the
Agency's eyes, "unallowable" expenditures claimed by the grantee
and reimbursed by the United States. The government will deduct
the sum from the grantee's next payment or, if no future grants
are in sight, demand repayment. The fiscal disallowance is
usually finalized at the regional level after negotiations with
the grantee. Regional directors have discretion whether to
convert audit recommendations into fiscal disallowances, although
they are under pressure from the Office of Management and Budget
and the Comptroller General to recover misspent grant funds [96]
and Congress has begun to withdraw such discretion by imposing
mandatory fiscal penalties for certain grantee

noncompliances. [97] The converse of a penalty is an "incentive"
payment which Congress occasionally offers to lure grantees into
certain activities. [98] Of course, withdrawal of an "incentive"
payment when a state is found to have violated the incentive's
conditions is functionally equivalent to a "penalty" or
"disallowance. "

The two remaining fiscal sanctions for violation of grant
conditions are termination of the grant or voiding it.
Termination may follow an Agency finding of substantial
noncompliance [99], and a voiding may occur when the Agency
discovers material misrepresentation in getting the grant. We
found only three termination cases and one voiding action in our
sample of 274 cases.

In summary, the decision which reaches the Board is normally
a fiscal sanction, whether a disallowance, a penalty, a
recoupment for grant ineligibility, a termination for
noncompliance, a withdrawal of an incentive payment, or a voiding
for misrepresentation. There will be a precise amount either to
be repaid by the grantee or to be withheld from future
allotments. Sometimes the Agency will lump together several
fiscal sanctions, as when several distinct disallowances are
recommended in a periodic audit. The questions before the Board
involve reconstructing what the appellant-grantee did with grant
funds, using docximentation produced in the normal course of
grant administration sometimes supplemented by testimony of
program officials. After determining the grantee's conduct, the

CASE MANAGEMENT 679

Board judges whether such was authorized and reimburseable under
relevant grant norms and, if not, whether the fiscal sanction
imposed was correct in amount.

The dispute reaches the Board in a partially crystallized
state. Typically, a regular [100] or special [101] audit will
produce a report (and background documents) recommending certain
fiscal action. After discussing the problem with the grantee and
giving it an opportunity to submit rebuttal documentation, the
regional director determines which disallowances or other adverse
action he will take as the final agency decision. Important to
our study is an understanding that grant disputes do not arrive
at the Board in a raw, undeveloped state but, on the contrary,
have already been processed for months, sometimes years, at the
Agency level. While the extent to which grantees have had an
opportunity to contest at the regional level will vary from case
to case, it is safe to say that the grantee will have had some
opportunities to be heard at that level before appealing to the
Board .

680 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

B. ROLE OF GRANT APPEALS BOARD

Origin of Board

The Grant Appeals Board was created in the Office of the
Secretary in 1973 [102], a year when the "E" still belonged to
HEW [103] and when the vast outpouring of domestic assistance
programs of the Great Society had reached its zenith [104]. Tens
of thousands of small grants were being awarded annually at the
discretion of agencies like the Office of Economic Opportunity,
the National Science Foundation, the Manpower Administration in
the Department of Labor, and the Law Enforcement Administration
in Justice [105]. The undoubted queen of the discretionary grant
was Health, Education, and Welfare. Through its Office of
Education, HEW ran 29 distinct education programs; its Public
Health Service awarded health research and training grants under
90 distinct statutory authorizations; and the Social and
Rehabilitation Service operated 13 welfare related discretionary
grant programs [106].

Grantees were pressing for a "greater measure of due
process" [107] in the award and administration of these funds,
and HEW responded by creating a mechanism in its highest office:

[A] Departmental Grant Appeals Board from which Grant
Appeals Panels would be selected for the purpose of
reviewing and providing hearings upon post-award
disputes which may arise in the administration of
certain grant programs by constituent agencies of the
Department of Health, Education and Welfare. [108]

The goal was to provide "fair or impartial review or
reconsideration" of disputes between grantees and officials
administering the Department's grant funds. [109]

It was a tentative, modest first step. The Board's
originators totally lacJced "any feel for the prospective size and
complexity of the Board's caseload." [110] Against this backdrop
of uncertainty, the Board's subject matter jurisdiction, as well
as its authority, was sharply limited at the outset. The Board
was given power with respect to programs making "direct,
discretionary project grants." These programs were large in
number but small in dollar outlay. Any other type of program —
for example, a "state plan, formula program" [111] — had to be
specially designated for Board jurisdiction by the Secretary and
the head of the operating division.

Nor could the Board decide any dispute within the covered
programs. For example, apart from the narrow category of
noncompeting continuation awards, the Board could not, and still
cannot, review the fundamental decisions whether to award a grant
or how much to award. [112] The types of disputes which could be
brought to the Board were:

1. noncompliance terminations of grants, in whole or

CASE MANAGEMENT 681

part;

2. disallowances based upon unallowable expenditure or
inadequate documentation;

3. disapproval of a request to incur an
expenditure [113];

4. voiding of a grant; [114]

5. decisions concerning indirect cost rates and certain
other rate determinations. [115]

The power of the Board was limited in two additional ways.
First, the Board's decisions were essentially advisory. If the
head of the operating division ("Constituent Agency" or "Agency")
was displeased with the result, he could reverse or modify it,
though it was hoped that a "reasons requirement" [116] would
curtail arbitrary action. [117] It also looked like the
Secretary himself could reverse or modify the Board without
offering any reasons. [118]

Second, the Board could not hold Department rules nor
statutes to violate the Constitution. This was accomplished
by a clause in the original Board charter which stated that
"[t]he Panel shall be bound by all applicable laws and
regulations." [119] This did not stop the Board, of course, from
interpreting its way around possible conflicts. And it is still
an open question, according to one Member, whether the Board may
void a regulation in plain conflict with an applicable statute.

Neither the original charter nor the 1975 revision [120],
which added "Subpart B — Practice and Procedure" — contained
much in the way of procedural innovation. On the contrary, the
authors explicitly chose their model from the Federal
Administrative Procedure Act of 1946:

This decision and review structure follows procedures
customarily used by Federal agencies for review of
hearing decisions under the Administrative Procedure Act
and is designed to afford to aggrieved grantees maximum
due process and to the heads of the constituent agencies
the benefit of a full record before a final decision is
made in disputes between grantees and employees or
officers of the agency. [121]

The power of the panels to judge that no material facts were
in dispute and to proceed thereafter by means of an informal
conference [122] were already respected facets of the
administrative process. [123]

Growth of the Board

Possibly the most significant event in the Board's history
was the extension of its jurisdiction, starting in 1978, to

682 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

disallowances within formula grant programs. [124] Most of
DHHS's large, state plan-formula programs are now included,
medicaid and public assistance being the most significant. [125]
This converted GAB into a major league player. From an anonymous
board handling "nickle and dime" disputes, the Board began
fielding multi-million dollar claims, many of which involved
public law issues of great national importance. To the Board also
came new players: the litigating offices of the great state
health and welfare agencies like the Departments of Social
Services of New York and California. Table 4A illustrates this
caseload growth:

CASE MANAGEMENT

683

TABLE 4A: BOARD APPEALS AND WRITTEN DECISIONS: 1973-1985

Year

1973

No. Appeals*

1974

1975

1976

1977

1978

163

1979

243

1980

189

1981

221

1982

254

1983

288

1984

257

1985

275

Dollars Appealed

Written

Decisions

286,839

1,305,537

12,315,506

484,911

681,465

69,742,235

511,284

104

918,667

109

not available

135

not available

127

not available

161

569,667,443

150

588,563,015

n/a

* Slightly overstated because requests for reconsideration are
docketed as separate appeals.

684 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

A second significant development was the vesting of final
decisional authority in the Board in 1981. [126] This was
probably more of a psychological than a substantive boost. No
Board decision had ever been overturned by the head of a
Constituent Agency or the Secretary between 1973 and 1981. [127]
Still/ the Departmental power had loomed above the Board,
and litigators had the uneasy feeling that their winning advocacy
could be obliterated by a stroke of the pen. [128]

The vesting of final decisional authority in the Board
acquired even greater significance when the Southern District of
New York held in 1980 that disallowance disputes had to be
processed through the Board before being brought into federal
court. [129] Thus, at the beginning of this decade not only was
the Board "the only game in town," but it was also a game which
had to be played! Before seeking judicial review in federal court
under the Administrative Procedure Act, 5 U.S.C. $702, a DHHS
grantee must first process its complaint through the Board.

CASE MANAGEMENT 685

C. BOARD PROCEDURES

Procedural Reform

The Board's "charter" was considerably revised in 1981 for
the purpose of creating a modern procedural system [130]. The
hope was to design a quick, fair, flexible, and
easy-to-understand set of procedures. The drafters sought to
imbue their procedures with the following attributes: a "fast"
decision, measured against normal court or bureaucratic
processing time; a "final" decision — final at least at the
agency level; an "expert" decision; a decision produced with less
than ordinary cost and time consxamption; decisions less likely to
be litigated further — meaning, presumably, high grantee
satisfaction with the process and the results, regardless of
outcome; a better administrative record for sound judicial action
on review; a process resistant to the pressure of political
intervention; and a process which offered a healthy forum to
expose, analyze, and resolve specific grantor-grantee problems of
a serious, recurring nature [131]. In the following paragraphs
we outline the new procedures which were in fact adopted in 1981
and are currently in force.

Regular Process

Three distinct methods of dispute resolution were instituted
by the Board, which we can call "simple," "regular," and
"complex," but most cases are assigned to the regular process. We
shall describe the regular process in some detail, then compare
and contrast the alternative procedures. Cases are channeled into
expeditied or regular process by the Presiding Member in the
letter acknowledging the appeal. Parties occasionally try to
convince the Board that their controversy deserves a higher level
process, such as a formal evidentiary hearing, and have had some
success.

Two factors, revealed on the face of the notice of appeal,
determine the appropriate process: amount- in-controversy and fact
or issue complexity. The Board retains flexibility to "enhance"
its review by allowing oral hearings under special circumstances,
and in our case sample exercised this option 17 times. On four
occasions the Board rejected an appellant's claim that material
facts could only be established by the witness examination,
cross-examination and confrontation which a traditional trial
format affords. While the Board vigorously pursues its goal of
efficiency by officially posturing against requests for slower,
more costly procedure, it in fact grants more complex process
upon an appropriate showing.

All cases start with an appeal from an Agency decision. The
Department has formalized by regulation the process its operatina
components use to notify and finalize their decisions in grant
disputes [132]. Such official notice, a "final written
decision" ("agency decision"), is to contain a complete statement
of the background and basis of the decision, including references

686 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

to applicable laws, and enough information to enable the affected
party and potential reviewers to understand the issues and the
Agency position on them. This format was imposed as an
important part of the 1981 procedural reform, and the Board has
not hesitated to police this regulation by returning
nonconforming notices to the Agency with instructions to cure the
defects identified by the Board. These rules aim to impose more
"discipline" on the operational arms of DHHS by requiring them to
identify issues in dispute clearly, make sincere efforts to
resolve them, and, in cases of impasse, create a document
"containing a complete and concise factual and legal basis for
the agency's action." [133] At a minimum such a decisional
process would provide a firm foundation for an appeal, and it
might even produce better decisions, thereby eliminating such
appeals [134] .

After receiving the agency decision, a grantee has 30 days to
bring the dispute to GAB by means of a "notice of
appeal" ("notice") . The Board has not issued a special form, but
requires simply that the notice contain: a copy of the agency
decision, an indication of the amount the grantee claims is in
dispute, and a "brief statement of why the decision is wrong."
The Board liberally allows appellants to correct defects in the
notice, such as not including the agency decision, as long as
the appeal appears to be timely. We found wide variety in the
notices, from simple one paragraph pleas to 20 page technical
legal arguments. A fair number of such notices are filed by
non-attorneys who are not versed in standard legal formats.

Ten or fewer days later, the Board sends an acknowledgement
of the appeal ("acknowledgement") . This, we shall see, is a
surprisingly important event. In addition to their perfunctory
tasks of sending appellant a copy of Board procedures, notifying
the Agency ("respondent") of the dispute, offering the parties a
mediator, and informing the parties of what's next — usually the
submission of a brief and appeal file by appellant —
acknowledgements often begin the case management process. In many
instances the Presiding Member has before him or her, in the
notice and agency decision, considerable information about the
dispute. He or she can begin to identify the legal issues, see
which facts are agreed to and which are in dispute, and sense the
types of documentation which are likely to be available. A fair
number of the Board controls we discuss in Section VI are
interjected in the acknowledgement [135]. Here we also find the
tentative assignment of a case to a procedural track.

In the regular process the next event in the preparatory
phase of the case is the creation of an appeal file, with
accompanying arguments. The Board perceives its "basic process"
as "review of a written record (which both parties are given
ample opportunity to develop) consisting of relevant documents
and statements submitted by both parties. " [136] Thirty days
after the acknowledgement, appellant submits both its appellant's
brief and an appeal file [137]. In practice, the appeal file is
typically an appendix to the brief and is used as a source of

CASE MANAGEMENT 687

fact citations in the brief. The Agency then has 30 days to
submit a respondent's brief and a supplemental appeal file [138],
the latter usually being in the form of an appendix to the
respondent's brief.

This is obviously an important case management phase. Here,
not only do most material facts surface, but legal and fact
issues begin to crystallize. Not surprisingly, the Presiding
Member will often intercede with information demands. Parties
will be instructed to answer, either in the appellant's reply or
in special submissions, multiple questions to clarify their
positions, as well as being pressured to make fact and legal
admissions which seem reasonable from the face of the documents
and arguments submitted [139]. It is important for the Board to
have, at this phase, as complete a documentary file as possible.
The Board recognized, while planning the procedural innovations
in 1981, the central role to be played by the appeal file:

While in the past the accumulation of documents
submitted to the board over time effectively became an
appeal file, the procedures now would make it clear that
there is a responsibility early in the process for both
parties to properly organize and submit relevant
documents, and that the appeal file is the documentary
heart of the record reviewed by the Board [140].

Of the cases we studied, 140 reached the stage when an
initial appeal file is submitted by appellants. Pages in these
files totalled 12,326, for an average of 88 and a median of 51.
In these 140 cases, either the Agency or the appellant, or both
submitted supplemental documents for the appeal file 109 times.
Such supplemental submissions totalled 10,609 pages, with an
average of 97 pages and a median of 49. All together, 140 cases
produced a total of 22,935 pages of documentary evidence, for an
average per file of 164 pages.

Once briefs and documents are submitted and the Presiding
Member's questions answered, many cases on the regular track are
in fact ready for disposition. When the parties agree, the case
is then decided on the written submissions — either finally or
semi-finally by means of an Order to Show Cause which gives the
party targeted for defeat a last gasp argument [141]. According
to one Member, the device of a show cause order or tentative
decision is less frequently employed at present than in the early
years under the new procedures. We counted 55 instances in our
1981-1985 sample of 274 cases [142].

When the "informal conference" ("conference") is the next
stage of the preparatory process, the Presiding Member takes firm
command [143]. The rules, indeed, plainly recognize this
authoritative role: "The informal conference primarily involves
questioning of the participants by a presiding Board
member. " [144] Typically, he or she issues a series of questions
to be addressed seriatim by the parties, either by their lawyers
or by their technical experts or by both [145]. When conducted in

688 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

person, these conferences resemble more a roundtable discussion
than a trial. Their purposes are:

To give the parties an opportunity to make an oral
presentation and the Board an opportunity to clarify
Issues and question both parties about matters which
the Board may not yet fully understand from the
record [146] .

While appellant usually starts the response to each question and
the Agency then talks, there are frequent Interruptions by Board
questions, comments, and clarifications. After formal responses
to the planned Inventory of queries, a free flow conversation
takes place among all present, Including Individuals who are
program experts. The Members call these people "participants"
Instead of "witnesses" because they provide Information not
related to disputed facts but rather background material which
helps explain a party's position. Ever Increasingly, the Board
has come to rely upon audio-taped telephonic Instead of In-person
conferences [147]. We recorded whether conferences and hearings
were conducted by telephone or In person and found an 80% use of
the telephone. The conference call phone system simply
substitutes for the table, the free-wheeling format being
essentially the same.

The normal case then moves directly to decision. The
Presiding Member may ask for proposed findings and
conclusions [148], but we noted no Instances of this In the case
files. More typically, the Board will send a "tentative decision"
to the parties for their comments. Also, an occasional
post-conference query was posed to one or both parties when a
review of the conference transcript [149] revealed a fact lacuna
or legal ambiguity.

Simple Process

For small stakes cases, $25,000 or less, an even simpler,
faster process exists. If an HHS Agency has already conducted a
formal review process by a board or other relatively Independent
reviewing authority, which resulted In an on-the-record decision,
this record Is forwarded to the Board for what is, essentially,
appellate review under a "clearly erroneous" standard. After
receiving the acJcnowledgement, the Agency sends the Board the
record below, the appellant submits a statement why the decision
below was clearly erroneous, and the Agency may, if it wishes,
submit a statement defending the decision below. These
submissions are all to be made within 3 0 days of the
acknowledgement. These cases are, therefore, prepared for
decision within 40 days of the notice of appeal, unless the Board
exercises its discretion to "allow or require the parties to
present further arguments or information." [150] One Member said
in an interview that when she sees that new matters are raised in
the notice of appeal, she will require the Agency to respond to
them, thereby adding an unprogrammed step to the process.

CASE MANAGEMENT 689

The other category of simple process is comprised of cases
worth $25,000 or less which have not had a formal [151] prior
review. In these cases each party has 30 days from the
acknowledgement to submit short arguments — ten pages or less —
and relevant background documents. Each party then gets to
respond orally to the other's submission in a telephone
conference arranged by the Presiding Member. Assuming further
proceedings, briefs, or submissions are not allowed, these cases
are ready for decision in less than two months.

We thought we would encounter requests for conferences or
hearings in "expedited" cases under the authority of 45 C.F.R.
$16. 12(b) but were mistaken. We coded for requested conferences
but only found five requests for a prehearing conference (all
granted) in cases scheduled for a hearing on the merits. In the
26 cases in our sample processed on the "expedited" track, no
appellant sought a live hearing or conference. This seems to
confirm the Board's judgment that the amounts involved in such
cases do not justify complex litigation methods.

Complex Process

The rules provide a formal hearing process in which witnesses
may be cross-examined and rules of evidence applied. This process
applies to cases in which (1) complex issues or disputed material
facts are found and (2) the Board believes an adversary,
evidentiary format would assist its decisionmaking. The Board
explicitly discourages requests for oral hearings because of
their expense and time-consumption [152]. Although this
conclusion is based on an express statement in the Board's
charter. Members emphasized in interviews that they discourage
evidentiary hearings only when they believe them unnecessary
after studying the case file.

In our case sample we located 20 instances in which a party
filed a written request for a formal fact hearing. The most
common disposition (n.9) was for the Board to convince the party
that a telephone conference would serve its needs, with the party
then withdrawing its request. Parties typically make an
immediate request for a hearing to preserve their options, then
quickly recede when it becomes clear that an evidentiary hearing
will not advance their cause. On six occasions the party's
request for a fact hearing was granted, while four times it was
denied. In the remaining case the appeal was withdrawn before the
Board acted on the request.

The 2U30ve data suggest that- a persistent party stands a
reasonaODle chance in getting a formal evidentiary hearing before
the Board, though the instances are too few to be definitive. In
an interview, the Board Chair stated that a party's non-frivolous
request for an evidentiary hearing will be granted, although the
Presiding Member may try to steer the parties toward a different
process.

In eleven other cases the Board and the parties agreed.

690 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

without a formal written request, that a fact hearing was
necessary. All together, then, only 17 of 137 dockets which were
fully adjudicated used a formal, evidentiary hearing. Apparently,
the Board and its litigants agree that traditional trial arts add
little to the decisional process in most cases. In a later
section we discuss the types of issues presented in Board cases
and how they rarely involve strong fact conflicts and credibility
problems, thus lessening the need for cross-examination of
witnesses.

Mixing, Matching, and Inventing

In practice the boundaries between the three procedures are
not as clearcut as would appear from the face of the Board's
rules. The Members have, not surprisingly, tailored procedures to
the exigencies of each case without overly worrying about the
"track" to which the case has formally been assigned in the
acknowledgement. For example, we found widespread use (n.l9) of a
"hybrid" conference: One in which the parties are permitted to
have witnesses testify and be "cross-examined" within the
structure of an informal, telephonic conference. Indeed, it was
sometimes the case where a conference scheduled for the answering
of questions posed by the Presiding Member to the parties served
to build the fact record by way of new evidence presented orally.
This frequent use of a hybrid mixture of "hearing" and
"conference" possibly explains why the pure trial-type format
is employed so infrequently. The hybrid serves as an alternative
method, presumably perceived as superior by Members, of getting
to facts which did not appear in the documentary appeal file. It
also minimizes the Members' need to be precise about the process
chosen.

Similarly, the rules led us to expect to find in-person
conferences [153], with the prior planning being done by
telephone. Instead, we found that the s\ibstantial majority of
conferences, 80%, were both planned and conducted by telephone.
Apparently, the Members have been so satisfied with the telephone
hearing that it has become the standard "trial" format at the
Board. We also encountered in many cases "summaries" of telephone
conferences (n.38), as opposed to the verbatim transcripts one
would otherwise expect (n.21). This "cost-saver seemed to provoke
little opposition, presumably because the summaries accurately
portrayed the substance of the testimony and arguments at the
conference. Because 70% of the conferences involved only legal
arguments based upon uncontroverted facts of record, the
"summaries" were typically of legal analysis rather than factual
testimony and, therefore, unlikely to provoke dispute or demand
precise attention to detail. In the balance of cases conducted
by telephone conference, the Board does nothing beyond sending
the audio-tape to the parties on request.

Members are not shy about using their broad procedural
powers to create the procedures necessary for circumstances
unforeseen in the rules. A good example is the "summary
decision." When an identical disallowance question surfaces again

CASE MANAGEMENT 691

for a different audit period, the appellant knows the Board will
follow its precedent and simply wants a quick decision so it can
demonstrate "exhaustion of administrative remedies" to the court
in which it seeks judicial review. The practice of the Board now
is to grant such summary adverse decisions upon request. We found
eight such requests, all of which were granted.

Board Members

Proceedings are directed by the Member chosen by the Board's
Executive Secretary. GAB's efficiency, effectiveness, and
reputation were considerably enhanced by the switch over time
from part-timers, trying to handle Board cases in the cracks
within their normal work schedules, to five Members whose
exclusive work is that of the Board [154]. The Member has the
typical catchall authority of an administrative hearing officer
"to take any other action necessary to resolve disputes in
accordance with the objectives of [Board] procedures." [155] His
or her specific powers include: issuing orders; examining
witnesses; taking the steps necessary to conduct an orderly
hearing; ruling on motions; staying cases; giving justified time
extensions; using the dismissal sanction to enforce deadlines,
orders, and rules [156]; ordering or assisting the parties to
submit relevant information; remanding to the Agency for further,
specified action; and waiving or modifying procedures in a
specific case upon prior notice to the parties.

Cases are decided by panels of three [157], unless the case
is summarily disposed of before the remaining two panel members
are named. The panel is assigned at a time when the Presiding
Member needs consultations about the merits, management problems,
or procedural rulings. This may be early or late, depending on
case needs. The panel needs to be constituted before an
evidentiary hearing so that the additional Members can attend
should they so choose. Members feel free to solicit ideas with
each other whether or not the consulted Member is on a panel.

When the case is ready for decision there is lively
interaction between panel members. While on site visits, we
observed animated discussions between panel members on points of
law and fact. It is true that the Members rarely issue
concurring or dissenting opinions [158], but one should not be
misled into thinking that the first and second signatures [159]
on panel opinions are merely rubber stamps. Even though consensus
on the result and reasoning may have been ultimately achieved,
considerable "give and take" and "bending" likely preceded it.

Staff

Professional staff attorneys are assigned to cases by the
Executive Secretary and typically play an active role in case
preparation and management. [160] They do file review, document
drafting, and conference arrangements. As is the case in
judge-clerk relations, the extent to which a Member depends upon
his or her assigned staffer depends upon the particular

692 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES
personal ities .

The professional excellence of GAB staff attorneys is proved
by the high opinions of the attorneys with whom they deal. Our
questionnaire respondents rated the staffers an average of 7.1 on
a 1 to 10 scale, with a median score of 7.4. Of 117 respondents,
only eight attorneys rated GAB staff lawyers below average.
D. PORTRAIT OF BOARD'S WORK

At the close of business on December 31, 1985, in its
thirteenth year of existence, GAB had received 1,992 appeals.
This was an average of only 153 per year, less than one
every other day. But the yearly caseload average after 1977,
when the Board began adjudicating disallowances within formula
grant programs [161], was 236 per year, compared to 20 per year
in the first five years of GAB's existence, 1973-1977. Also, our
study showed that the average dollar value per case was
$1,169,000, meaning that every year from 1978 to date, the Board
adjudicated rights to an average of $275,884,000, more than
one-quarter of a billion dollars annually [162].

In the following table we see the range of dollar values in
the 274 cases which comprised our 1981-1985 sample. For the
sample, the total dollars appealed were $313,195,000, with a mean
of $1,169,000 and a median of $125,500. The table clarifies that
the average case value is pushed considerably above the median by
several controversies involving tens of millions of dollars.

CASE MANAGEMENT

693

Table 4B: DOLLAR VALUES OF CASES

Dollars (OOO'S)
0-25
26-50
51-75
76-100
101-200
201-300
301-400
401-500
501-1,000
1,001-10,000
10,001-28,117

No. of Cases
72
18
22
13
25
15
14

5
28
45

There were fourteen cases with a "0" dollar value. These would
involve issues which had not yet translated into monetary
amounts, such as rejection of a grantee plan for the
reimbursement of future indirect costs.

We see in Table 4C that the bulk of the litigation at GAB is
between the United States and state agencies over dollars granted
in the large formula programs such as medicaid and AFDC.

694

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Program
medicaid
AFDC
social

services
child welfare
child support
supplemental

security

Income
Headstart

Low- income
energy aid

Table 4C: AVERAGE CASE VALUES PER PROGRAM

Statute Total Dollars Average Per Case
SSA, 19 212,282,000 1,814,000
SSA,4-A 36,806,000 1,937,000
SSA, 20 11,509,000 1,644,000

SSA,4-B
SSA,4-D
SSA, 16

Headstart

Act
LIEAA

1,985,000

1,858,000

13,938,000

8,102,000
381,000

661,000

103,000
13,938,000

172,000
63,500

Cases

117

47
6

A significant percentage of cases and appealed dollars
are resolved by dispositions short of full-cycle Board
adjudication. [163] Table 4D below shows the breakdowns.
"Jurisdiction" means dismissal for lack of Board authority over
the appeal. "Appeal withdrawn" means the grantee chose not to
pursue the case. "Settlement" means a voluntary resolution
between grantee and Agency. "Dismissal with prejudice" means the
grantee gave up its claim or lost because of procedural
noncompliance, while "dismissal without prejudice" is a
withdrawal that permits later reinstatement of the appeal. The
latter is a technique used to permit settlement discussions or
the resolution of key issues in similar cases without having the
appeal clog the Board's docket. "Other" is a miscellany comprised
of decisions based on reasons like ripeness, lack of a valid
cause of action, and Agency withdrawals of the disallowance.

CASE MANAGEMENT 695

Table 4D: SUMMARY DISPOSITIONS

Tyoe CQunt

% Samole

$ ADpealed

Mean

(OOO's)

Jurisdiction

4.0%

6,292

572

Appeal Withdrawn

13.5%

10,321

279

Settlement

21.9%

64,174

1,069

Dismissal w/Prejudice

2.9%

1,309

164

Dism. w/o Prejudice

5.8%

18,631

1,164

Other

1.8%

740

148

TOTAL

137

49.9%

101,467

741

Two important conclusions can be derived from Table 4D. First, the
summary disposition cases comprise half of the Board's workload,
and, therefore, are sure to have an important impact on the
Board's "efficiency" quotient. We shall later analyze the time
and effort necessary to resolve these "summary" CQ.:5es and compare
this data with full-cycle adjudication. [164] Second, while the
number of such resolutions is large, the total dollars resolved
by such shortcuts — $101,467,000 — was about one-third of the total
dollars in dispute in the case sample ($313,195,000). This is a
simple reflection of the fact that the mean value of shortcut
cases ($741,000) was almost one-half of the mean value of
full-cycle cases ($1,506,000) [165] and tw6-thirds of the mean
value of all cases in the sample. The interesting revelation
here is not that the stakes in truncated cases are smaller: that
is a normal litigation pattern. What is important is that the
gap between dollars resolved summarily and those fully
adjudicated is as small as is shown.

The percentage of full settlements, 21.9%, is not impressive
considering the compareible federal and state court settlement
rates. The dollars settled figure, $64,174,000, is also about
one-fifth (20.5%) of the total dollars appealed. Later we will
speculate why Board cases are more prone to be adjudicated on the
merits than to "settle out" — a stark comparison with normal state
and federal civil litigation. [166] In contrast, 66.8% of the
appealed dollars ($209,177,000) were awarded by full-cycle Board
decision. The unsettled balance was decided summarily through
jurisdictional, ripeness, and procedural dismissals, abandonment
of the appeal, nonprejudicial dismissal, and Agency withdrawal of
the disallowance.

We tracked the "process" used for each case: special
expedited; expedited; written submission; conference; hybrid
conference; and hearing. [167] Table 4E below reports the
results.

696 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Table 4E: UTILIZATION OF PROCESS
Process i i $ Appealed; Mean

(000)
Special Expedited 7 5% 9

Expedited 19 13% 19

Written Submission 45 30% 824

Conference 44 29%

1,753
Hybrid Conference 19 13%
Hearing 17 11% 4,172

CASE MANAGEMENT 697

The data confirm the procedural theory that the most valuable
cases will be assigned to the most complex processes. The first
column lists the process in order of increasing complexity. We
would expect the dollar value of cases to increase in the same
direction, and the right hand column in Table 4E soundly confirms
our expectation.

We also recorded whether conferences and hearings were
conducted by telephone or in person. We found an 80% use of the
telephone. Seventeen in-person hearings or conferences were held
in the 274 seunple cases; only 6.2% of the docketed appeals. When
a case's issues are few and not factually or legally complex, the
Members appear to steer the parties towards a telephone
conference.

Who wins Board-adjudicated dollars: United States or
grantees? We entered for each case the distribution of awards
between the U.S. and its grantees and discovered that of 184
disallowances adjudicated by the Board, the United States won 171
times, in whole or in part, for a value of $151,450,000, while
grantees won 74 times, in whole or in part, for a total value of
$31,118,000. In short, the United States won five of every six
dollars adjudicated by the Board. The average federal victory
was $1,515,000, while the grantee average was $421,000. The
median federal victory was $127,000, while grantees had a $65,000
median. In 37 cases the Board remanded for further proceedings
at the agency level. These were normally determinations,
following the Board's instructions, of the precise amounts owed
by one side to the other. Most of these remands never returned
to the Board, making it infeasible for us to trace these dollars.
The "balance," however, is small:

Adjudicated U.S. : $151,450,000

$ 31,118,000
ft 5fi.finQ nnn

Adjudicated Grantee
Remanded Dollars

9 31,118,000
$ 26,609,000

We went back to our original data sheets to confirm the above
data. We found that case results did, indeed, heavily favor the
United States. In cases which went full cycle to a Board
adjudication, the United States won 86 disallowances and 17
"split" decisions — with the amount awarded to the grantee
usually being minor. On the other side, the grantees won only 18
disallowances outright, and 5 "split" decisions. This is a 105 to
23 "win" ratio favoring the United States, just about the same
ratio as "dollars adjudicated." This corroborates an earlier
report which found that the United States won three of every four
cases in the period from 1973 through 1980 [168].

When we toss in the results of cases which short-circuited
against the grantee, for example jurisdictional dismissals and
withdrawals of the appeal, the scorecard is even bleaker for the
grantee community. In our case sample there were 55 of these
results, which bolsters the win-loss ratio in favor of the United
States to 160 to 23.

698 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Grantees were able, however, to achieve a favorable
settlement in a significant niimber of cases. In 40 cases,
settlement terms favored the grantee, while in five cases the
terms were more favorable to the United States. These cases were
typically of small dollar value, rarely reaching six figures.

The typical case litigated at the Board is a medicaid
disallowance of significant size disputed by one of the major
state social service agencies. The average value of a state
agency appeal is $1,564,000. The list of appellants is headed by
the New York State Department of Social Services with 3 3 appeals
in our sample, followed by New Jersey (15), Ohio (13),
Pennsylvania (13), and Illinois (10). California's Departments
of Health Services and Social Services brought only seven
disputes to the Board in this period, making us wonder whether
geography discourages some appeals. One Member thinks not. In
an interview she stated that fewer appeals may be filed by these
California agencies because they involve themselves aggressively
in the audit process, thereby making Board appeals unnecessary by
achieving favorable resolution at the earlier stage.

For every multiple user, there is a "one shot" appellant:
103 of the appeals were brought by parties who appealed no other
case. As shown by the following table of types of organizations
appealing, many of these "one shot" users are non-profit
organizations .

CASE MANAGEMENT 699

Table 4F: CATEGORIES OF APPELLANT ORGANIZATIONS

Cgt^qpry # APP^aXg 4 Total S Average S

state agency 196 72% 305,027,000 1,564,000

non-profit 58 21% 4,924,000 86,000

local govt. 12 4% 2,240,000 249,000

university 5 2% 911,000 228,000

Indian tribe 3 1% 93,000 31,000

700 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

On the other side of the "v." we find only five entities within HHS doing substantial
defense work at the Board. The Health Care Financing Admistration ("HCFA") defended 119
medicaid cases, 43% of those in the sample. The Office of Human Development Services
("OHDS") was respondent in 79 cases (29%) under four different programs: AFDC (19),
Social Services Program (7), Headstart (50), and Child Welfare (3). The Office of Child
Support Enforcement litigated 20 appeals (7%) under Title IV-D, Social Security Act. The
Public Health Service responded in 19 cases (7%) and the Social Security Administration in
18 cases (7%), both defending disallowances under assorted statutes. A variety of entities
within DHHS handle the balance of appeals.

The great bulk of the appeals, 251 of 274, involved fiscal
disallowances. While the Board has jurisdiction over several
other types of disputes [169], only a handful of appeals, 8%,
involved such other disputes.

With numerous different grantees appealing cases, many only
once in the 43 months covered by our sample, and only a few
responding agencies, one would expect the United States to have
the upper hand in litigation experience which, in turn, might
partially explain the federal government's five-to-one win ratio.
We recorded each attorney's name for each case, allowing us to
determine the litigation experience of each for the cases in the
sample. Based on the data in Table 4G below, we quickly see that
the United States infrequently defends its allowances with
inexperienced lawyers. Indeed, in 147 cases of the 2 32 in v/hich
the U.S. was represented by a lawyer, the U.S. attorney had at
least one prior case before the Board, and in 107 Board cases out
of 232 (47%) , the legal representative of the United States had
already litigated three or more cases before the Board. On the
other hand, the grantees had such veteran lawyers with three or
more prior experiences in only 48 out of 208 cases (23%) and had
"one time" litigators in 100 cases, almost half of the cases in
which grantees were represented by a lawyer.

Freouencv

case

cases

CASE MANAGEMENT 701

Table 4G: NUMBER OF CASES PER LAWYER

No. U.S. Lawyers No. Grantee Lawyers

38 100

18 19

11 4

6 4

3 1

2 1

1 2

1 1

2 1
1 0
1 0
1 0

While the grantee community frequently used lawyers with
little or no GAB experience, it more often used lawyer teams,
though the data here do not distinguish between pro forma
signatures and real participation. In 34 cases it used two
lawyers to prosecute the appeal, compared with only 13 such
instances for the United States. And it used teams of three
twelve times, compared to four such instances for its adversary.

In 82 cases grantees chose to litigate pro se — without the
benefit of an attorney. Our study of the case files suggested
these were cases of relatively small economic value. The data
confirm an average pro se value of $3 07,000, or almost one-fourth
of the average value of all cases of $1,169,000. Similarly, the
25 cases in which the United States had no lawyer had a mean
value of $159,000, almost one-eighth the universal mean.
Typically the pro se case is brought by a non-profit organization
litigating an average disallowance of $86,000.

The drafting, discussing, and finalizing of written decisions is an important part of the
Board's work. Half of the Board's cases run full-cycle, meaning the Board must adjudicate
entitlement to the appealed dollars. Between 1973 and 1985 the Board issued 714 written
opinions in mimeographed form [170], almost a three foot stack.

702 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

V. THE PACE OF LITIGATION

A. OVERALL RECORD

We have segregated data into two clusters: 1) cases which
have completed the entire litigation process at GAB, called
"full-cycle" cases; and 2) cases which have ended prior to the
Board's reaching the merits, called "summary" adjudications. For
both, their "disposition time" starts on the day GAB stamps
"received" on the notice of appeal [171]. Full-cycle cases end
with the date of issuance of a written Board decision on the
merits. Summary cases end with an earlier closing of the file for
one of various reasons: dismissal for lack of Board jurisdiction
or for non-prosecution; withdrawal of the appeal with or without
prejudice; or settlement. Our sample happened to divide exactly
into two: 137 full-cycle cases and 137 summary dispositions.

Disposition time for full-cycle cases at GAB averaged 198
days (6.6 months) with a 179 day median (6.0 months). The average
time for summary dispositions was 108 days (3.6 months), with a
median of 77 days (2.6 months). For all cases on the docket, the
average disposition time was 153 days, or five months.

CASE MANAGEMENT 703

Table 5A presents disposition times for all cases by
quarter-years .

TABLE 5A: DISPOSITION TIME BY QUARTER- YEARS

No»Full-Cvcle

0-3

mos.

4-6

mos.

7-9

mos.

10-12

mos.

> 12

mos.

No . Summarv

Total

35.9%

31.3%

19.5%

6.9%

6.1%

131 131 262 99.7%

Several conclusions can be derived from Table 5A. First, we see
that the Board clears from its docket a remarkable two-thirds of
the filed cases (n.l76) within six months of filing, 38% of these
(n.66) by a full-cycle adjudication. Second, only 13% of the
entire docket lingers more than nine months. Some of these
"older" cases were stayed pending settlement discussions or
resolution of key issues in parallel cases [172]. Third, the
typical full-cycle case is on the docket sometime between four
and nine months, while the life span of the typical summary
adjudication is six months or less.

In federal district court in 1982, 1983, and 1984, the median
disposition time for non-jury trials was 13 months [173], meaning
that full-cycle GAB cases (median 6.0 months) are resolved more
than twice as quickly. The federal disposition data measures from
time of "issue" — the last answer or response — through trial.
Joining issue in federal court takes at least two months [174],
so the GAB full-cycle case is resolved at least 2.5 times faster
than a federal court case: six versus fifteen months. Comparing
the whole docket of each system, the gap narrows between U.S.
district court and GAB to two months, seven versus five. [175] The
reason is that the great bulk of cases in federal district court,
95%, terminate before trial, while only half of GAB cases do so.

Comparison between GAB and state court produces even more
draunatic contrasts. The middle case at GAB is off the docket in
153 days, compared to 811 days for the median tort case in
Boston, 788 days in Detroit, 654 days in Newark, 594 days in
Houston, 583 days in Pittsburgh, and 574 days in San Diego [176].
Even "fast court" cities like New Orleans, Fort Lauderdale, and
Phoenix are twice as slow as GAB [177]. Similar comparisons can
be made for disposition time of cases of all types. GAB is six
times as fast as Bronx County, five times as fast as Philadelphia
and Minneapolis, and three times as fast as Seattle and St.
Paul [178]. In Los Angeles Superior Court it takes 41.5 months
to reach trial [179], while at GAB an appellant in 6.6 months has
reached trial, has been tried, and has received a final written
decision accompanied by an opinion.

704 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES
B. PACE, PROCESS AND OTHER CORRELATIONS

In section IV-C . suora . we discussed the "procedural tracks'*
instituted at GAB to differentiate cases, for processing
purposes, by amount in controversy and by degree of issue
difficulty. The five tracks are, in increasing order of
complexity: special expedited; expedited; written submission;
conference; and hearing. Because each more complex process
involves greater opportunities to be heard to the parties as well
as more time to prepare, one would naturally expect processing
time to correlate directly with the type process employed. Our
data confirm this expectation:

CASE MANAGEMENT 705

TABLE 5B: DISPOSITION TIME BY TYPE PROCESS (FULL-CYCLE CASES)

Process

Mean Davs

No. Cases

special expedited

151

expedited

155

written submission

201

conference/hearing

241

The Board has set goals of three months for expedited cases,
six months for cases on a written submission, and nine months for
cases involving a hearing [180]. Looking at the averages in Table
4B we might think the Board is lagging behind its goals in the
first two categories. But the Board starts counting days from
the "first submission after the notice of appeal." [181] . On the
average of all cases it takes appellants 80 days (median 56 days)
to submit their briefs and appeal files after the appeal is
received [182]. Roughly speaking, therefore, the Board is close
to target on its time goals.

We thought other factors besides the "track" used might
impact upon disposition time. Obviously stays and time extensions
have a direct effect, and these are studied separately below. In
addition, the dollar value of cases might correlate positively,
on the theory that GAB and the parties would invest time and
energy in direct proportion to the dollar sums at stake. In
general, this correlation proved out as demonstrated in Table 5C
below.

706 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

TABLE 5C: DISPOSITION TIME OF FULL-CYCLE CASES BY DOLLAR VALUE

Dollar Values Mean Days

(000)

0-25
25-100
100-500
500-1000
1000-10,000
10,000+

169

209

180

211

216

237

All 198 Hi

We wondered whether who the appellant was might impact upon
case disposition time, thinking, for example, that a major state
agency with many Board cases might have a "bagful of tricks"
which would delay proceedings. We were pleasantly surprised to
learn that, with one exception, veteran litigators take less
time at the Board than others.

CASE MANAGEMENT 707

TABLE 5D: DISPOSITION TIME OF FULL CYCLE CASES BY PARTICULAR

STATE AGENCIES

Agency Mean Davs No. Cases Days Below Average

(198)

Illinois Dep't Public Aid 296 8 -98

N.J. Dep't Human Services 118 10 80
N.Y. State Dep't Social

Services 168 14 30

Ohio Dep't Public Welfare 162 9 36

Pa. Dep't Public Welfare 108 8 90

Interestingly, we found that nonprofit organizations averaged
212 days in the 20 full cycle cases appearing in our sample with
nonprofits as appellant. While the statistics are too few to be
more than suggestive, it may be that experience in litigating at
the Board produces greater efficiencies in that appellants learn
to move their cases quickly through the process, being fully
cognizant of the Board's determination to move cases along as
expeditiously as possible.

It appears that the Member who presides may have an important
influence on case disposition time. Member "A" seems to shepherd
cases through almost twice as fast as Member "E". The breakdown
for 130 full cycle cases is:

Mean

No.

Cases

147

178

202

223

708 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

TABLE 5E: DISPOSITION TIME OF FULL CYCLE CASES BY PRESIDING

MEMBER

Presiding Member
Member "A"
Member "B"
Member "C"
Member "D"
Member "E" 264 29

Because the Board has "action forcing" procedures, meaning
constant next steps with deadlines, as well as personnel
management procedures which pressure Members to meet such
deadlines [183], we must ask how disposition times can vary
significantly from Member to Member.

We should first explore the factors which may make one
full-cycle case take significantly more time to resolve than
another. The type of process utilized is one factor, of course.
Table 5B, supra . shows that cases with conferences and hearings
require almost 40 more days than cases submitted on briefs and
almost 100 more days than cases on an expedited track. Also
involved is the "litigiousness" of the attorneys: some
litigators are infamous for the barrage of motions they file at
GAB. As Table 5C, supra, demonstrates, this "litigiousness" may
be caused by the high dollar stakes involved, there generally
being a direct correlation between time of disposition and
amounts in controversy. Another factor may be consolidation
practice. When a case is linked to a later appeal ("main case") ,
it typically has a longer processing time because it must await
processing of the main case. Stays may be rightly entered in one
case but not another, as discussed in Section V-E infra. The
final significant factor is a case's special need for extra
attention. The GAB procedures have enough flexibility to
permit the process needed to decide a case correctly. If more
facts or more law or more issues or more analysis is needed, the
Presiding Member can always issue more questions, convoke more
conferences, and order more briefs. Such flexibility, however,
is constantly colliding with the pressure from personnel managers
to get cases decided within allotted times.

Is it possible for one Member to be assigned more "extra
attention" cases than another? The answer is that such
assignments are possible and even probable. The reason is that
cases are assigned on the basis of the Members' particular skills
and experiences. A Member who has special strengths in the
minute examination of factually complex records will be assigned
that type of case, while another, strong in legal analysis, will
be assigned the tough legal issues. The former will then have
cases that are typically slower to bring to decision than the
latter. Similarly, the practice of assigning appeals involving
issues identical with or similar to those in decided cases to the
Member who presided over the earlier appeal will "batch" appeals
in ways leading to different disposition times. One batch may
involve fast dispositions on legal grounds, while another might

CASE MANAGEMENT 709

require slow, painstaking development of the fact record of each
appeal .

Still, even if cases were assigned on a purely random basis,
we would expect some variation in processing time among Members.
Each factor which leads to different disposition times is
controlled to some extent by the Presiding Member. Some Members,
for example, may be less willing to grant hearings, stays, and
time extensions than others, or may suppress a lawyer's
"papering" practices faster than another Member. Some Members
will be more resistant to managerial pressure than another. And
some Members are more willing than others to pursue factual and
legal inquiries not raised by the parties but possibly important
to correct resolution.

710 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES
C. THE PACE OF STEPS IN THE PROCESS

The first step in a GAB appeal is the filing of a notice of
appeal within 30 days of "receiving" the Agency's final written
decision disallowing costs or taking other adverse action. The
Board considers the appeal "filed" on the date of nailing, as
established by the postmarked date. It is empowered to dismiss
cases for failure to meet the 30 day filing deadline [184] but
will excuse late filings for "good cause" [185].

In many cases there is no easy way to ascertain when an
appellant "received" an Agency's final written decision sent to
it by ordinary mail. Many cases are filed without challenge
several days beyond 30 days from the date appearing on the final
written decision, presumably because of the time gap between
Agency sending and appellant receiving. In our case sample, we
encountered 73 cases in which appeals were filed between 32 and
40 days from the date appearing on the final written decision.
Most of these were cases where the "excess" is explained by the
later receipt date or the fact that the 31st day after receipt
was a Saturday, Sunday, or holiday [186]. Still, a significant
number of cases, 22, were filed on the 41st day or beyond. Three
of the cases in our sample were dismissed for untimely filing,
while in several the appellant demonstrated "good cause" after
the Board chair issued an order to show cause why the case should
not be dismissed as untimely filed. In the balance of cases, it
appears that the Agency did not press the issue and the case was
settled, or the appeal was voluntarily withdrawn, perhaps because
of the jurisdictional problem [187],

In any event, the mean time which elapses between the date of
filing and the date of the final written decision is 35 days,
and the median is exactly 30 days.

The next step is for the appeal to reach the Board where it
is date stamped on the day "received." This takes an average of
eight days, with a median of five days. From the date of receipt,
the Board promises to take no more than 10 days to aclcnowledge
the appeal, notify the respondent, send a copy of the Board
procedures to appellant, and tell appellant what to do
next [188]. In most cases, 61% (141/233), the Board does meet
this self-imposed deadline. A few acknowledgements (n.l2; 5%)
take place on the 11th or 12th day, perhaps because the prior day
was a weekend or holiday, and some are just outside the deadline
by a day or two (29/233; 12%). The number of cases in which the
acknowledgement takes 15 or more days is 51, 22% of our case
sample. The mean time taken for aclcnowledgements is 13 days,
while the median is 10.

Next comes the briefing schedule and the sxibmission of
documents for the appeal file. In the regular process, appellant
has 30 days to file a brief and appeal file, the respondent then
has 3 0 days to file its brief and supplemental appeal file, and,
finally, appellant may submit a short reply within the next 15
days. Theoretically, then, the briefing schedule in the regular

CASE MANAGEMENT 711

process is 75 days. In expedited cases, there is to be a
simultaneously filing of briefs by both sides within 30 days of
the acknowledgement.

We found considerable "slippage" in this time schedule,
produced mostly by the ready award of time extensions, at least
as to a party's initial requests [189]. We found a mean time of
67 days (median 46 days) between acknowledgments and appellants'
briefs, a mean time of 52 days (median 41 days) between
appellants' and respondents' briefs, and, from then, an average
of 30 more days (median 21 days) for replies to be submitted. All
together, briefing takes an average of 149 days, with a median of
108 days. The average is almost twice what one would expect from
the face of the rules, though the median case is developed only
about a month behind schedule.

When briefing is completed, the conference or hearing follows
fairly rapidly. In the average case, the time between receipt of
the appeal and the conference or hearing on the merits is 165
days, while the middle case gets heard within 153 days.

The step which follows a conference or hearing on the merits
is a GAB final decision in the form of a reasoned opinion [190].
126 different written opinions issued in cases which fell into
our sample. In 60 cases the written decision was issued without
the benefit of a hearing or conference on the merits, either
because the case was in the expedited track or because the
parties agreed to a decision based upon the appeal file and their
briefs. The balance, 66, contains cases where the GAB three
member panel had the benefit of a hearing or conference. Their
deliberations and the writing of an opinion consumed an average
of 62 days, with the median at 53 days.

We can construct a timetable for the mean and median case at
GAB based upon the time spans discussed in the above paragraphs.

TABLE 5F: TIMETABLE FOR MEAN AND MEDIAN GAB CASE

"Average" Case "Middle" Case # Cases

Day 1 Final Written Decision

Day 36 Appeal filed

Day 44 Appeal received

Day 57 Acknowledgment

Day 124 Appellant's Brief & File

Day 176 Respondent's Brief & File

Day 206 Appellant's Reply

Day 209 Conference/hearing

Day 271 GAB Written Decision

It turns out that these "average" and "middle" cases take
slightly longer when constructed this way than when we simply
take the mean (198 days) and median (179 days) disposition times
of all full cycle Board cases. We must adjust to start at the
same point — "appeal received" — by subtracting 43 days in the
left-hand column (271-43=228) and 35 days in the right-hand

Day 1

274

Day 31

259

Day 36

264

Day 46

233

Day 92

141

Day 13 3

119

Day 154

Day 189

Day 242

712

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

column of Table 5F (242-35=207) . These are higher than the "all
full cycle cases" calculation because the faster cases submitted
on briefs without a hearing or conference are excluded in the
latter stages from the cases underlying Table 5F.

CASE MANAGEMENT 713

D. TIME EXTENSIONS

The Board's practices on granting more time, usually for the
filing of briefs, has an important parallel in federal and state
court practices concerning trial continuances. Generous
continuance policy is often highlighted as a major cause of delay
in judicial spheres, both civil and criminal [191], and
"tightening up" is regularly a part of reform efforts [192].

The Presiding Member has power to "grant extensions of time
for good reasons" [193]. Both grantee and Agency attorneys
have not been hesitant to aslc for more time, and rarely protest
the other side's request [194]. The case files display the usual
justifications: onerous worlcloads; unusual complexity in law or
fact; conflicts with trials of other cases; large dollar staJces
justifying extra concern; recent assignment to the case; and
internal organizational problems.

Based on the data in our case sample, we can confidently
conclude that, for the salce of fairness and good briefing,
most excuses are deemed by Board members to be acceptable, at
least the first time around. We encountered 160
requests for time extensions filed by appellants, of which the
Board denied only three. There were 90 such requests from United
States attorneys, none of which were denied. Therefore, in the
cases in our sample only one per cent of all requests for more
time are denied. The Board granted a total of 5,464 extra days
for the 246 time extensions we found. The cases in our sample
were on the Board's docket a total of 40,084 days, meaning that
time extensions prolonged the Board's pace of disposition by
13.6% (5,464/40,084).

Not only does the Board very infrequently deny a party's
request for more time, but it also pares them down only slightly
— overall, by one day. This may reflect a lawyer's paring
down his requests to reasonable periods after having consulted
with the staff attorney or Member beforehand. The next table
compares the average time requested by parties to the average
time granted by the Board.

714

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

TABLE 5G: BOARD ACTION ON REQUESTS FOR TIME EXTENSIONS

Party

No. Requests

appellant: 1st 106

appellant: 2d 46

appellant: 3d 8

respondent : 1st 65

respondent: 2d 19

respondent: 3d 6

total 250

Ave. Days Asked
27.2
26.0
16.4
21.1
17.9
13.7
22.9

Ave. Days Gjyen
25.8
22.8
16.3
19.5
16.4
12.4
21.9

CASE MANAGEMENT 7 1 5

E. STAYS

A "stay" is the suspension of the case, usually pending some
important event like the outcome of settlement discussions or the
resolution of key issues in a parallel case [195]. The stay is
not for the benefit of the parties, as is a time extension, but
for the benefit of the process because energy may be saved by
case settlement or resolution of dispositive issues. The
difference is reflected in the fact that most stays in our case
sample were imposed by the Board itself or were requested jointly
by the parties.

In our case sample, 34 stays were imposed. Total days stayed
were 1,654, for an average of 44 days per stay. Combining stays
and time extensions , we see that of 40,084 days our sample cases
were on the GAB docket, 7,118 (17.8%) were "stayed" or "extended"
days.

For a Board that prides itself on speed of disposition, these
"stayed" days should not be counted as the Board's processing
time. The Board's current policy is to dismiss such cases
without prejudice to their reinstatement should negotiations
break down. This may lead to the reverse "counting" problem: a
single case being treated as two when it comes back with a new
docket number.

716 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES
F. JOINT CONSIDERATION

In the same way that courts can jointly consider cases
involving common questions of law or fact [196], the Board has
developed a practice of "joint consideration" of cases involving
identical questions. This procedure is particularly important in
the field of federal financial assistance for two reasons. First,
fiscal disallowances are typically taken only for a discrete
accounting period, for example, a particular fiscal year or a
particular quarter-year. The grantee may have engaged in the
questioned practice for a number of years or quarters, and
separate disallowances will be entered for each of these.
Although identical legal and factual issues are involved, the
disallowed dollars are different and the Board requires separate,
timely appeals of each such disallowance [197]. Obvious economies
will accrue by consolidating such appeals and+having single
briefs and hearings for all. Secondly, a number of states may
engage in a practice which the Agency judges violates the
terms of a particular grant program. Typically, a series of
disallowances will issue against different states. While dollars,
parties, and assistance agreements are technically different, the
legal standards emanating from grant statute and implementing
regulations will be the same, and each state's practices
identical or similar enough to be legally indistinguishable.
These cases too offer opportunities for procedural efficiencies
by means of joint consideration.

To our sample of 274 cases were added 41 "consolidated"
cases [198]. The total value of these cases, measured by dollars
appealed, was $116,840,000 [199]. What this means is that the
40,084 litigation days consumed by the 274 cases in our sample
served to resolve disputes over not only the $313,195,000
appealed in the main cases, but also the $116,840,000 appealed in
the consolidated cases, for a total of $430,035,000. Main and
consolidated cases numbered 315 in our sample, for an average
case value of $1,391,699. The median for the 41 jointly
considered cases was $386,000, and median for the 274 main cases
was $125,500.

Eighteen of the cases in our sample had additional ones
consolidated with them. Usually the groupings were small, mostly
pairs and several triplets. But major consolidations occurred
twice: one joined twelve distinct appeals and another "mega" case
jointly considered sixteen. The consolidations were made pursuant
to Board directives. We encountered such an order in each sample
case file where a joint consideration had occurred. We aslced the
attorneys who had been subjected to such a joint consideration
Board directive whether they approved of the practice. 49
lawyers answered that they had litigated a consolidated case, and
these gave the practice a hearty 4 points on a scale of 1 to 5
(median 4.1), voting as follows:

CASE MANAGEMENT 717

TABLE 5H: ATTORNEY OPINIONS ON JOINT CONSIDERATION PRACTICE

Opinion No.

strongly approve 16

approve 22

neutral 8

disapprove 1

strongly disapprove 2

718 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

VI. CASE MANAGEMENT AT THE BOARD

A. INTRODUCTION

In the preceding section we displayed some remarkable data
about the rapid processing of large dollar cases at the Grant
Appeals Board. From beginning to end it takes the Board 198 days
to adjudicate fully, including a detailed opinion, a case worth
$1,169,000. In Section VIII we will learn that the lawyers
practicing at such a fast track court heartily approve of GAB's
litigation system. This holds true for grantee lawyers even
though they lose, as a group, 80% of their appeals. In this
section we will describe the management techniques used by Board
Members to process grant appeals.

We hope, of course, that our readers will draw the conclusion
that the Board's speed of disposition is a result of these
management practices. We cannot guarantee such a cause and
effect relationship because our study is not a controlled
experiment. It is possible that the same cases and parties would
race as quickly and efficiently through federal district court,
with its quite different procedure and practice. Common sense,
however, makes us believe such a possibility is remote. Each of
the management techniques described below is, on its face, quite
likely to produce a faster, more efficient disposition than
alternatives. The first one, for example, is the practice of
trying cases with common issues together rather than separately.
Logic tells us that when the same input produces two outputs
rather than one, we have achieved greater efficiency and have
conserved resources which can now be invested in securing other
outputs. Similar straightforward logic produces a like
conclusion for each of the Board's other management practices:
they will more efficiently and more quickly produce an
adjudication than the alternative.

By "alternative" we mean the traditional litigation mode.
For each listed practice there is an implicit comparison with the
traditional alternative. The old way of litigating includes the
following practices. The case is litigated individually, despite
the existence of common factual or legal issues with other
lawsuits. The representatives of the parties are allowed to
create the issues to be litigated and also to manage the
presentation of proofs, relatively free of judicial intervention.
Fact lacuna, poor briefs, and missing documents and witnesses are
tolerated as party litigation choices, for better or worse.
Little guidance comes from the bench about unacceptable
litigation behavior, continuances are liberally granted, and
parties are allowed to forgive each other their mutual failures
to meet assorted deadlines. The judge may press settlement,
depending on the state of his calendar, but does not ordinarily
pressure parties to make partial concesssions on unreasonable
factual or legal stances. And the judge's convenience would most
certainly determine trial dates, continuances, resolution of
motions, conferences, and so forth.

CASE MANAGEMENT 7 1 9

We are not asserting that the case management techniques used
by GAB are the "best" techniques, either individually or
collectively. The quality of each device, possible improvements,
and alternative techniques would make excellent siibjects for
another study but are beyond the scope of ours, which is simply
descriptive and empirical.

Similarly, we do not claim that the "traditional" litigation
style described above exists in all courtrooms and administrative
boards. Many modem management techniques have been inserted in
many chambers in response to the ever- increasing demand for court
efficiency. Still, the "old ways" persist in whole or part in
many adjudicatory systems. We know this from the studies cited
in Section II and our own recent experiences.

720 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES
B. REVIEW OF BOARD MANAGEMENT TECHNIQUES

Besides standard case management methods, such as written
procedures, deadlines, and sanctions, GAB Members actively issue
management orders to the parties so as to move cases along
efficiently and to insure that the factual record and applicable
law are fully developed. Several of these management orders
embody proctices that are infrequently found in other judicial or
administrative courts, while some, like "show cause" orders, are
standard fare. Where we believe the Board is quite untypical is
in its intensive and systematic use of the devices described
herein. In this section we outline the management practices,
provide illustrations, and quantify the use of each.

1. Joint Consideration (Consolidation) .

We saw in Section V-F that the Board has achieved significant
economies of scale by considering jointly appeals which have
common questions of law or fact. When cases are piggy-backed on
top of each other, a single set of briefs and a single hearing
serve for all, and just one decision is needed to clear all cases
from the docket. The Board has particularly inviting
consolidation opportunities because of the nature of federal
grant disallowances. Although the state agency may have engaged
in the challenged practice for a considerable time, disallowances
are taken on a quarterly basis. This leads to several appeals
involving different disallowances but the same fact pattern and
identical issues. Similarly, several states may receive the same
type of disallowance, making advisable consolidation of several
appeals by different states.

An example will illustrate the practice. The appeal of the
Massachusetts Department of Public Welfare in Docket No. 83-246
was from a disallowance of $6.8 million in medicaid
reimbursement. The Agency, HCFA, asserted that Massachusetts had
failed to file its reimbursement claim within one year of the
fiscal year in which the expenditure occurred, in violation of
the medicaid statute and regulations. After studying the notice
of appeal, the Presiding Member said in the acknowledgement
notice he sent to the parties that Massachusetts had appealed
similar disallowances in Dockets 83-244 and 83-245 and that all
three appeals involved the same time limit issue. He then
consolidated the cases with the following order:

Unless there is an objection by either party, the Board will
proceed to consider the cases jointly. This means that the
cases will follow the same briefing schedule, that the
parties' briefs should address all three cases, and that one
appeal file should be developed for all three cases. Issues
which are unique to a particular case should be addressed
separately within the same brief. Joint consideration of
these cases should expedite their consideration by the Board.
At the conclusion of the proceedings, the Board will issue a
single decision dealing with all three cases.

CASE MANAGEMENT 721

Cases can be partially consolidated. For example, the
statute of limitations question discussed above produced joint
consideration of 13 appeals filed by eight different states, all
of which had suffered medicaid disallowances taken by HFCA on the
ground of untimely filing of reimbursement claims. On April 4,
1984,, a Member issued a letter entitled "Proposed Joint
Consideration of Appeals." This responded to a motion from the
Louisiana Department of Health and Human Services requesting such
consolidation. He gave each affected state five days from the
receipt of his letter to file objections to his consolidation.
On April 27th, he issued an "Order for Joint Consideration of
Appeals." This order limited the consolidation to the common
legal question which the Member, not the parties, phrased as
follows: "That question is whether any provisions of Pub.L.
97-276, 96-272, 97-92, 96-276, 97-51, 97-16, or 45 CFR Part 95
preclude the Agency from paying the various State claims for
[federal financial participation] because of the time limits
applicable to filing of the claims." While there would be joint
consideration of the common legal question, the factual
development and discussion of individual legal issues present in
each appeal would proceed separately. Therefore, the Member
issued stay orders only in those appeals where the time limit
question was the only remaining issue.

To eighteen of the cases in our sample were joined 41
additional appeals. We registered 27 different orders necessary
to accomplish these consolidations.

722 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

2. Procedural Directions.

When a particular event in a case is not regulated by the
Board rules in Appendix A, or when details are missing, the Board
will issue procedural directions to the parties under its general
powers to control proceedings [200]. For example, the procedures
for joint consideration of appeals are mostly improvised on an ad
hoc basis. In the major consolidation discussed above, the
Member established a special briefing schedule and allowed the
eight appellants to respond to the one HCFA brief either jointly
or individually. Later, he established a conference with
an agenda and an order of presentations. He stated the purpose
of the conference to be "to discuss the arguments made in the
briefs, as well as whether [certain exceptions] carry over into
the other statutes setting time limits for filing claims."

In another case a Member warned an appellant who had
submitted a document improperly. The Member cited GAB rules
which require an original and two copies to the Board, a
certificate that a copy has been sent to the other side , and a
reference to the appeal's docket number [201]. While the Member
accepted the letter, he instructed the appellant to make all
future submissions in accordance with the rules.

In the 274 cases comprising our sample, we encountered 66
separate instances of the Presiding Member creating special
procedures and issuing appropriate instructions to the parties.

CASE MANAGEMENT 723

3. Questions to Clarify Party's Position.

If a party makes a statement in a notice of appeal or brief
which the Presiding Member does not understand, or doubts, or
wonders about its basis, he or she is likely to require the party
to expand upon its position. The party's stance may be of a
legal nature. An illustration is a case where a Member
instructed appellant to "[p] lease explain the State's position"
concerning the holding of a particular federal court precedent.
The state had asserted a favorable reading of the precedent in
its notice of appeal, and the Member inserted the clarification
order in the acknowledgement of the appeal. Sometimes the
question may seek a factual clarification or an explanation of
the meaning of a document. In the acknowledgement of an appeal,
one Member asked: "Is it the State's position that, under 45 CFR
95.13(d), expenditures . . . were not made until May 15, 1981?
(Notice of Appeal, p. 3) Please explain."

The questioning technique is one of the most popular
management tools of the Board. We counted 85 instances in which
questions were issued requiring parties to expand upon their
factual and legal statements and positions or to clarify
ambiguities in documents.

724 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

4. Order to Develop Record.

Similar to the above is the Board requirement that a party
submit certain factual or legal information, often issued as a
formal "Order to Develop Record." Sometimes the Agency will be
asked to clarify its practices. In one case the Agency was asked
to explain how it determines which congressional appropriation to
use to pay a particular claim for federal financial
participation. In several cases the Board asked the Agency to
state its legal basis for the disallowance.

In the case files we encountered 94 instances in which orders
to develop the record were entered and 68 instances when
particular fact-seeking or law-seeking questions were posed to
the parties. In the former category we placed the frequently
used order to submit certain documentation missing from the
appeal file.

5. Written Questions for Conference or Hearing.

The questions discussed in paragraphs 3 and 4 above
frequently form the agenda for a GAB conference or hearing on the
merits. Unlike state and federal court where the parties
typically determine and formulate the issues to be litigated and
also determine what evidence and arg\iment to direct to these
issues, a normal case at GAB is managed by the Presiding Member
as to issues, proof, and argument. Having ascertained the
factual and legal ambiguities in each side's case by careful
study of the briefs and documentation submitted, the Member
will ordinarily structure the conference or hearing as a forum
for addressing these ambiguities. Each side will be asked to
respond to a series of questions, with rebuttal time available
for reactions to the other side's presentation.

In the case files we encountered 25 sets of written questions
as the agenda for a conference or hearing. This technique, plus
the preceding two, reveal the tremendous extent to which a
Presiding Member at GAB takes charge of an appeal and
orchestrates argiiment and proof.

6. Issue Formation.

Sometimes in acknowledging the notice of appeal and sometimes
in the letter setting the procedure for a conference or hearing
the Presiding Member will formulate the issues being litigated.
In most cases issue formulation is a not a matter of serious
dispute. The final written decision of the Agency must state the
legal and factual basis for the fiscal disallowance and, by this
time, the parties will have been negotiating long enough to have
agreed upon the issues. Nonetheless, we found the Presiding
Member stating the issues in dispute sixteen times, and, in ten
more cases, asking the parties to clarify them.

Observe how different this is from typical federal and state
civil practice where elaborate efforts are made in pleadings,

CASE MANAGEMENT 725

motions, briefs and pre-trial conferences to formulate the exact
questions for litigation and to carve away claims and defenses
that lack substantial support in fact or law. Deciding what to
decide is frequently a major determinant of civil court delay and
cost.

Lawyers practicing at GAB are quite content with the issue
formulation of the Members. When asked their opinion of "issue
clarity" in their last litigated case, 55% of the respondents
answered "very good" and 39% answered "good" [202]. This high
opinion was held by both U.S. and grantee attorneys [203] and
regardless of case result [204].

7 . Warnings .

In common with federal and state judges, Members often issue
warnings to the parties about possible sanctions or adverse
actions which may be levied in response to certain party
behavior. We have seen that Presiding Members rarely deny time
extensions [205]. It may well be that few denials are registered
because the Board makes explicit, by warning, when the parties
should stop asking. In one case, by way of illustration, a
Member conceded a Massachusetts lawyer one more month to file the
appellant's brief and appeal file. The lawyer had pleaded some
of the usual excuses: recent assignment to the case;
reorganization of his legal department; difficult legal issues;
and large dollar stakes. While approving the motion, the Member
warned: "Although your request for an extension is granted,
please be advised that no further extensions will be granted
absent extraordinary circumstances." Similarly, another Member
gave a two-month extension to a lawyer with impending federal
court trials but advised: "The appellant should note, however,
that the Board does not usually grant extensions of such length
as the one requested here. The Board will not be inclined to
grant any further extensions without a showing of extreme
hardship." And in Docket No. 83-272, a Member advised the
Chicago Department of Human Services that, having given it five
extra months to present certain documentation, his patience was
coming to an end.

Warnings of impending disciplinary sanctions are also
frequent. In more than one case, a party who was neglecting to
certify that he had sent copies to the other side was told that
the next failure would result in the exclusion of his offered
proof from the record.

In the case files we counted 18 such warnings.

8. Orders to Show Cause.

A popular management device at the Board is the "order to
show cause" (or its close kin the "order to respond to tentative
findings") 55 of which were found in the case files. This is a
"last gasp" opportunity for a party to convince the Board not to
take some adverse action, many times being an adverse decision on

726 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

the merits issued in "draft" form. The Board will lay out the
findings of fact and legal analysis underlying its proposed
decision and ask the "about to lose" party why the Board should
not finalize its action. In one case the Ohio Department of
Human Services submitted "Comments on Draft Decision" which
convinced the Board to withdraw its tentative decision and
reverse a $1.25 million disallowance [206].

Show cause orders are also used for various sanctions. A
typical illustration is when a Member issued an order for the
appellant to show cause why the appeal should not be dismissed
for being untimely by one month. In his proposed order the
Member rejected as "insufficient justification of the substantial
delay here" the change of management excuse previously offered by
the new executive director of the nonprofit appellant [207]. In
another case, a different Member "tentatively conclude[d]" that
the Board should dismiss an appeal because the "time has passed
for the City to present more documentation" of its claim. He
gave the City a final 21 days to show cause why the City's appeal
should not be dismissed.

9. Seeking Party Concessions.

An order to show cause is an imposed decision. Different in
kind is an effort to seek a factual or legal concession from a
party because of the element of agreement. Much of what judges
do at pre-trial conferences is to promote party agreement on
issues, facts, and documents. This strategy enables the areas of
true dispute to be narrowed, thereby augmenting litigation
efficiency. It is an essential tool in all judicial kits.

According to one Member, promoting party agreement is "the
kind of thing the Board is good at." [207] He sent us copies of
correspondence between the Illinois Department of Public Aid and
DHHS ' s Office of Human Development Services in which the latter
withdrew $4.2 million of a $16 million disallowance because of
"facts that emerged at and subsequent to the hearing before the
GAB." In turn , the state withdrew its appeal of the balance of
the disallowance. The Member summarized the bargaining process
in the following words:

[The appeal] involved a long process before us
(unfortunately) including a hearing, and a good many months
of "stayed" status while OHDS mulled it over. The state
conceded a big portion of the disallowance originally based
on Board precedent. Then, after a long while and further
development, the Board presented an extensive list of
questions to OHDS which challenged OHDS to justify certain
positions or face loss. In response to those questions, OHDS
chose to withdraw the remaining disallowance. . . . Thus, I
like to think the Board led the two adversary parties to
decisions which they can justify to themselves, without our
resolution in the form of a decision. [209]

In our sampled cases we found ten specific instances of the

CASE MANAGEMENT 727

Presiding Member pressuring a party towards a concession. In
one case, a Member summarized a phone conversation as follows:
"The Agency, however, was persuaded to agree to examine further
documentation submitted within the next 45 days, after I cited
the success in reducing the disallowance in [Docket No.] 82-130
and the problems the City noted in gathering the documentation."
PresumaUDly, the Agency could have taken the position that the
grantee's documentation should have been offered during the audit
negotiations and not belatedly before the Board, though the
Board regularly allows post-audit submissions.

Concessions are often of a procedural nature. One example
is when a party requests a fact hearing but withdraws the request
when convinced by the Presiding Member that a hearing is not
really necessary.

10. Special Briefs.

If the Board wishes special input from the parties on
difficult questions of statutory interpretation or the like, it
may issue an "invitation to brief." This is particularly helpful
to the Board when an important question of law affects several
appeals and the combined research efforts of several parties may
insure that no stone is left unturned. We encountered 21 such
invitations to brief, many of which were quite comprehensive in
detailing the issues and sub-issues to be discussed in the
special briefs.

11. Summary Decision.

The "summary decision" was instituted by the Board to make
swift decisions on cases with foregone conclusions. Typically, a
Board precedent is squarely on point because of the losing appeal
of an earlier disallowance involving identical grounds. The
appellant ]cnows its new case is also a loser and wishes only to
"exhaust" its administrative remedy at the Board as quickly as
possible on its way to federal court. The Board is quite willing
to accommodate this desire and will summarily enter an adverse
decision in a one or two paragraph opinion which cites the
governing precedent.

12. Miscellaneous Orders.

The orders discussed in the preceding paragraphs, while being
the heart of the Board's case management, do not exhaust the
inventory. We also noted orders (n.2) setting a place of hearing
outside the District of Columbia, orders (n.2) requiring the
attendance of a designated person at a hearing or conference,
orders (n.7) splitting appeals into separate dockets, orders
(n.ll) requiring parties to file status reports, and orders
(n.lO) that parties identify their witnesses and the substance of
their testimony.

In Table 6A below, we rank the management techniques
discussed above by frequency of use as discovered in the files of

our samoled cases.

728 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

TABLE 6A: INVENTORY OF GAB CASE MANAGEMENT TECHNIQUES

Technique Times Used

1. SUBMIT SPECIFIED INFORMATION OR DOCUMENT 94

2. CLARIFY FACTS, LAW, OR DOCUMENT 85

3. QUESTIONS SEEKING INFORMATION ABOUT FACTS OR LAW 68

4. PROCEDURAL DIRECTIONS TO PARTIES 66

5. SHOW CAUSE ORDERS 55

6. CONSOLIDATE CASES 27

7. WRITTEN QUESTIONS FOR CONFERENCE OR HEARING 25

8. INVITATION TO BRIEF 21

9 . WARNINGS 18

10. GAB FORMULATES ISSUE 16

11. SUMMARY DECISION 12

12. FILE STATUS REPORTS 11

13. IDENTIFY WITNESSES AND TESTIMONY 10

14. PARTIES TO CLARIFY ISSUES 10

15. SPLITTING APPEAL INTO SEPARATE DOCKETS 7

16. LOCATE HEARING OUTSIDE D.C. 2

17. REQUIRE SPECIFIED WITNESSES 2

Total 529

CASE MANAGEMENT 729

C. ATTORNEYS' VIEWS OF CASE MANAGEMENT

We asked the attorneys who practice at GAB whether the
Presiding Member had used "case management" techniques in the
attorney's last case at the Board. We defined the quoted phrase
as follows:

Techniques used by Board Members and staff to move
cases along efficiently and to achieve correct results.
Examples include orders to develop the record, orders that
particular information or documents be provided, and GAB
formulation of the issues in dispute.

98 respondents replied affirmatively. We asked these whether
such management increased the efficiency of the proceeding. 58
said "yes," which is 78% of the total. Ten said "no" (10%) and
the balance (n.l2; 12%) did not know. All together, then,
lawyers who "know" believe at a six-to-one ratio that court
management improves efficiency, which we defined for them as
"[r]eaching and deciding an issue with minimum investment of time
and resources . "

Almost the same six-to-one ratio approves of case management
in general. Table 6B summarizes the answers to this
questionnaire probe.

730 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

TABLE 6B: LAWYERS' OPINION OF CASE MANAGEMENT

Opinion No. i

STRONGLY APPROVE 15 12

APPROVE 66 53

NEUTRAL 29 23

DISAPPROVE 13 11

STRONGLY DISAPPROVE 1 1

The significant percentage of attorneys who were "neutral"
worries us in that court efficiency should be a concern of every
member of the legal profession. We also observe that the 12%
figure for "strongly approve" is considerably below the 3 6% rate
at which respondents gave the best rating over all our questions
[210] .

It is interesting to observe that while attorneys approve of
case management both in general and in its specific application,
they are consideraJaly less sure that such management improves the
quality of the final decision in a case. Less than half of the
respondents thought that the case management practiced in their
case "help[ed] achieve a correct result on the merits." The
others thought it did not (n.22; 23%) or they did not know (n.29;
30%) .

CASE MANAGEMENT 731

VII. BOARD EFFECTIVENESS

How well does the Board produce its desired effects? As an
adjudicatory body, the Board's overt goal is to produce "correct"
adjudications, meaning the combination of: 1) accurate
fact-finding; 2) appropriate selection of legal norms; 3) sound
understanding of the content and meaning of those norms; and 4)
precise syllogistic application of facts to law. Stated thus,
"effectiveness" immediately shows its elusive character.

Having had a considerable prior experience in analyzing grant
law in general and Board decisions in particular [211], we
considered making personal judgments about the correctness of
Board adjudications. For example, we have incorporated some 500
Board decisions into our three-volume treatise and, in the
process, gained the impression that the Board correctly selected,
understood, and applied the grant norms governing the disputes
before it in a high percentage of cases. Still, this evaluation,
even if sound, is only partially informed. We had no workable way
of ascertaining whether the "facts" narrated in Board opinions
coincided with reality in terms either of accuracy or
completeness. Nor could we feasibly ascertain whether all
relevant law was considered. Further, the softness of most legal
norms, even those in the arrid field of grants-in-aid, means
that more than one and, memy times, contradictory interpretations
may be reasonable. Board opinions present and defend just one
view, the one leading to the Board's result. We lacked,
therefore, the other reasonable readings and applications which
might cast doubt upon the validity of the Board's decision. As a
consequence, like other researchers [212], we did not assay an
independent judgment about how "just" or "correct" the Board's
decisions are.

Instead of offering our personal judgments, we turned to the
composite views of the attorneys who practice at the Board and to
the federal courts which review its decisions. Even these sources
are flawed: the former by the partiality infusing the adversary
system, the latter by the narrow scope of judicial review of
administrative action [213].

Before turning to the views of lawyers and federal judges, we
will examine the Board's eibility to promote settlements by
negotiation or mediation. Agreed upon resolutions are not
necessarily "correct" resolutions in that a party with a strong
case on law and facts may have inappropriately bargained away his
"lawful" dollars. But such is an overly academic view of civil
adjudication. The bottom line is not abstractions but party
satisfactions. If the disputants walk out of court pleased with
the result, no one need look behind the settlement. For this
reason, courts which promote (without forcing) settlements are
generally considered effective. A division of disputed dollars
which satisfies all parties is per se a "correct" resolution.

In 1981 the Board hoped to improve settlement rates by
offering parties the services of trained mediators [214]. Each

732 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES
acknowledgement of appeal contains a standard passage stating:

Although the appeal is now pending, the parties
may negotiate to resolve the dispute informally.
The Board will assist in any way appropriate, and
can provide mediation services. See $16.18.

In the 274 cases comprising our case sample, the Board's
mediation offer was accepted only four times, three in 1982
appeals and the fourth in 1983. Two of the four led to mediated
resolutions of small amounts. The other two failed in mediation
and came back into the adjudication process. Thus, less than one
percent (.7%) of the Board's cases are resolved by mediation. In
an interview, the Board Chair believed that a higher percentage
of mediations was occurring recently, and he expressed continued
interest in promoting the process. [215]

We considered the attorneys' rejection of mediation to be so
absolute that probing in the questionnaire for their motivations
was not justified. Based upon our experience, we offer several
explanations. First is the general lack of familiarity with
mediation in the profession [216] . Second, government lawyers
sometimes perceive settlement to be an inappropriate disposition
of public funds to which their agency is "entitled. " [217] We
shall see that even negotiated settlements at the Board are
infrequent, which corroborates this thesis. Third, almost all
attorneys practicing at the Board are salaried employees of
government or quasi-public agencies. This means that the strong
economic pressure on attorneys and parties which forces most
civil litigation to settle is absent, though large caseloads in
some instances may push in that direction. Fourth is the status
of cases at the point they reach the Board. The Agency's final
written disallowance will normally issue only after a lengthy
series of negotiations beginning with the audit process. The
cases which reach the Board may be those where the parties are
"talked out," the lines of disagreement being clearly etched by
then. When they appeal to the Board, further negotiation may seem
senseless to the parties, even when the extra ingredient of a
mediator is offered. Fifth, public officials may, for political
reasons, prefer to have a decision imposed by the Board rather
than being accused of abandoning a claim. Finally, the process
of getting a settlement approved by superior officials may be
more complicated and difficult than pursuing the Board appeal to
completion.

After rejecting mediation, parties may still engage in
direct settlement negotiations, a process which the Board
encourages [218]. Sixty cases in our sample, 22% of the total,
were fully settled. This compares to federal district court where
47.1% of filed civil cases terminate with no judicial action
whatsoever and where all but 5% of the balance terminate without
reaching trial. [219] . The total dollars settled at GAB, which
includes both full and partial settlements [220], amounts to
$64,174,000, or 20% of the total amounts appealed.

CASE MANAGEMENT 733

We suspect that the low settlement rate may reflect the
pre-appeal breakdown of negotiations which led, in the first
place, to the final Agency disallowance and the appeal to the
Board. It may also reflect the weakness of many grantee appeals.
Grantees lose 83 percent of dollars appealed to the Board and
adjudicated by it and 82 percent of all disallowances [218].
Grantees of course perceive that many of these Board decisions
were incorrect — one-quarter of the grantee attorneys thought
their loss was "unfair" or "very unfair. "[222] .Still, most U.S.
attorneys believed the contrary — that the final outcome in their
case was "very fair" (42%) or "fair" (54%) [223] — and it is the
perception of the strength of one's case which determines
settlement possibilities. Because U.S. attorneys are repeat
litigators at the Board [224], they know of their high success
rate, which can only solidify anti-settlement attitudes. In
summary, whether or not the grantees bring weak appeals, and the
data suggest this to be the case, the U.S. attorneys certainly
perceive maximum chances to win an adjudication and,
consequently, are not eager to settle.

We asked the lawyers "Overall, to what extent do you feel
that the final outcome of the case was fair to all involved?" and
let them answer "very fair," "fair," "unfair," or "very
unfair. " [225] . This was our "effectiveness" question, though we
substituted the more feuniliar concept of fairness. The next TaUDle
7A organizes the overall results [226].

No.

24%

50%

21%

734 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

TABLE 7A: ATTORNEY VIEWS ON BOARD EFFECTIVENESS

VERY FAIR CASE RESULT
FAIR CASE RESULT
UNFAIR CASE RESULT
VERY UNFAIR CASE RESULT

While most attorneys thought their case was correctly or fairly
decided, a sizeable block, one-quarter, was dissatisfied. The
next teUble ascertains whether the attorneys' success or failure
in the case litigated colors their views as to Board
effectiveness.

TABLE 7B: ATTORNEY VIEWS ON BOARD EFFECTIVESS BY CASE RESULT [227]

VERY FAIR CASE RESULT
FAIR CASE RESULT
UNFAIR CASE RESULT
VERY UNFAIR CASE RESULT

The results in Table 7B are not surprising. Case winners rarely
believed their victories to be unfair, while losers thought at a
44% rate that their defeats were undeserved. In the adversary
system it is natural for attorneys to become convinced, along the
way, of the justice of their cause. However, it is surprising to
note that 56% of the losers admitted the fairness of a loss. This
may corroborate the theory of some Agency attorneys, one which
our experience leads us to share, that grantee appeals are often
very weak on law and fact. This theory would also explain why so
few winners were willing to characterize their victories as
unjustified, especially after having received a thorough,
convincingly reasoned Board opinion.

The next table analyzes attorney views by party represented.
This is, essentially, a rehash of Table 7B because Agency
attorneys win such a high percentage of cases at the Board. In
other words, the group of "winners" is comprised mostly of Agency
attorneys, and grantee legal representatives make up the bulk of
those reporting losses.

Winner

Loser

No. %

21 43%

2 6%

26 53%

18 50%

2 4%

13 36%

0 0%

3 8%

No.

42%

13%

54%

49%

33%

CASE MANAGEMENT 735

TABLE 7C: ATTORNEY VIEWS ON BOARD EFFECTIVENESS BY
PARTY REPRESENTED [228]

U.S. Ge

Nc
VERY FAIR CASE RESULT
FAIR CASE RESULT
UNFAIR CASE RESULT
VERY UNFAIR CASE RESULT

GAB decisions have been appealed many times to federal court,
thereby offering some evidence of the soundness of Board
adjudications. One might readily assume that GAB's batting
average on appeal would be a reliable indicator of Board
effectiveness. This batting average at the time of writing is a
hefty .888, a sure MVP pick. GAB has been affirmed 32 times on
appeal [229], and reversed or remanded on only four
occasions [230] .

Yet our bets on this game have to be carefully hedged for
many reasons. First, Board decisions which favor the grantee are
not appealable into federal court because GAB action is the
Secretary's final decision by delegation. This means that neither
the Agency nor the grantee is adversely affected by the decision
and no party has standing to appeal. As a consequence a number of
GAB decisions are effectively insulated from review. Second,
federal court review is limited by a narrow standard of review,
whether "arbitrary and capricious" or "substantial evidence."
This means that grantees have to convince the federal bench that
the GAB decision was more than merely wrong. Pushing in the
other direction is the third factor, that grantees choose which
decisions to appeal and, presumably, invest their scarce
resources only in best opportunities. Some fifty GAB decisions
have been brought into federal court, only one out of every
fifteen, meaning that a substantial winnowing takes place. Three
of each fifteen are pro-grantee therefore unappealable results,
leaving eleven grantee choices not to appeal. A fourth warning
light is the appellate power to affirm a Board decision for
reasons other than those articulated below and the advocates'
propensity to invent new arguments and tactics on appeal [231].
Our scoring does not attempt the herculean task of determining
when the grounds for affirmance advanced by district and
appellate judges were arguably or clearly different from the
grounds for decision stated by GAB.

Despite all these caveats, we believe the 89% Board win
record on appeal strongly corroborates our impression that the
Board decides cases not only efficiently but also well. The
substantial bulk of federal court opinions adopt the Board's
reasoning and would appear to be affirmances regardless of the
scope of review. Further, the fact that losing grantees do not
appeal eleven of every fifteen GAB decisions corroborates our
questionnaire results which show high lawyer satisfaction with
GAB both in practice and product. The decision to appeal, to be
sure, is composed of many considerations. But the quality of the

736 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Board decision and its supporting opinion are critical factors
and a low appeal rate can be read as an affirmation of the
soundness of both.

CASE MANAGEMENT 737

VIII. PERCEPTIONS OF PROCESS

A. ATTORNEY QUESTIONNAIRE

Empirical studies demonstrate that the effectiveness of case
management techniques and court improvement initiatives is highly
dependent on the cooperation of the bar practicing in the
particular court system. One study labeled this the "local legal
culture" and showed its strong impact on case processing
times [232]. Court procedures aimed at moving cases along
expeditiously may or may not succeed in the long run depending
upon attitudes of the lawyers and judges subject to them. Where
bench and bar believe in the appropriateness of and need for
greater efficiency in case processing, procedural steps aimed at
that goal will be productive. This is particularly true when
attorneys can be made to see that efficiency serves their
interests as well as the public's, as when rapid decisions help
management run a better program or business. On the other hand,
in districts where attorneys and judges believe that lawyers
should control the pace and methods of litigation, with minimal
judicial interference, efficiency-seeking measures will likely
fail. Even if reforms are mandatory, lawyers, in collaboration
with like-minded judges, will find ways to evade the new
requirements and to continue to litigate in the style traditional
to the district.

In light of the determinative influence of lawyer attitudes
on the likelihood of success of procedural innovations, we had to
ascertain the views of the lawyers practicing before GAB. Their
views might provide important insights about the acceptability of
GAB "heavy management" techniques to the bar and, consequently,
the reception to be expected elsewhere. Lawyers from coast to
coast practice before GAB; therefore, our findings would have a
"national" flavor as opposed to a "local legal culture." This
would enhance our findings, in the sense of making them
representative of views likely to be held throughout the country.
But it would also factor out the attitudes contrary to those in
our sample which might be held in aberrational districts,
regions, or agencies.

We sent the questionnaire in Appendix E to 290 attorneys
whose names appeared in GAB case files. 131 responses were
received from at least 31 different states. See Appendix B.
Eighty respondents represented grantees before the Board and
fifty represented the United States. We asked the lawyers to
answer case-specific questions on the basis of the case they last
litigated at GAB. One of our questions was whether they had won,
lost, or split this last case. 50 reported victories, 38 defeats,
35 split decisions, and 8 did not respond. Throughout the report
we use the phrase "United States attorney" not in a technical
sense but meaning the representative of the United States'
position. One Board Member objected to our putting the "United
States" on the right-hand side of the "v.," saying:

I object to speaking as thought the U.S. were a party.

738 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

The siibagencies of the Department are parties. The process
is set up by the Secretary of the Department. If the
correct result is achieved, the U.S. "wins," even if the
grantee retains the funds.

In summary, our responses reflected a good cross-section of
the country, of the parties represented at GAB, and of case
results there. Most respondents reported on recent results
(1985,80; 1984,33; 1983,15; 1982,2; 1981,1), meaning that their
perceptions were reasonably fresh. Of importance is the fact that
those who responded had litigated more than 491 cases before the
Board [233], almost one-fourth of the entire caseload of the
Board over its thirteen year history.

Most of the respondents had moderate legal
experience. Two-thirds said they had practiced law between 6 and
15 years. Only 11% (n.l4) had 16 or more years in the practice of
law, while 22% (n.28) had been lawyers five years or less. On an
average they had represented government authorities for eight
years; these responses spread over a range from one (n.4) to
thirty-one (n.l) years, with most (n.86) in the 2 to 10 year
range. Only 25 respondents, 19%, had appeared in just one case at
GAB. 45 respondents (35%) had litigated six or more cases, and
the average across all respondents was 3.8 cases. 84% said they
had participated in a GAB conference or hearing in their last
case.

All together, the respondents had considerable experience
providing legal representation to government agencies both at GAB
and in all regions of the United States. This profile encourages
us to believe that the questionnaire answers were likely to
reflect both considered and informed judgments.

Our questionnaire sought the following types of
information [234]. First, we wanted some idea what these
attorneys generally thought about court efficiency and case
management — the heart of this report. Second, we wanted their
general impressions about the Board itself : its procedures,
personnel, efficiency, and capacity to produce "correct" results.
Third, we sought information about particular facets of GAB
procedures, such as discovery, use of telephonic conferences, and
deadlines. Finally, we scattered several questions aimed at
ascertaining whether attorneys thought the Board to be partial,
in the sense of being predisposed toward ruling in favor of or
against the United States.

CASE MANAGEMENT 739

B. COMPOSITE VIEWS OF ATTORNEYS [235]

We asked attorneys for their opinion of strong "case
management" which we defined as follows:

Techniques used by Board members and staff to
move cases along efficiently and to achieve correct
results. Examples include orders to develop the
record, orders that particular information or
documents be provided, questions to clarify parties'
legal and factual positions, and GAB formulation of
the issues in dispute.

We assumed that attorneys, used to controlling the pace and
procedures of litigation, would be generally antipathetic to
heavy management of "their" case. We were pleasantly surprised to
learn the contrary: overall, our attorneys approved such
interventionism. On the extremes, 15 respondents strongly
approved of such management, while only one vehemently
disapproved. Toward the center, more than half of the respondents
"approved" of court management (n.66), while only 13 respondents,
10.5%, "disapproved." A considereODle number of respondents, 29
(23.4%), were "neutral" to the matter. This significant quantity
of indifference may signal a worrisome attitude that court
efficiency is not a lawyer's concern. In summary, the composite
opinion about case management was:

APPROVE 81 65%
NEUTRAL 29 23%
DISAPPROVE 14 11%

This attorneys' predisposition in favor of active case management
portended a rosy review of the Board, which is similarly
inclined, both in theory and practice.

In fact, the attorneys' evaluation of the Board's efficiency,
procedures, and personnel is even more positive than one could
anticipate. Recall that grantees win only one of every six
dollars and only one of every six disallowances adjudicated by
the Board [236]. Since two- thirds of the respondents were
grantee attorneys, we might expect a dismal opinion of the Board.
But on all counts the Board received high grades.

Concerning the Board's efficiency, defined as "reaching and
deciding an issue with minimum investment of time and resources,"
the lawyers gave the Board top rating ("very good") in 53
responses, 41% of the total. Most of the remainder (n.62; 48%)
rated the Board's efficiency as "adequate." The mean and median
scores for this rating were 3.3 out of 4.

Such efficiency did not, apparently, curtail the parties'
opportunities to prove their cases, the price one might expect
highly efficient court systems must pay. [237] From Table 8 A,
infra, we see that the Board was rated very high in terms of the
opportunities it offered the parties to present their cases as to

740 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

facts (mean: 3.5/4), as to law (mean: 3.5/4), and as to "all of
the evidence and arguments favoring your side of the case."
(mean: 3. 3/4) .

We used two ways of measuring the attorneys' general opinions
about the Board's procedures. We asked attorneys to rate
them directly on a scale of 1 to 10. The Board's procedures
scored an impressive 7.01, above state court (6.58) and below
federal court (7.49). A question for future research is what
particular facets of state and federal court practice are
considered unattractive and attractive, respectively. A second
measure is the composite score on all questions. The respondents
gave the Board the top score in 36% of the ratings (856/2379) and
a score of "adequate," "fair," "approve," or "infrequent"
(something undesirable) in half the cases (1194/2379) . Thus, in a
remarkable 85% of all evaluations the Board was graded as
satisfactory or better. The mean and median score on all
questions was 3.2 of 4. [238]

Board personnel received comparable ratings. On a scale of 1
to 10, Board Members were rated at 7.02 and Board staff attorneys
at 7.09. When asked directly about the "competence" of the Board
Member who presided over their cases, the lawyers gave top grades
("very good") in 60 instances (46%), while rating the judge as
inadequate or worse only nine times (7%) .The mean score on the
"competence" question was a solid 3.38 of 4.

We gave the attorneys an opportunity to tell us about GAB in
their own words. 38 respondents volunteered comments. Their
tenor coincided with the positive pattern of the scores, whether
offered by United States or grantee representatives. The lawyers
who were favoreUsly impressed with the Board's operations said:

"[T]he judge cuts through all the rhetoric and gets
down to the issues very quickly." (Respondent #5.
U.S. Winner)

"GAB is . . . first rate on substance, creativity in pro-
cedures, and fairness." (Respondent #18. Ge. Loser)

"What impressed me most about the GAB procedure was

the creation of the ' file ' whereby we were able to submit

all pertinent evidence... ." (Respondent #19. Ge. Loser)

"[T]he best administrative tribunal I've ever worked
with in terms of case development. The presiding officials
and staff attorneys are particularly good at questioning
to develop facts. ... [T]he decisions are very, very
thorough." (Respondent #26. U.S. Winner)

"In every respect I have found the Board and its staff
to be an outstanding professional body." (Respondent #51.
U.S. Splitter)

"[T]he GAB'S procedures are fair and expeditious."

CASE MANAGEMENT 741

(Respondent #57. U.S. Splitter)

"I specialize in GAB practice because I like it. It is
fast, fair, and no one gets away with sloppy work."
(Respondent #63. Ge. Winner).

"The GAB works well because of the excellent quality of
staff ... ." (Respondent #82. Ge. Splitter)

"I have been uniformly impressed with the Board,
particularly as to ... [the] clarity and excellence of
the written decisions." (Respondent #92. U.S. Splitter)

"I am generally impressed with the informal and usually
fair way the Board handles individual cases ... . "
(Respondent #99. Ge. Winner)

"I found that body to be very thorough in assessing the
facts submitted and in making a ruling on those
facts... ." (Respondent #108. Ge. Winner)

"GAB is a good, fairly quick and less expensive
alternative to litigation." (Respondent #122. Ge. Loser)

"On the whole I have not had any trouble in cases
before the GAB. I am satisfied with the procedures."
(Respondent #127. U.S. Winner)

Seventeen representatives of the grantee community commented
negatively. The most common criticism was that the Board, despite
its appearance of neutrality, was at bottom an arm of the United
States which strongly favored DHHS actions and interpretations.
Strong feelings are evident in the following epithets: "a slick,
efficient operation which ends up quickly reviewing and approving
most of DHHS' proposed adverse actions;" "a kangaroo court that
rubber stamps the wishes of the U.S."; "their role is simply to
implement departmental policy and give it a gloss of legality and
impartiality"; "[t]he GAB seems to view their function as
upholding DHHS disallowances"; "[t]he gross partiality of the GAB
for its employer, DHHS, makes it an obscenity in the 'justice'
system"; and "[t]hey are clearly fearful of showing any more than
the smallest amount of independence from DHHS positions." GAB's
adherence to "technical" federal requirements is frequently
perceived by the grantee community as antithetical to the "big
picture," which is the ultimate goal of the programs: to provide
health and welfare services to needy individuals.

On the other side of the "v.", federal attorneys frequently
perceived the exact opposite: the Board bending over backwards to
help grantees. Five U.S. attorneys complained about the Board's
pro-grantee attitude. But there is a subtle difference in the
complaints of each side. The U.S. attorneys saw litigation
favoritism, such as interjecting issues favorable to the
grantee-appellant, making grantees' arguments for them, and
liberally conceding them time concessions. In contrast, the

742 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

grantee attorneys worried more about the Board's uncritical
acceptance of federal policies xinderlying fiscal disallowances
— more a question of rulings on the merits. Two U.S. attorneys
anticipated this criticism from the grantee group and rejoined
that if grantees frequently lost at the Board, this was simply a
result of their cases generally being weak on the merits and not
any pro-United States bias on the part of the Board.

This perception that GAB is wedded to federal substantive
policy, whether realistic or not, seems to be the grantees' main
bone of contention. Twenty lawyers bothered to write that GAB's
authority should be increased in this regard. The Board should
have the power, according to the write-in's, to set aside DHHS
policy (whether in the form of regulations, lesser issuances, or
"interpretations") as contrary to statute, as arbitrary and
capricious, or as procedurally flawed. One senses that these
lawyers lost cases at the Board because of an unfavorable DHHS
rule which made no sense to them but which the Board honored
nonetheless. This also underlies the several comments that GAB
should offer "more fairness, less rules," or should correct
inequities caused by DHHS actions and policies, or should avoid
"technicalities."

Several particular aspects of Board procedure provoked
significant discontent. 66 attorneys (52%) were unhappy with the
accessibility of GAB precedents which are issued in mimeographed
form, mailed only to those who know to ask, and roughly indexed.
Thirteen respondents commented that GAB should index, publish,
and widely disseminate its opinions. A significant number of
grantee attorneys, 28, rated their discovery opportunities as
inadequate or very poor. The recommendations for broader
discovery powers were the second favorite write-in comment. Many
lawyers also mentioned the Board as needing subpoena power,
although it was not clear whether they meant subpoenas to compel
attendance at a deposition, at a hearing, or both. Significant
numbers of attorneys (n.20; 16%) thought Board members did not
wisely utilize their discretion and most (n.76; 60%) thought such
exercises of discretion were merely adequate. This is not
surprising given that acts of discretion, such as granting or
withholding time extensions, frequently involve delicate and
debatable balances of equity. A final "soft spot" was the Board's
reception of redundant evidence, thought to be "frequent" or
"very frequent" by 28% of the respondents.

On all other counts — notices, deadlines, issue clarity,
evidence gaps, surprise witnesses, evidentiary rulings, and use
of telephone conferences — the Board scored well.

The discovery issue has plagued the Board for several years.
Discovery is not mentioned in the Board rules, but the Board will
grant discovery if a litigant can show a strong need. [239]
Several lawyers are unhappy about having to make such a showing,
preferring to have free access to depositions and interrogatories
as in federal and state court. One Member thought these were
just a handful of disgruntled lawyers, but data in Table 8A,

CASE MANAGEMENT 743

Infra, show it to be a sizeaOale minority.

Without doubt, should the Board adopt free discovery as in
federal court it would invite the delays and abuses which
provoked the 1983 amendments to the Federal Rules of Civil
Procedure [240]. A change toward free discovery would not bring
many compensating benefits, because cases at the Board do not
ordinarily involve the type of fact issues for which discovery is
most needed [241], and would certainly not be generally required
as a due process right under the balancing test of Mathews v.
Eldridae [242]. Should the Board decide to offer discovery it
probably has the legal wherewithal to do so, though it cannot
directly issue subpoenas or contempt orders. It will take
negative evidentiary inferences should a party fail to produce a
witness or a document as ordered [243], and can take a hint from
the Supreme Court and, under its power to control proceedings,
impose sanctions against parties who disobey discovery directives
[244]. But a serious question remains whether more discovery
would be an advisable reform.

The Board should disseminate more widely its opinions and the
key word and citation index prepared by its staff. Board
decisions are authoritative precedents and for the sake of
fairness should be as widely available to the first time
litigator as the veteran. While efforts to convince private
companies to publish and disseminate Board opinions have
foundered on economic reefs, the Board itself could expand and
improve its distribution list, as by automatically sending its
opinions and their indices to first time litigators.

We were puzzled by a significant aberration in the data:
Despite the high scores given by both sides to Board procedures
and personnel, a significant percentage of attorneys, one
quarter, thought the final outcome in their cases was "unfair" or
"very unfair." These were overwhelmingly grantee attorneys: 29 of
31 who thought the outcome unfair. See Table 8B, infra. Good
people applying good procedures should normally, one would
imagine, produce good results.

We first looked, of course, at the correlation between an
attorney's opinion on the fairness of a case's outcome and how
well the attorney did in the case: win, lose, or split. See Table
8C, infra. As expected, substantial numbers of losers thought the
case result was "very unfair" (n.3; 8%) or "unfair" (n.l3; 36%).
We were surprised to learn that those who reported split
victories also groused about the outcome in almost equal numbers
(n.l3; 37%). The reason for discontent in those who reported
partial wins is likely the quality of the victory. Not
infrequently the Board or the Agency will make a minor financial
concession to the grantee while preserving the bulk of the fiscal
disallowance. Consequently, the grantee can report a "split"
result while remaining dissatisfied with the outcome.

It is pleasing to note that a large percentage of those who

744 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

reported having lost at the Board were able to characterize that
result as "fair" (n.l8; 50%), though only in two cases did the
loser describe the result as "very fair." Curiously, the converse
did not happen frequently. No winners thought their victory to be
"very unfair" and only two judged their win to be "unfair." This
is consistent with the data which show that the United States
usually wins and the write-in comments of its attorneys to the
effect that grantee appeals are often quite unsound in law and
fact.

The puzzle — satisfaction with the Board but dissatisfaction
with case results — may have a second, more subtle key. It may be
that attorneys from the grantee community believe that the
"pro-U.S." bias of the Board, a view often mentioned in the
write-in comments, leads to unsound results even though the
Board's procedures are generally perceived to be satisfactory and
its personnel to be competent. We asked the attorneys whether
Board members and staff treated parties impartially. In 28 cases
(21%) lawyers reported partiality, 21 viewing the United States
as being favored and 7 seeing the grantee as the favorite. A
lesser number (n.20; 15%) reported the procedures as being
biased [245], most thinking the United States to be the
beneficiary of the bias (n.l4). Part of the perception of bias
may stem from the belief in the grantee community that the United
States has superior resources in litigating before the Board.
Forty percent of the respondents so believed. On their face the
Board procedures offered equal and quite full participatory
opportunities — 79% of the respondents thought "participatory
opportunities" to be equal. Yet superior United States resources
and a pro-U.S. disposition led to numbers of unfair results in
the eyes of a significant minority of grantee lawyers.

Cutting in the other direction, the grantee lawyers did not
harshly judge the Board Member presiding over their particular
cases. He or she was seen as very impartial in 22 cases (28%), as
impartial in 41 (51%) , and as biased 17 times (22%) . See
Table 8B, infra. The mean score on this question, 3.2 of 4, was
the seone as the mean result for all questions. See Table 8A,
infra. And the percentage of grantee lawyers answering
negatively on this question — 22% — was not greatly higher than
the negative answers on all questions: 16%. See Table 8B, infra.
We may conclude, therefore, that the Board Member is perceived as
a competent judge with personal integrity operating under
efficient, well-conceived procedures yet, in the eyes of a
substantial minority, systematically biased in favor of the
United States because of the Board's status as a United States
agency. Many respondents suggested that GAB be made "independent"
of the agency whose actions it reviews.

CASE MANAGEMENT 745

C. PERCEPTIONS BY PARTY REPRESENTED

Attorneys for the United states win five of every six dollars
adjudicated at the Board and also five of every six
disallowances [246]. Naturally, on the other side grantees are
losing. One would expect this disparity in outcomes to translate
into marked differences in attitudes about the Board. To measure
such differences, we segregate, in Table 8B, infra . the
questionnaire ratings by party represented [244].

A measurable difference is found in most categories, with
grantee attorneys generally giving the Board lower ratings. But
what is truly remarkaible is the narrowness of the spread.
Overall, grantee lawyers rated the Board as satisfactory or
better in 83.5% of the ratings, while the United States attorneys
did so at a 90.3% proportion. Similarly, the composite means are
only .2 points apart, 3.3/4 for the U.S. attorneys, 3.1/4 for the
grantee representatives. Ratings of Board personnel are even
closer. And in evaluating Board efficiency, grantee lawyers gave
GAB higher grades than the U.S. attorneys.

There is a marked difference in the perception of validity of
case outcomes. In only 13% of the cases were grantee lawyers
willing to say that the final outcome of a case was "very fair,"
compared to 42% of the other side. Also, 5% less grantee
attorneys thought the case result to be "fair." Put in converse
terms, a sizeable block of grantee attorneys were unhappy (n.25)
or very unhappy (n.4) with the outcome of the case they litigated
before the Board. The mean scores of the "fairness of outcome"
question were significantly divergent: U.S., 3.36/4; Ge, 2.57/4.
Part of the explanation appears to be that the GAB Members, while
competent (grantee attorneys actually scored them higher than
U.S. attorneys on "competence") , are perceived as partial to the
United States. On impartiality, U.S. lawyers rated the Members
3.44/4, while grantee lawyers 3.03/4.

746

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

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CASE MANAGEMENT 749

IX. OPPORTUNITIES TO BE HEARD

Pushing cases speedily through an adjudicative process may
sacrifice party participation. The fewer events in a case, the
quicker it can be resolved. From an instrumental perspective,
curtailing "opportunities to be heard" may deprive the Board of
relevant fact, law, policy data, and analysis, thereby leading to
Board ineffectiveness in case results. Efficiently ineffective
is not our goal in civil litigation. We want correct decisions
efficiently reached.

We saw in Section VI how aggressively the Board shepherds each
case by using multiple management techniques. While Section VIII
taught us that attorneys for both sides are generally quite
pleased with the Board's procedures and practices, including case
management, we learned in Section VII that a significant number
of grantee lawyers thought the result in their losing case to be
"unfair" or "very unfair." This may be, of course, the natural
grousing of lawyers who, caught up in the adversary system, come
to convince themselves of the "justness" of their cause. But it
may also be a perception caused or fed by the Board's tight case
management. As one illustration, a sizeable number of attorneys
practicing at the Board want broader discovery
opportunities [248]. The view that a case result was unfair
might have been formed on the basis of denied discovery which the
attorney believed would have unearthed facts damaging to the
other side.

We measured "opportunities to be heard" in several ways. One
was to identify and count the various participatory requests in
the 274 cases sampled. We looked for the different opportunities
sought and the Board's disposition of such motions, petitions,
and requests. We started with an inventory of participatory
requests typically found in civil litigation and added the new
ones we uncovered in our scrutiny of case files. Table 9A, below,
contains our inventory of requests and the number of each found
in the case files.

750 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

TABLE 9A: ATTORNEYS' PARTICIPATORY REQUESTS

Request No.

1. FACT HEARING 21

2. WITHDRAW APPEAL WITHOUT PREJUDICE 11

3. CONSOLIDATE CASES 10

4. SUMMARY DECISION 8

5. DISCOVERY 7

6. CONFERENCE 7

7. SUBMIT DOCUMENT 6

8. SUBMIT ADDITIONAL BRIEF 6

9. INTERVENE 6

10. ADVISORY OPINION 5

11. MEDIATION 4

12. GAB PROVIDE CERTAIN DATA 2

13. PARTICULAR PERSON BE PRODUCED 2

14. SUMMARY JUDGMENT 2

15. CHANGE OF VENUE 1

16. SUBSTANTIVE CHANGE IN TRANSCRIPT 1

17. CHANGE FORMULATION OF ISSUE 0

18. ADD AN ISSUE 0

What surprised us most about this inventory was the small
size of the count. The attorneys who practice at GAB do not seem
to press very hard for opportunities to be heard beyond what the
Board offers in its standard procedural formats. The often
expressed idea that case delay and inefficiency is bred by
lawyers engaged in procedural maneuvering is not confirmed by the
litigation experience at the Board. Nor can it be said that the
paucity of participatory requests is produced by the likelihood
of denial. In fact, the Board granted 51 of the contested
requests, compared to only 26 denials, the balance of requests
being either withdrawn or resolved by party agreement.

Another way we measured "opportunities to be heard" was to
collect and count side disputes: wrangling over technicalities
unrelated to the case merits. This is what is commonly known as
"motions" practice in state and federal court [249].

Consistent with our findings on participatory requests, we
encountered few disputes divorced from the merits. What we mostly
found were issues concerning the Board's jurisdiction over the
particular subject matter or concerning the timeliness of the
appeal. There were 26 jurisdictional issues injected into our
sampled cases. Most of these controversies were initiated sua
sponte by the Board Chair. The bulk of these peripheral matters,
therefore, cannot be attributed to overly contentious attorneys.

Separating out matters of the Board's authority, what
remained was only a handful of spats. We found eight instances
when one side moved to impose sanctions upon the other for
alleged procedural error, three motions to strike documents
submitted by the adversary, one formal discovery motion pursued

CASE MANAGEMENT 751

with briefs, and one motion to add a party claimed to be
necessary.

In arguing side disputes, neither party submitted extensive
briefs In the normal case. The attorneys for the
appellant-grantees averaged only 3.7 pages In their briefs on
these technical matters, compared to an average brief of ten
pages In their main argument on the merits and an average reply
brief of 8.3 pages. Briefs for the United States In side disputes
averaged 6.2 pages, compared to an average 12.2 pages In their
main briefs on the merits.

In summary, we found relatively few Issues tangential to the
merits being raised. When technical matters were placed In
controversy, the parties did not Invest substantial resources and
energy In pursuing them.

As another measure of "opportunities to be heard" we asked
the attorneys directly about their participatory opportunities
and found, consistent with the above data, a high level of
contentment with Board practice. As a general matter the lawyers
believe that the Board's procedural tracks offer sufficient
process for them to present their cases fully, with the exception
of some attorneys who want freer discovery [250].

When asked about the "completeness of fact presentation" in
the last case they litigated at the Board, 108 lawyers answered.
65 (60%) thought the facts were adequately complete and 40 (37%)
believed the facts to have been very complete. One way or
another, therefore, the Board manages to obtain a reasonably
complete record of the facts underlying the dispute. We also
asked the lawyers to rate their "opportunities to present facts,"
which focuses more narrowly on their personal litigation chances.
Answers to this question demonstrated even greater respect for
the Board with 56% (73/130) of the respondents replying "very
fair" and 35% (46/130) replying "fair."

Lawyers have the opportunity to present their law by the
normal means of main and reply briefs. Also, the Board will
occasionally issue "Invitations to Brief" on important issues
common to several appeals [251]. We further noted that many
appellants inserted legal analysis and citation in their notices
of appeal. Lawyers perceive these different "opportunities to
present law" as quite satisfactory. Most of the 131 respondents,
57%, thought this aspect of Board practice to be "very fair,"
with the remainder mostly rating such opportunities as "fair"
(38%). As we noted earlier [252], lawyers have not sought extra
litigation advantages very frequently. We found in 274 case files
only six requests to submit additional briefs.

Overall, there was a 91% rate of contentment with litigation
opportunities. The response to the question "To what extent did
the GAB procedures provide you with an opportunity to present all
of the evidence and arguments favoring your side of the case?" is
displayed in Table 9B below. We readily see that lawyers

752 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

litigating at the Board believe that the heavy case
management practiced there does not negatively affect their
"opportunities to be heard."

TABLE 9B: LAWYERS' PERCEPTION OF OPPORTUNITIES TO BE HEARD

Rating No. %

VERY GOOD
ADEQUATE
INADEQUATE
VERY POOR

While grantee lawyers were less willing than their U.S.
counterparts to rate Board opportunities as "very good," 35%
versus 62%, most, 52% thought the opportunities adequate [ 253 ] .
This combined rating of 87% satisfied is very impressive
considering that grantee attorneys lose 80% of their cases at the
Board and 80% of the dollars appealed [254].

45%

46%

CASE MANAGEMENT 753

X. CONCLUSIONS AND LIMITS THEREON

A. SYNOPSIS OF THE BOARD'S RECORD

The law's inefficiencies have commanded considereODle
national attention in the 1980 's. Motored by the trenchant
criticisms of respected legal scholars, a consensus is rapidly
developing that the cost and delay of civil litigation must be
combatted in substantial ways and that this is the duty of those
who preside over courts and administrative boards. Many years
ago the California Chief Justice pronounced his duty to be not
merely the achievement of justice but the efficient achievement
of justice [255]. He said:

Every court has a responsibility to the public to see that
justice is administered efficiently and expeditiously and
that the facilities of the court are made available at the
first possible moment to those whose cases are awaiting
trial. [256]

It may be that other chief justices have lilcewise perceived their
court management duties over the years, but only tinkering and
patchwork [257] and little systemic improvement have occurred in
response. Now that the plight of our courts is regularly
surfacing as a matter of serious national concern, however, we
have to hope that judicial efficiency will receive the attention
and effort it deserves.

This study focuses on one promising approach: action- forcing
procedures and aggressive case management by the judge to whom a
case is assigned. We have attempted to measure empirically the
results of certain case management procedures and techniques
employed by the Grant Appeals Board in a conscious effort to
improve the efficiency of its administrative adjudications.

Our empirical measurements, our questionnaire results, and
our interviews have produced a composite picture of a
hard-working administrative court which produces speedy
resolutions of disputes involving substantial dollar sxims. Based
upon attorney evaluations and the upholding of most Board actions
by federal courts, we can conclude further that the Board decides
correctly as wefll as quickly. Cases worth $1.2 million on the
average and $125,000 at the median get decided with a
well-reasoned opinion about five months after the case is filed,
with each case being given sufficient attention to please the
legal representatives of the parties. Section VII revealed that
lawyers are quite satisfied with the procedural system at GAB,
discovery and publication of opinions being the only areas of
significant discontent, and give solid overall ratings to the
Board and its personnel. This evaluation is quite remarkable in
light of the fact that grantee lawyers gave high grades to the
Board for efficiency even though as a group they lost five-sixths
of the cases they brought there.

In sum, we have found at GAB a successful adjudicatory system

754 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

for processing civil disputes. The question now is whether the
Board's procedures and practices could serve, in whole or part,
as a model for court reform initiatives elsewhere. To try to
answer this question, we shall first isolate those features of
Board practice that seem particularly important to its success
and then discuss factors which might limit the utility of Board
procedures in other settings.

CASE MANAGEMENT 755

B. PEOPLE FACTORS

While this is primarily a study of procedural rules and
techniques, we cannot overlook the human element. The
combination of good people and good rules produces the Board's
outstanding record, not one or the other alone. So, before
analyzing the aspects of Board procedures which contribute most
significantly to its high efficiency and effectiveness, we must
relate our impressions about the human engines which drive the
Board's procedures.

We have observed in the GAB Members a commitment to
professional excellence and a deep pride in workmanship. One
observer stated that the "single most important factor"
underlying the Board's excellent record is the fact that its
Members are high quality, hard-working judges with a universal
commitment to excellence in process and excellence in result.
Based upon our reading of Board opinions and case files, our
observations of Members at work, and our interviews with them, we
concur in this evaluation. The questionnaire results show that
the attorneys practicing at the Board are in agreement too. It
states almost the obvious to say that good procedures
incompetently applied will produce inferior results. To some
degree, therefore, this study necessarily presumes that those who
adopt the Board's procedures, in whole or part, are comparably
competent and enthusiastic in their application. Each court
administrator must determine whether delay and inefficiency in
his adjudicatory system is a product of poor procedures rather
than personnel problems.

Other characteristics of the Members at GAB are important to
an understanding of the Board's success. All of the Members
bring to their jobs considerable prior experience in dealing with
government procurement and grant-in-aid issues, and the stability
of the Board's membership has enabled that experience to grow
year by year. As one Member said, "We have been here so long
this is our expertise." This means that each Member infuses each
case with a sound general understanding of the policies,
patterns, and practices of Congress and the Executive Branch in
establishing programs under the Spending Power. They also
possess deep understandings of specific statutes and regulatory
material which they have had multiple opportunities to examine in
earlier cases.- This program expertise is reinforced by a case
assignment system which is not random but which affirmatively
places disputes in the hands of Members with relevant past
adjudications .

Members consequently bring to most disputes a ready
understanding of the issues and the parties' respective positions
and, more importantly, enough substantive competence for them to
engineer a sound decision even if the parties have failed to
present their best cases. During interviews several Members
emphasized their duty to decide cases correctly regardless of the
competence of the party presentations. They do not hesitate to
add issues overlooked by the parties, to suggest new areas for

756 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

factual exploration, and to dig up relevant laws and regulations
unknown to the adversaries. This most frequently happens in
cases where the appellant is appearing pro se or by means of
inexperienced counsel. In interviews agency counsel readily
admitted using GAB as a training ground for aspiring
litigators. In such a case, the Presiding Member will help him
develop his case, leading to complaints by veteran litigators
that the Board will sometimes "bend over bac]cwards" in favor of
appellants.

From the perspectives of this study, efficiency and
effectiveness, such program expertise is a mixed blessing. It
lengthens a case's processing time to add new issues, explore new
facts, dig up new documentation, and find and assess new legal
norms. It is faster and easier to take the cases as presented by
the parties and to let them suffer the consequences of their
neglects. But such a laissez faire approach sacrifices correct
results on the merits. At the Board, the Members' approach, one
which appears dissimilar to the "adversarial system" in American
courts, is not merely to umpire the game of adversaries but to
insure that the party with the better case wins.

This elevation of substance over form is heartening. It
appears to stem from the public nature of the issues before the
Board. The Board adjudicates entitlements to public revenues by
applying norms derived from laws and regulations. Should it err
in such adjudications the loser is not only the litigator, but
also the public at large whose program goals have been undercut.
For this reason adjudicators of public law disputes like Board
Members tend to perceive their primary goal to be to the law
rather than to the mere umpiring of an adversarial joust. [258]
This is reflected in the Board's reluctance to impose sanctions
against the United States for violations of Board orders and
procedures if the effect is to deprive the U.S. Treasury of
receipts to which it would otherwise be entitled [259].

Another important "people factor" underlying GAB's remarkable
efficiency is the cooperative spirit among Board Members which
enables them to reach consensus quickly. This is reflected in
the publication of almost 800 three-Member opinions without one
dissent and with but one concurring opinion. A Member said the
Board is comprised of "like-minded people." We take this to mean
a sharing of professional understandings about technical matters
rather than similarity in personal values. All Members are
likely to read a grant-in-aid regulation the same way. The Board
"is not the Supreme Court," as the Members say, meaning both that
it does not have the Court's time and resources to pursue the
filigree of policy debates and that its matters are mundane,
technical, and somewhat arcane as opposed to the matters of
intense personal importance which regularly wrench the high
court .

A final observation is that Board Members are part of the
federal government's personnel management system and are rated
biannually on their performances. Written performance criteria.

CASE MANAGEMENT 757

reproduced in Appendix F, are utilized by the Board Chair who is
responsible for these ratings. Treating judges as personnel to
be "managed" by a "superior officer" and by biweekly computer
case status reports is as unusual in a judicial system as it is
common in business and the executive branches of government. In
interviews, Board Members believed that performance ratings
worked subtly to maintain high levels of productivity and
responsibility. They did not believe that the rating system in
any way compromised their independence of judgment about the
merits of cases. [260] Persons in charge of courts and boards
elsewhere are advised to consider adopting modem personnel
management techniques whenever the danger to independence of
judgment can be avoided or minimized. If judges are not exempt
from being efficient in the work for which they are paid, there
seems to be little reason not to measure that efficiency
periodically [261], as long as no effort is made to gauge the
"accuracy" or "correctness" of their adjudicatory
decisions. [262]

758 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES
C. PROCESS FACTORS

In Section VI we described and quantified the various
management techniques which Board Members utilize within the
structure created by the rules of procedure, explained in Section
IV-C. While each particular procedure and practice contributes
in some way across the Board's caseload, certain of them appear
to have a particularly powerful positive influence on Board
efficiency and effectiveness.

Heading the list, we believe, is the assignment of cases to a
"presiding" Board Member. Apart from jurisdictional
preliminaries which are all handled by the Board Chair, each
surviving case is assigned for processing to one Board Member.
Although a panel of three ultimately determines the merits, the
Presiding Member shapes it and moves it along from step to step.
He or she rules on motions, plans and presides at the conference
or hearing, and otherwise brings the case to the point of
decision. This is, essentially, the "individual calendar system"
which has proved effective in federal district court compared to
the inefficient "master calendar system." [263] By assigning all
responsibility to a single judge, the individual calendar system
enables managers to ascertain where and why backlogs and
breakdowns are occurring. The clear visibility of case progress
puts pressure on the Members to effectuate the Board's case
management goals and enables the Board Chair to "manage"
performance by rating Board Members under written performance
standards .

This is not to say that case schedules will not vary, both
individually and in the aggregate, from Member to Member.
Variations are normal because each case imposes different
demands, the interstices of set "routines" have considerable
flexibility and adjustability, and leeway exists for each Member
to fashion a personal adjudicatory style. To illustrate, we
learned that one Member averaged 147 days to resolve 42
full-cycle cases while another Member averaged 264 days for 29
full-cycle cases [264]. Still, we believe that GAB's
"action-forcing" procedural system both minimizes such individual
disparities [265] and keeps even the most deliberative judge on a
reasonably fast track. In short, while large differences between
cases make complete routinization impossible, management rules
and techniques can avoid the inefficiencies inherent in the case
"customization" so prevalent in state and federal court.

Also important to the Board's case management success is the
appeal file system. Within a few weeks of the appeal's filing
the Presiding Member has on his or her desk many of the documents
containing the relevant case facts. To quote one Member, "the
cases are off and running at an early date." [266] The notice of
appeal has delineated the issues and the basis for the Agency's
action. The appeal file now displays the background
documentation. With these in hand, the Presiding Member may
thoroughly familiarize himself or herself with the case facts,
understand the issues and the parties' positions, begin to

CASE MANAGEMENT 759

structure the process suitable to the case, and issue preliminary
case management directives. [267] Any dispute preceded by party
interactions which create a factual record is amene^Dle to the
appeal file approach.

Another important management technique is the "tracking" of
cases based on amount- in-controversy and issue complexity.
Because the Board generally does not rule on constitutional
issues [268], it need not worry about cases with small dollars
but important principles at stalce. It may rely on the dollar
amount appealed to ascertain the "worth" of cases and their
respective claims to the Board's attention. So, unlike federal
court where cases small in dollars and even principles get the
same Federal Rules as the blockbusters [269], Board cases worth
$25,000 or less, about 18% of the docket, are assigned to an
expedited processing track. Such assignment takes maneuver
options away from the lawyers and practically guarantees a fast,
inexpensive disposition. In our case sample, such cases were
decided on the merits an average of five months after being
filed.

The Board of course recognizes that a $200 claim may involve
difficult, complex questions of adjudicative fact "correctly"
resolved only after an elaborate trial. Conversely, a $200
million dispute may involve only questions of law or simple fact
resolved after a brief study of uncontroverted dociiments. The
Board retains the power, therefore, of assigning cases to
trial-type process when the case so merits. The important
distinction from normal civil procedure is that the Board makes
such assignments, not the lawyers. The lawyers cannot threaten
an extended trial as a negotiating ploy, nor do they have free
rein to waste valuable litigation resources on matters of small
importance .

In practice as well as procedure the Board thwarts attorney
maneuvers which contribute to delay. For example, in the case
files we often found warnings that further time extensions would
not be granted except under extraordinary circumstances. The
Members are generous about granting the first or second request
for more time, thereby stretching case disposition time by some
22 days on the average. But stern warnings accompanying such
approvals have the effect of discouraging further requests for
additional time. Here we see another important facet of Board
practice leading to efficiency in disposition: the anti-dilatory
attitude of Board Members. Possibly more important than
action-forcing procedures are action-forcing attitudes on the
part of judges, enforcement of procedures being at bottom wholly
discretionary. The Board Members believe in the time
disposition goals established by rule [270] and actively seek to
accomplish them by discouraging dilatory tactics and enforcing
the procedures as written. The fact that their own performances
are being regularly measured may play some role in creating the
pressure to move cases along rapidly. In comparison, most court
systems permit attorneys to set a pace of litigation convenient
to the attorneys' office caseload [271]. At the Board we noted a

760 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES
total rejection of such a judicial laissez-faire attitude.

The above anti-dilatory attitude may explain the comparative
absence at the Board of "side disputes": wrangling about
technical matters like pleading error, jurisdiction, and
discovery, which consumes so much time, energy and resources in
state and federal court. Attorneys practicing at the Board, half
of whom have one or more prior litigations there, may sense that
the Presiding Member will take a hostile view of dilatory and
strategic motions and avoid all but the most well-founded
petitions.

The absence of trial formalities also seems to contribute
importantly to the Board's efficiency, and is another factor
meriting emphasis. We found only a handful of formal hearings in
the 274 cases sampled. At these hearings direct examination and
cross-examination take place, but in a relatively casual,
conversational style. In opening such hearings the Presiding
Member reminds counsel that the formal rules of evidence do not
apply. The routine includes the following statement:

We try to preserve an informal atmosphere for this type of
hearing, but we need to produce an orderly transcript,
particularly since there are two other board members who will
not be here all the time and will work only from the trans-
cript.

So generally we need to take the same care concerning oral
presentation as we would in the courtroom. That is the
witnesses and attorneys should speak slowly, clearly, one at
a time, and avoid visual displays such as nods which will not
get on the record.

The board has always taken a liberal view of the rules of
evidence in this type of proceeding, and except where I
determine that evidence or testimony is clearly irrelevant,
immaterial, or unduly repetitious, it will be included as set
out in Section 1611(b) of the board's rules. So I ask the
attorneys to try to keep to a minimum your objections based
on evidentiary matter.

There should be few exhibits introduced in this hearing
because both sides have had ample opportunity to develop and
add to the appeal file. If there are documents which either
of you wish to introduce, would you follow the procedure,
please, of handing a copy to the reporter for marking and a
copy to opposing counsel, move introduction of the document.
I will ask for objections; if there are none or the objection
is overruled, the document will be admitted, and the board
should be given a copy.

We encountered few or no evidentiary objections and rulings in
the 17 hearing transcripts we studied. Most objections were
handled informally by suggestions from the Presiding Member
agreed to by counsel. In summary, we noted little of the
gamesmanship and rituals so common in adjudicatory jury trials .\
The emphasis was on getting to the facts of the case, the \
policies behind the relevant grant rules, and the parties'

CASE MANAGEMENT 761

respective positions on both. We suspect that an hour of "trial"
time at the Board would translate into three or four hours in
civil court and much more taking into account post-trial motions.

This trial efficiency becomes even more pronounced when the
hearing format is the telephone conference. The relaxation of
formal evidence rules and procedures similarly discourages
technical objections, which are rarely noted. Further, the use
of telephones seems to encourage attorneys and parties to "get to
the point." In observing telephone conferences, listening to
tapes, and reading transcripts, we observed little of the
meandering typical of attorney examination of witnesses in civil
court. The lawyers and witnesses addressed, usually directly and
forthrightly, the questions posed by the Presiding Member in a
pre-conference statement. Having had time to prepare responses,
the parties quickly and directly answered the critical fact and
policy questions raised by the Presiding Member.

The final Board practice which we think merits special
attention is the active search by the Presiding Member for
relevant facts, law, and policy. This may be, indeed, the most
critical determinant of the Board's efficiency and effectiveness.
Such Member activism, which occurs as early in the process as the
acknowledgement of appeal, quickly and firmly channels the case
along productive lines.

After studying the notice of appeal, a Member may issue a
directive to the Agency to respond to matters not considered
during the audit process. Having examined the notice of appeal,
appeal brief, and appeal file, the Member might instruct the
Agency to respond to a list of questions in its respondent's
brief. After examining both briefs and the appeal file, a Member
might ask the parties to satisfy, in further briefs or at a
conference or hearing, the Member's information needs. These
might be clarifications of documents submitted by the parties; or
refinement of a party's factual or legal theories; or completion
of the factual record; or further legal research. Members use
the questioning technique systematically and intensively,
disgorging from the parties whatever is needed to complete the
record so that the final decision will be based on the merits and
not the relative competence of the parties. In the 274 case
files studied, we encountered 272 sets of questions, many cases
having multiple sets.

In the process do the Members lose their neutrality and
objectivity? They think not. One Member stated that her
interventionism in completing the record might work to the
advantage of the less competent party, but that once the record
was complete she felt neutral in her weighing of facts and legal
analysis. All Members conceived their duty as getting to correct
results regardless of the parties' respective ability to marshall
facts and to argue the law. Thus, even if subtle biases might
attend their interventionism, which they did not admit, the price
paid would be small compared to the large benefit of correct
decisions.

762 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

While the grantee lawyers did give a significant negative
vote on the question of Member bias, we read the data as meaning
a general slant in favor of the United States, rather than bias
in particular cases [272]. Indeed, legal representatives of the
United States were more likely than grantee lawyers to complain
that Member intervention in specific cases favored the other
side, but there were only five such complaints [273].

CASE MANAGEMENT 763

D. LIMITING FACTORS

Certain characteristics of the cases and parties appearing at
the Board partially explain its adjudicatory success. To the
extent these characteristics are unique to Board litigation,
they limit the results one might expect at a court or agency
which adopts the Board's adjudicatory system. A good
illustration is the high median and mean dollar value of the
cases at the Board. While large economic stakes may motivate the
parties to fight fiercely, they do not necessarily correlate with
case complexity. Large dollar appeals at the Board sometimes
involve only questions of statutory interpretation and simple
ones at that [274]. Also, the audit process frequently brings
the same issue and parties back for one or more subsequent
disallowances. Using joint consideration techniques [275], the
Board can run up its record of case and dollar adjudications with
little extra effort. In summary, the fact that many zeroes are
in controversy at the Board is quite unique and not an accurate
measure of case complexity there.

One unique feature of Board adjudications is the cooperative
and continuing nature of the programs within which controversies
arise. We have written elsewhere about the "cooperative" essence
of federal grants-in-aid, meaning that the parties to an
assistance agreement have the common legal goal of providing the
services defined in the statute, regulation, and agreement [276].
This means that dollar disputes at the Board sometimes have an
almost surrealistic aura. By winning, the Agency defeats the
grantee's ability to effectuate the program which the Agency is
pledged to promote [277]. Enforcement of grant conditions does,
of course, have a deterrent effect on other grantees, thereby
keeping the national program on the route planned by Congress.
But the fact that the litigants are generally partners and only
sporadically adversaries does mollify the disputatiousness which
might otherwise attend Board litigation. We hesitate to
emphasize this factor, however, because Members have assured us
that grantee attorneys, particularly state agency counsel, fight
as vehemently and competently for "their" dollars as attorneys
in the private sector.

A more important "limiting factor" is the considerable
pre-processing of disputes which occurs before an appeal is filed
at the Grant Appeals Board [278]. Months and even years of audit
investigation and resolution have served to sharpen the factual
and legal issues and to gather the documentary evidence relevant
thereto. The fact that the Board receives a meaty package at the
outset enables it to begin active case management right away — an
opportunity generally not present in civil court where the
starting case package is only the raw claims in the pleadings.

This limits the replicability of the Board's procedures to
those cases which have a substantial prefiling record needing
to be "fine-tuned" in court. Other government disputes with a
sxibstantial investigative file would qualify, as would business

764 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

deals which have generated a substantial pre-dispute paper
record. Government contract matters are natural candidates for
the Board's adjudicatory system; indeed, the Board Chair said
that his experience at boards of contract appeals inspired the
1981 GAB procedural reform. [279]

The Board system could also be a planned second stage of
dispute resolution. Parties could first be channeled into a
private dispute resolution mode, such as mediation,
negotiation, or arbitration, which, should it fail in whole or
part, can serve to produce a factual record and definition of
issues. Board-type procedures can then pick up the dispute and
provide a swift second-stage adjudicatory resolution. A major
impediment to such a two-stage system is the rule normally
attached to arbitration, mediation, and negotiation that the
"record" of such a process is not to be admissible in court.
Policy makers would have to determine whether such a
confidentiality rule is so critical to the viability of stage one
that it cannot be abandoned in favor of an effective and
efficient stage two.

Even in civil court or ALJ proceedings unmodified by
compulsory arbitration or the like, phase one might be a
magistrate-directed discovery phase, with the product of that
discovery forming the "appeal file" for the next phase which
heavily borrows GAB processing techniques. [280] We suspect that
this is what generally happens in complex cases in federal
district court, though there may still be some ideas in this
report of interest to federal judges who support aggressive case
management .

Cases where facts are peculiarly within the possession of one
party who has motivations to suppress them, such as conspiracy,
fraud, or antitrust claims, are not suitable for the Board's
procedural system, at least ab initio. The "merits" of such
cases cannot be reached without affording one side ample
opportunity to disgorge the facts possessed by the other. In
most Board cases a substantial package of facts already exists at
the time of appeal and is held by both sides. While the Board
does some fact supplementation, its basic job is to determine
the legal implications of facts which, for the most part, the
parties do not contest. As we discussed above, the Board system
may, nonetheless, be valuable as a second stage. The
pre-processing which occurs at the Agency level and leads to the
set of documents forming the appeal file could be replicated in
other types of disputes as, for example, a discovery phase
managed by a magistrate or a non-confidential negotiations phase.
What arrives in court, then, might be a reasonably developed fact
record, like the GAB appeal file, to which the judge can apply
his managerial skills.

The dispute with strong fact conflicts is another category of
case unsuitable for GAB methodology. When parties and witnesses
are likely to distort and color the "truth," testing by
cross-examination is essential, as are rules for authentication

CASE MANAGEMENT 765

of dociments. Estoppel issues at the Board may present issues of
credibility, and the pressures of office may occasionally tempt a
witness to color the truth, but these are not typical issues
litigated at the Board. Usual "fact" is a matter of
documentation kept in the normal course of government business
with the controversy being one of meaning and effect rather than
authenticity. Indeed, our case file study left us with the
impression that the substantial majority of case facts in Board
disputes are uncontroverted. Frequently the question was whether
there were more relevant facts or documents to be placed in the
record; rarely was the reliability of what was in the record a
cause for concern.

766 ADMINISTRATIVE CONFERENCE OF THE UNFTED STATES
E. CONCLUSIONS

We set out many pages and months ago to test a thesis
empirically: That the Grant Appeals Board was operating an
efficient and effective system for the adjudication of important
disputes between the U.S. Department of Health and Human Services
and its grantees. In 1981 GAB devised a set of procedures aimed
at producing high quality decisions in efficient fashion [281].
Our study hoped to measure the result of that study. If what
seemed to be a "success story" withstood our factual probing, we
might have a model worthy of emulation elsewhere.

We have found such success at GAB. In the sections of this
study we have reported the details of GAB's practices and
procedures and the effects thereof in a random sample of 274
cases and in a questionnaire survey answered by 131 attorneys who
practice at GAB. In summary, the Board is doing a superb job
under a set of procedures worthy of careful study and selective
adoption by adjudicatory bodies throughout the country.

We were commissioned by the Administrative Conference of the
United States, whose charter is to recommend improvements in the
functioning of administrative agencies of the United States. The
recommendations in the next section are directed to that end. We
hope that improvements in the scores of adjudicatory centers
throughout the federal bureaucracy will be inspired by our
findings.

But these are not natural limits on our findings and
recommendations. Lessons are here to be learned by those in
charge of civil adjudications wherever located: boards,
commissions, AU's, municipal courts, county courts,
administrative courts, federal courts. The cause of improved
adjudication of American civil disputes is urgent. We hope our
study contributes to that cause.

CASE MANAGEMENT 767

FOOTNOTES

[1] Fed. R. Civ. P., 1. See generally Subrin, "The New Era in
American Civil Procedure," 67 A. B.A.J. 1648 (1981) (criticizing
eunendments to Fed. R. Civ. P. 11, 16, and 26 for their deemphasis
of simplicity and uniformity) . See also Resnik, "Failing Faith:
Adjudicatory Procedure in Decline," 53 U. Chi. L. Rev. 494,
504 n.43 (1986) (drafters of federal rules interested in "keeping
distinctions to a minimxim") [hereinafter cited as RESNIK].

[2] See R. Cappalli, RIGHTS AND REMEDIES UNDER FEDERAL GRANTS
(BNA 1979) ; R. Cappalli, FEDERAL GRANTS AND COOPERATIVE
AGREEMENTS: LAW, POLICY AND PRACTICE , 3 vols. (Callaghan 1982)
[hereinafter cited as FEDERAL GRANTS].

[3] We even find the FRCP's adopted, at times verbatim, as
rules for administrative proceedings. See 1 Pa. Admin. Code
$$31.1-35.251.

[4] See, e.g. . Fed. R. Civ. P. 26(f) advisory committee note
("The committee believes that abuse of discovery, while very
serious in certain cases, is not so general as to require ...
basic changes ...."); Fed. R. Civ. P. 16 advisory committee note
("In many respects, the rule has been a success.").

[5] See, e.g. . Shaffer v. Heitner, 433 U.S. 186, 211 (1977)
("We believe ... that the fairness standard of International Shoe
can be easily applied in the vast majority of cases.") Compare,
e.g. . Broderick, "Compulsory Arbitration: One Better Way," 69
A. B.A.J. 64, 65 (1983) ("prompt and less expensive alternative")
with A.Lind & J.Shapard, EVALUATION OF COURT-ANNEXED ARBITRATION
IN THREE FEDERAL DISTRICT COURTS (Federal Judicial Center 1983)
(high percentage of trial de novo demands) .

[6] See, e.g. . Citizens to Preserve Overton Park, Inc. v.
Volpe, 401 U.S. 402 (1971).

[7] See, e.g. . M. Rosenberg, THE PRETRIAL CONFERENCE AND
EFFECTIVE JUSTICE (1964) .

[8] See, e.g. . W. Gellhorn, WHEN AMERICANS COMPLAIN:
GOVERNMENTAL GRIEVANCE PROCEDURES (1966) .

[9] Mashaw, "The Management Side of Due Process: Some
Theoretical and Litigation Notes on the Assurance of Accuracy,
Fairness, and Timeliness in the Adjudication of Social Welfare
Claims," 59 Cornell L. Rev. 772 (1974) [hereinafter cited as
MASHAW] .

[10] See, e.g. . Rosenberg, "Devising Procedures That Are
Civil to Promote Justice That is Civilized," 69 Mich. L. Rev.
797, 800 (1971) ("bagful of tinkerings and patchings").

'11] Newman, "Rethinking Fairness: Perspectives on the

768 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Litigation Process, " 94 Yale L. J. 1643 (1985) [ hereinafter
cited as NEWMAN] .

[12] Bok, "A Flawed System of Law Practice and Training, "33
J. Legal Educ. 570 (1983).

[13] See Franlcel, "The Search for Truth — An Umpireal View,"
30 Record of the N.Y.C.B.A. 14 (1975); Frankel, "The Search for
Truth: An Umpireal View," 123 U. Pa. L. Rev. 1031 (1975);
Frankel, "The Adversary Judge, " 54 Texas L. Rev. 465 (1976).

[14] See, e.g. , NEWMAN, supra note 11, at 1657; Flanders,
CASE MANAGEMENT AND COURT MANAGEMENT IN UNITED STATES DISTRICT
COURTS 5 (Federal Judicial Center 1977) [ hereinafter cited as
FLANDERS]; Flanders, "Case Management in Federal Courts: Some
Controversies and Some Results," 4 Just. Sys. J. 135, 135-36
(1978) .

[15] A controlled experiment would be one in which certain
cases would be litigated through the "reformed" system while
others followed the usual course. See generally M. Rosenberg, THE
PRETRIAL CONFERENCE AND EFFECTIVE JUSTICE 16-22 (1964). This
would enable one to be sure that whatever different results
obtained were the product of the "reforms" and not outside
factors. Since we have no control group, the best we can do is
empirically measure the GAB results, ascertain correlations,
estimate the causes of certain phenomena, and be aware of other
factors, unmeasured, which may have influenced the outcomes. See
text at Section VI -A.

[16] For a general discussion of the characteristics which
differentiate the alternative processes for resolving disputes,
see S. Goldberg, E. Green & F. Sander, DISPUTE RESOLUTION ch. 1
(1985) [hereinafter cited as DISPUTE RESOLUTION].

[17] See text accompanying note 214, infra.

[18] See text accompanying note 150, infra.

[19] See, e.g. . Adler et al, SIMPLE JUSTICE: HOW LITIGANTS
FARE IN THE PITTSBURGH COURT ARBITRATION PROGRAM 8-12 (Rand Inst,
for Civil Justice 1983) .

[20] See Rosenberg, Rient & Rowe, "Expenses: The Roadblock to
Justice," 20 Judges' J. 16-19 (1981) reproduced in DISPUTE
RESOLUTION, supra note 16, at 3 00-306.

[21] See generally A. Lind & J. Shapard, EVALUATION OF
COURT-ANNEXED ARBITRATION IN THREE FEDERAL DISTRICT COURTS
(Federal Judicial Center 1983) .

[22] See, e.g. . Verkuil, "The Ombudsman and the Limits of the
Adversary System," 75 Colum. L. Rev. 845 (1975).

[23] F. James & G. Hazard, CIVIL PROCEDURE 300 (3d ed. 1985)

CASE MANAGEMENT 769

[hereinafter cited as JAMES].

[24] See notes 37-45. infra, and accompanying text.

[25] JAMES, supra note 23, at 300.

[26] See Alschuler, "Mediation With a Mugger: The Shortage of
Adjudicative Services and the Need for a Two-Tier Trial System in
Civil Cases," 99 Harv. L. Rev. 1808, 1823 (1986) [hereinafter
cited as ALSCHULER] .

[27] See RESNIK, supra note 1, at 545.

[28] See W. Brazil, SETTLING CIVIL SUITS 1, 44-45 (1985).

[29] See JAMES, supra note 23, at 299-300.

[30] See, e.g. . L. Forer, MONEY AND JUSTICE; WHO OWNS THE
COURTS (1984) ( Philadelphia Court of Common Pleas) ; "Disorder in
the Courts," Phila. Inquirer, Jan 26, 1986, at 1, cols. 1-4, lOA,
cols. 1-5, llA, cols. 1-5, 12-A, cols. 1-5; Jan. 27, 1986, at 1,
cols. 1-3, 6A, cols. 1-5, 7A, col.l; Jan. 28, 1986, at 1, cols.
1-4, 8A, cols. 1-5, 9A, cols. 1-5, lOA, cols. 1-5; Jan. 30,
1986, at 1, cols. 1-6, 16A, cols. 1-5, 17A, COls. 1-5, 18A,.
cols. 1-5 (same) .

[31] See JAMES . supra note 23, at 295-96.

[32] Galanter, "Reading the Landscape of Disputes: What We Know
and Don't Know And Thinlc We Know) About Our Allegedly Contentious
and Litigious Society," 31 UCLA L. Rev. 4, 6-7 (1983)
[hereinafter cited as GALANTER] . The word apparently comes
from Manning, "Hyperlexis: Our National Disease, " 71 Nw.
U. L. Rev. 767 (1977) .

[33] GALANTER, supra note 32, at 63.

[34] Criminal, domestic relations, and tort caseloads have
increased substantially, while property, contract, and commercial
disputes have dropped significantly. Id. at 43.

[35] See GALANTER . supra note 32, at 45-47. See also
Selvin, M. & Ebener, P. A., MANAGING THE UNMANAGEABLE: A HISTORY
OF CIVIL DELAY IN THE LOS ANGELES SUPERIOR COURT 43-46 ( Rand
Institute for Civil Justice 1984) [hereinafter cited as SELVIN].

[36] See GALANTER, supra note 32, at 72. See also
Friedman, "The Six Million Dollar Man: Litigation and Rights
Consciousness in Modern America," 39 Md. L. Rev. 661 (1980).

[37] See Kaufman, "The Philosophy of Effective Judicial
Supervision Over Litigation," 29 F.R.D. 207 (1961) quoting an
address by Mr. Chief Justice Warren to the American Bar
Association [hereinafter cited as KAUFMAN] .

770 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

[38] Burger, "Isn't There a Better Way?," 68 A. B.A.J. 274
(1982) .

[39] Newman, supra note 11, at 1644 ("Too many
cases take too much time to be resolved and impose too
much cost upon litigants and taxpayers alilce.").

[40] Id. at 1643. And making the system more susceptible to
uneven attorney quality, waste of client resources, and
procedural manipulation by parties with large budgets. See
RESNIK, supra note 1, at 523-24.

[41] Frankel, "The Adversary Judge," 54 Tex. L. Rev. 465, 483
(1976) .

[42] See, e.g. . Kaufman, supra note 37, at 207 ("The layman's
greatest grievance with the legal profession and our legal
processes is that he feels that justice follows too slow and
tortuous a path in reaching its goal and that there is far too
much reliance on what he considers 'technicalities'.");
Schwarzer, "Managing Civil Litigation: The Trial Judge's Role,"
61 Judicature 400, 401 (1978) ("The litigation explosion has
created an unprecedented crisis in the administration of justice.
The burgeoning volume, complexity and cost of civil litigation
threatens to exhaust the resources of courts and litigants.");
Peckham, "The Federal Judge as a Case Manager: The New Role in
Guiding a Case from Filing to Disposition," 69 Calif. L. Rev. 770
(1981) (" [T]oday's massive volume of litigation and the
skyrocketing costs of attorney fees and other litigation expenses
have, by necessity, cast the trial judge in a new role, that of
pretrial manager.") [hereinafter cited as PECKHAM].

[43] See L. Forer, MONEY AND JUSTICE: WHO OWNS THE COURTS
(1984) .

[44] Bok, "A Flawed System of Law Practice and Training," 33
J. Legal Educ. 570, 571 (1983).

[45] See, e.g. . T. Church et al. JUSTICE DELAYED: THE PACE OF
LITIGATION IN URBAN TRIAL COURTS (National Center for State
Courts 1978) [ hereinafter cited as CHURCH] ; SELVIN, supra note
35; FLANDERS, supra note 14.

[46] See CHURCH, supra note 45, at chs. 4,5; Flanders,

"Case Management in Federal Courts: Some Controversies and Some

Results," 4 Just. Sys. J. 147, 151 (1978).

[47] See FLANDERS, supra note 14, at ix, ch.2; Connolly &
Lombard, JUDICIAL CONTROLS AND THE CIVIL LITIGATIVE PROCESS:
MOTIONS 56-57 (Federal Judicial Center 1980) .

[48] See CHURCH, supra note 45 at 36 ("The differences in
civil case disposition times between the two systems is striking,
the mean disposition time of individual calendar courts is over
200 days faster than the mean of the master calendar courts.").

CASE MANAGEMENT 771

[49] See Connolly & Lombard, JUDICIAL CONTROLS AND THE CIVIL
LITIGATIVE PROCESS: MOTIONS 57-58 (Federal Judicial Center
1980) .

[50] See CHURCH, supra note 45, at 24 ("By whatever
index chosen, it is apparent that size of court bears little
relationship to civil processing time.").

[51] See SELVIN, supra note 35, at 38; CHURCH, supra
note 45, at 27 : "The data suggest that civil judge caseload has
little relation to civil case disposition time. Courts with heavy
filings per judge can be either relatively fast or relatively
slow." Of course, when caseload begins to produce backlog, the
effect is to slow the pace of each case to disposition.

[52] See CHURCH, supra note 45, at 33 (inverse
relationship between settlement intensity and disposition time) .
See also SELVIN, supra note 35, at 81-84.

[53] See CHURCH , supra note 45, at 79-80; SELVIN, supra note
35, at 103. Adding judges is likely to lead to a decrease in
average productivity per judge.

[54] See SELVIN, supra note 35, at 80.

[55] KAUFMAN, supra note 37, at 207. See also Flanders, "Case
Management in Federal Courts: Some Controversies and Some
Results," 4 Just. Sys. J. 147 (1978) ("Judicial supervision of the
civil docket is a relatively new phenomenon in American
courts . " ) .

[56] KAUFMAN, supra note 37, at 210-11, 213.

[57] Idi at 212.

[58] See generally Resnik, MANAGERIAL JUDGES (Rand Institute
for Civil Justice 1982) ; Elliott, "Managerial Judging and the
Evolution of Procedure," 53 U. Chi. L. Rev. 306 (1986)
[hereinafter cited as ELLIOTT] ; Flanders, "Case Management in
Federal Courts: Some Controversies and Some Results," 4 Just.
Sys. J. 147 (1978) ; Galanter, "The Emergence of the Judge as a
Mediator in Civil Cases, " 69 Judicature 257 (1986) .

For a monumental review of the aspirations underlying the
original Federal Rules of Civil Procedure, as well as a
comprehensive overview of current thinking and literature, see
RESNIK, supra note 1.

[59] See, e.g. . Schwarzer, "Managing Civil Litigation: The
Trial Judge's Role," 61 Judicature 400 (1978); PECKHAM, supra
note 42; Rubin, "The Managed Calendar: Some Pragmatic Suggestions
About Achieving the Just, Speedy, and Inexpensive Determination
of Civil Cases in Federal Courts," 4 Just. Sys. J. 135 (1978)
[hereinafter cited as RUBIN] . There has been little such

772 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

activity in state court systems. See CHURCH . supra note 45, at
39.

[60] Cases are assigned to a particular judge for all
purposes. See generally FLANDERS , supra note 14, at 13-15.

[61] For his preliminary status conference, Judge Peckliam uses
a telephone conference call with a reporter present rather than
an actual meeting. PECKHAM . supra note 59, at 780.

[62] Data "strongly suggests that a great deal of the time
during which most cases are pending is essentially lost. The
lawyers are undoubtedly are busy, but they are busy on other
cases.'* FIANDERS . supra note 14, at 69.

[63] See Neubauer, "Judicial Role and Case Management," 4
Just. Sys. J. 223 (1978). See also ELLIOTT, supra note 58, at
316-17; FIANDERS . supra note 14, at 17:

The strongest findings of this project concern
differences in the ways courts manage civil cases
during the pretrial phases. The courts differ widely
in the controls they exercise over preparation of
civil cases. The degree of control is closely
associated with the time required for each stage of a
case, which also varies greatly among courts.

[64] See FLANDERS, supra note 14.

[65] See id. at xi-x.

[66] RUBIN, supra note 59, at 140.

[67] See R. Cappalli, RIGHTS AND REMEDIES UNDER FEDERAL

GRANTS 172-73 (1979). See generally FEDERAL GRANTS, supra note 2,

at $$1:03-1:16.

[68] See FEDERAL GRANTS, supra note 2, at $1:13.

[69] United States Dep't of Transp. v. Paralyzed Veterans of
America, 54 U.S.L.W. 4854, 4857 (June 24, 1986).

[70] See Pennhurst State School & Hosp. v. Halderman, 451
U.S. 1, 17 (1981). See generally FEDERAL GRANTS, supra note 2,
at $10:10.

[71] 1 C.F.R. $305.82-2 (1986).

[72] See FEDERAL GRANTS, supra note 2, at $$11:04-11:06.

[73] In re: Louisiana Dep't of Health & Human Servs., HHS
Grant App. Bd. , Dec. No. 647 (May 9, 1985).

[74] In re: Pennsylvania Dep't of Pub. Welfare, HHS Grant
App. Bd., Dec. No. 190 (June 17, 1981). See also In re: Illinois

CASE MANAGEMENT 773

Dep't of Pxiblic Aid, HHS Grant App. Bd. , Dec. No. 733 (Mar. 26,
1986) .

[75] See In re: New York State Dep*t of Social Servs., HHS
Grant App. Bd. , Dec. No. 673 (July 19, 1985).

[76] In re: Maryland Dep't of Human Resources, HHS Grant App.
Bd., Dec. No. 706 (Nov. 21, 1985).

[77] In re: New Jersey Dep't of Human Servs., HHS Grant App.
Bd. , Dec. No. 648 (May 17, 1985), aff'd on reconsideration. Nov.
22, 1985.

[78] In re: New Yor)c State Dep't of Social Servs., HHS Grant
App. Bd., Dec. No. 307 (May 28, 1982). See also In re: Oregon
Dep't of Human Resources, HHS Grant App. Bd. , Dec. No. 729
(Mar. 20, 1986) .

[79] See In re: California Dep't of Health Servs., HHS Grant
App. Bd,, Dec. No. 665, at p. 2 (June 28, 1985).

[80] See generally FEDERAL GRANTS, supra note 2, at
$$4:24-4:54.

[81] See, e.g. . In re: New Yorlc City Hiiman Resources Admin.,
HHS Grant App. Bd. , Dec. No. 720 (Jan. 30, 1986) (grant advances
not accounted for constitute a debt to the United States) ; In re:
Economic Opportunity Council of Suf folic County, Inc., HHS Grant
App. Bd., Dec. No. 679 (Aug. 12, 1985) (grantee allowed to prove
allowable costs actually paid) .

[82] Id.

[83] See, e.g. . In re: Area IV PSRO of Michigan, HHS Grant
App. Bd. , Dec. No. 651 (June 3, 1985) (employee deferred
compensation plan). See generally FEDERAL GRANTS, supra note 2,
at $$ 4:31-4:52.

[84] In re: Puerto Rico Office for Human Development, HHS
Grant App. Bd., Dec. No. 474 (Nov.9,1983) , aff'd sub nom. .
Puerto Rico v. United States, No. 84-0388 (D.P.R. April 19,
1985) .

[85] In re: New York State Dep't of Social Servs., HHS Grant
App. Bd., Dec. No. 151 (Feb. 26, 1981).

[86] See In re: Area IV PSRO of Michigan, HHS Grant App. Bd.,
Dec. No 651 (June 3, 1985).

[87] See In re: Ohio Dep't of Human Servs., HHS Grant App.
Bd., Dec. No. 725 (Mar. 7, 1986).

[88] See In re: Utah Dep't of Social Servs., HHS Grant App.
Bd., Dec. No. 750 (April 30, 1986).

774 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

[89] See generally FEDERAL GRANTS, supra note 2, at $5:11.

[90] See App. A at app. A, para.D.

[91] See FEDERAL GRANTS, supra note 2, at ch. 19.

[92] See id. at ch. 20.

[93] See Id. at ch. 21.

[94] See id. at ch. 22.

[95] Sometimes under the particular wording of a grant
statute the failure of a grantee to comply with grant conditions
leads to "ineligibility" for the grant rather than the
disallowance of certain costs incurred by an eligible grantee.
See, e.g. . In re: Maryland Dep't of Human Resources, HHS Grant
App. Bd. , Dec. No. 706, at pp. 5-7 (Nov. 21, 1985).

[96] See generally FEDERAL GRANTS, supra note 2, at $$6:04,
6:05, 6:16.

[97] See, e.g. . In re: Effect of DEFRA Amendments on
Utilization Control Disallowances, HHS Grant App. Bd. , Dec. No.
655 (June 7, 1985) .

[98] See, e.g. . New Yorlc State Dep't of Social Servs., HHS
Grant App. Bd. , Dec. No. 628 (Mar. 19, 1985) (medicaid incentive
payment for states which enroll the help of local governments in
collecting from liable third parties) .

[99] See, e.g. . In re: National Urban Indian Council, HHS
Grant App. Bd. , Dec. No. 710 (Dec. 5, 1985) ( grant properly
terminated where grantee stopped performing primary grant
activities without justification) .

[100] See generally FEDERAL GRANTS, supra note 2, at ch. 6.

[101] Compliance with certain grant conditions is often the
subject of special reviews of all grantees. These may lead to
multiple disallowances and appeals. See, e.g. In re: Maryland
Dep't of Human Resources, HHS Grant App. Bd. , Dec. No. 706, at
pp. 8-9 (Nov. 21, 1985) (review of state's eligibility for
supplemental child welfare grants) .

[102] See 38 Fed. Reg. 9,906 (1973). For general discussions of
the origin, growth, caseload and procedures of the Board, see
FEDERAL GRANTS, supra note 2, at $$8:66-8:78.10 (rev. ed. 1985);
5 Mezines, Stein & Gruff, ADMINISTRATIVE LAW $54.08 (1984)
[hereinafter cited as ADMINISTRATIVE LAW ] .

[103] Now the Department of Health and Human Services ("DHHS") .

[104] In 1973 President Nixon began to fight inflation by
impounding federal assistance. See FEDERAL GRANTS, supra note 2,

CASE MANAGEMENT 775

at $$4:05-4:08.

[105] See generally Office of Economic Opportunity, CATALOG OF
FEDERAL DOMESTIC ASSISTANCE (Jan. 1973); 1969 LISTING OF
OPERATING FEDERAL PROGRAMS COMPILED DURING THE ROTH STUDY, H.R.
Doc. No. 91-177, 91st Cong., 1st Sess. (1969).

[106] See 45 C.F.R. pt. 16, apps. A-E (1977).

[107] See 38 Fed. Reg. 9,906 (1973).

[108] 37 Fed. Reg. 24,675 (1972).

[109] Ida.

[110] 38 Fed. Reg. 9,907 (1973).

[Ill] Readers who wish to Icnow more about the distinctions
between "formula" and "discretionary" grants can refer to FEDERAL
GRANTS, supra note 2, at $4:01.

[112] The Administrative Conference of the United States has
declined to go beyond recommending "informal complaint
mechanisms" to process such cases. See 1 C.F.R. $305.82-2 (1985)
at para. III-A.

[113] The Board dropped this type of dispute from its
jurisdiction in the 1981 revision of Part 16. See 46 Fed. Reg.
43,816 (1981); In re Life Planning/Health Servs., Inc., HHS Grant
App. Bd., Dec. No. 343 (Sept. 28, 1982).

[114] For misrepresentation in its procural, for example.

[115] For a discussion of indirect costs and the establishment
of rates, see FEDERAL GRANTS, supra note 2, at $$4:53-4:54.

[116] See 45 C.F.R. $ 16. 10 (d) (1977) ("In any case in which the
head of the constituent agency modifies or reverses the initial
decision of the Panel, he shall accompany such action by written
statement of the grounds for such modification or reversal....").

[117] See 38 Fed. Reg. 9,907 (1973).

[118] See 45 C.F.R. $16. 10(d) (1977) .

[119] 45 C.F.R. $16. 8(a) (1977) .

[120] 40 Fed. Reg. .33,936 (1975).

[121] 37 Fed. Reg. 24,676 (1972).

[122] See 45 C.F.R. $16 . 8 (b) (1977) .

[123] See, e.g. . 5 U.S.C. $556(c)("In ... determining claims
for money or benefits ... an agency may, when a party will not be

776 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

prejudiced thereby, adopt procedures for the submission of all or
part of the evidence in written form.").

[124] See 43 Fed. Reg. 9,264 (1978), codified at 45 C.F.R. pt.
16, app. A, para. B(a) (1985) .

[125] For detailed breakdowns, see Table 4C.

[126] This step had a curious history. Before 1981 the Board
rules explicitly allowed the head of an HHS Constituent Agency to
review and affirm, modify, or reverse the Board decision. See 45
C.F.R. $16.81 (1977). The 1981 proposal would have transferred
that discretionary review power to the Secretary. 46 Fed. Reg.
1,649 (1981) (proposed to be codified at 45 C.F.R. $16.21). In the
final regulation, however, the proposed solution was omitted
because it provoked considerable opposition. See 46 Fed. Reg.
43,817 (1981). The Department was to study the matter further
and, in the interim, the Board's decisions would be the final
DHHS action. The matter seems to have been resolved, whether by
conscious action or inertia, in favor of GAB finality because
neither the original clause nor its proposed substitute has
resurfaced to date.

[127] Telephone interview with John Settle, July 16, 1986.

[128] Some of this distrust still persists. One questionnaire
respondent described the Board as a "kangaroo court that rubber
stamps the wishes of the U.S."

[129] Wingate V. Harris, 501 F. Supp. 58 (S.D.N.Y. 1980).

[130] The Board's Chair, John Settle, and Member Judy
Ballard were the chief architects of the new procedures. See
ADMINISTRATIVE LAW, supra note 102, at $54 . 08 [3] [b] .

[131] The goals are taken from the preamble to the proposed
rules. See 46 Fed. Reg. 1,644 (1981).

[132] See 45 C.F.R. $74,304 (1985); FEDERAL GRANTS, supra
note 2 , at $8:68.

[133] 46 Fed. Reg. 1,644 (1981).

[134] See id.

[135] "The Board may, at the time it acknowledges an appeal or
at any appropriate later point, request additional documents or
information; request briefing on issues in the case; ...." 45
C.F.R. $16.9 (1985).

[136] 45 C.F.R. $16.4 (1985).

[137] "[T]he documents supporting the claim, tabbed and
organized chronologically and accompanied by an indexed list
identifying each document." 45 C.F.R. $16.8 (a) (1) (1985) .

CASE MANAGEMENT 777

[138] "[A]ny additional documents supporting the respondent's
position, organized and indexed ...." 45 C.F.R.
$16. 8(b) (1) (1985) .

[139] See Section VI-B.

[140] 46 Fed. Reg. 1,644 (1981).

[141] "The Board may ... issue orders to show cause why a
proposed finding or decision of the Board should not become
final; ..." 45 C.F.R. $16.9 (1985).

[142] See Table 6A.

[143] See 45 C.F.R. $16. 10 (a) (1985) .

[144] 45 C.F.R. $16.4 (1985), The preamble to the final
regulation emphasizes that the conference is not an evidentiary
hearing and is, to the extent possible, confined in scope to the
material in the appeal file. Thus, while parties can make oral
presentations, such are intended to be analyses of the record and
arguments based thereon.

[145] The conference format is normally established by
preliminary telephonic scheduling conferences. See 45 C.F.R.
$16.9 (1985) Such conference calls establish the time for the
conference, identify disputed legal issues, determine procedures,
and estaJslish participants, including witnesses. See 45 C.F.R.
$16. 10(b) (1985) .

[146] 45 C.F.R. $16. 10(a) (1985).

[147] Compare DeFoor, II & Sechen, "Telephone Hearings in
Florida," 38 U. Miami L. Rev. 593 (1984).

[148] See 45 C.F.R. $16. 10(c) (4) (1985).

[149] The case files reveal either verbatim transcripts or
summaries of the conference prepared by staff. Apparently, the
Presiding Member and staff assistant will judge which type record
would best serve the needs of the case. The rules imply a right
to a verbatim transcript: "On request, a party will be sent one
copy of the transcript." 45 C.F.R. $16. 10(c) (1) (1985).

[150] 45 C.F.R. $16. 12(d) (3) (1985).

[151] Because all disputes have been processed to some extent
at the Agency level, the distinction is between informal and
on-the-record proceedings, although the latter do not have to
follow Federal Administrative Procedure Act formalities.

[152] See 45 C.F.R. $16. 4 (1985).

[153] The rules do state in a section entitled "Summary of

778 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

procedures below" that " [c]onferences may be conducted by
telephone conference call." 45 C.F.R. $16.4 (1985) (emphasis
added) .

[154] See ADMINISTRATIVE LAW, supra note 102, at pp. 54-143
n.31, 54-150. A sixth Member was appointed in 1986. This Member
does Part 16 work on a part-time basis; most of his work involves
certain civil money penalties imposed in the medicare program.

[155] 45 C.F.R. $16.13 (1985).

[156] The Board has expressed doubts about its power to enforce
deadlines against the Agency. It has stated that it may
indirectly deter unreasonable delay by closing the record on a
tardy Agency. See 46 Fed. Reg. 43,817 (1981).

[157] We have encountered an en banc decision in a major
consolidated case. See In re: Effect of DEFRA Amendments on
Utilization Control Disallowances, HHS Grant App. Bd. , Dec. No.
655 (June 7, 1985) .

[158] At the time of writing, only one concurrence in 754
opinions. This happened in In re: Vermont Agency of Human Servs.,
HHS Grant App. Bd. , Dec. No. 338 (June 30, 1982).

[159] The Presiding Member signs last under Board customs.

[160] See generally ADMINISTRATIVE LAW. supra note 102, $54. 08 [3]
at pp. 54-150 to 54-151.

[161] See note 124, supra, and accompanying text.

[162] Actual amounts appealed in 1984 and 1985, both over $500
million, show that recent appeals are even more valuable. See
Table 4A.

[163] We treated the "summary decision," a form of summary
judgment based on directly applicable precedents in parallel
cases, as a full-cycle adjudication.

[164] See Section V-A.

[165] It is not one-third because a number of full-cycle cases
have no dollar values assigned.

[166] See, e.g. . GALANTER, supra note 32, at 28 (88%
settlement rate) .

[167] For descriptions of each procedure, see Section IV-C.

[168] See ADMINISTRATIVE LAW, supra note 102, at p. 54-195.

[169] See text accompanying notes 112-115. These are:
noncompliance terminations; cost rates and plans; voiding a
grant; and denial of a noncompeting continuation award.

CASE MANAGEMENT 779

[170] The Board's decisions are not formally published. They
are issued in typed, mimeographed form to the parties and are
mailed free of charge to persons who have so requested.

[171] The appeal is technically filed when an appellant
"submit[s]" a notice of appeal. See App. A at $16. 7(a). That date
is identified by postmark on the mailing envelope or date of
hand delivery. GAB's responsibility to dispose of an appeal
expeditiously can only commence when it has knowledge of the
appeal .

[172] See Section V-E.

[173] 1984 Annual Report of the Director of the Administrative
Office of the United States Courts at p. 192 [hereinafter cited
as 1984 ANNUAL REPORT] .

[174] See FLANDERS, supra note 14, at 25, table 9.

[175] See 1984 ANNUAL REPORT, supra note 173, at 286,
table C-5.

[176] See CHURCH, supra note 45, at 11, table 2.1.

[177] See idj^ at 10, table 2.1.

[178] See idi. at 10-11, table 2.1.

[179] See SELVIN, supra note 35, at 27.

[180] See App. A at $16.23.

[181] Idj.

[182] See Table 5F.

[183] See Section X-B; App. F.

[184] See App. A at $16. 15(b).

[185] See FEDERAL GRANTS, supra note 2, at $8:68.

[186] Time spans are legally counted by excluding the day the
event occurs which sets a time period running and also excluding
the last day if it is a Saturday, Sunday, or holiday. See App. A
at $16.19.

[187] While the Chair initially inspects appeals for
jurisdictional compliance, see App. A at app. A, para. G, it may
be that he does not press timeliness questions absent Agency
insistence with the same rigor that he inspects and dismisses for
lack of subject matter jurisdiction. In an interview, the Board
Chair stated that he issues a show cause order automatically
whenever it appears on the face of the record (as when the

780 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

appellant's date of receipt is stamped on the disallowance
notice) that the appeal is untimely.

[188] See App. A at $16»7(b).

[189] See Section V-D.

[190] Further special briefing occurs occasionally.

[191] See Church et al. PRETRIAL DELAY: A REVIEW AND
BIBLIOGRAPHY 34-35 (Nat'l Center for State Courts 1978).

[192] See Ebener, COURT EFFORTS TO REDUCE PRETRIAL DELAY 39-42
(Rand Inst, for Civil Justice 1981) .

[193] See App. A at $16.13.

[194] We found only one written objection to a time extension
requested by the other party.

[195] The Board is empowered to "suspend cases which are not
ready for review ...." See App. A at $16.13.

[196] See, e.g. . Fed. R. Civ. P. 42(a).

[197] See FEDERAL GRANTS, supra note 2, at $8:68 n.75.

[198] To a "main" case would be added "consolidated" ones. The
main case would serve as the litigation vehicle for all cases.
The same appeal file, briefs, conferences, hearings, and
witnesses would serve for all. If many different states were
joined, lead counsel might be agreed upon.

[199] This amount is swollen by three very large cases, two for
$16 million each and one for $64 million, that were jointly
considered.

[200] See App. A at $16.13.

[201] See App. A at $16.20.

[202] See Table 8A.

[203] See Table 8B.

[204] See Table 8C.

[205] See Section IV-D.

[206] See In re: Ohio Dept. of Human Servs., HHS Grant App.
Bd., Doc. No. 725 (Mar. 7, 1986), aff'd on reconsideration. June
6, 1986.

[207] The appeal was for $8,008. One wonders whether a
dismissal would be entered on the same facts in an $8 million

CASE MANAGEMENT 781

appeal .

[208] Correspondence on file with author concerning In re
Illinois Dept. of Public Aid. Dkt. No. 83-192.

[209] Another Member viewed this incident differently, stating:

I do not think it was "unfortunate" that we held a hearing.
What was unfortunate was that the State did not fully develop
the facts and the Agency had not fully developed its legal
position to the point of considering the consequences. We
thus took a long time to sort matters out. The reason our
questions ultimately had the result they did was that we had
developed expertise in reimbursement systems and indirect
cost questions, as well as in the way Medicaid had
implemented the timely claims requirement.

[210] See Table 8A.

[211] See FEDERAL GRANTS, supra note 2, passim; R. Cappalli,
RIGHTS AND REMEDIES UNDER FEDERAL GRANTS (1979) .

[212] See, e.g. . J. L. Mashaw et al. . SOCIAL SECURITY HEARINGS
AND APPEALS XX (1978) .

[213] Review is under "substantial evidence" and "arbitrary and
capricious" standards. See, e.g. . Illinois ex rel. Illinois Dep't
of Pub. Aid, 609 F. Supp. 1421, 1426-27 (N.D. 111. 1985).

[214] See 46 Fed. Reg. 1,645 (1981). The Board Members and
staff attorneys have been trained in mediation techniques. Even
though few cases have been successfully mediated, such training
is valuable for the enhancement of interpersonal skills. Board
Members stated that the training helped them manage their
assigned cases.

[215] See Practice Manual: Departmental Grant Appeals Board
15-16 (first draft; undated) [hereinafter cited as PRACTICE
MANUAL] .

[216] See DISPUTE RESOLUTION, supra note 16, at pp. 485-87.

[217] Cf . Behfe, "Arbitration: A Permissible or Desirable
Method for Resolving Disputes Involving Federal Acquisition and.
Assistance Contracts?," 16 Pub. Cont. L. Rev. 66 (1986).

[218] See Section VI-B-9.

[219] 1984 ANNUAL REPORT, supra note 173, at 152.

[220] In 51 cases adjudicated by the Board, some portion of the
appealed dollars, usually minor, was withdrawn from the Board's
authority by settlement.

[221] See Section IV-D,

782 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

[222] See Table 8B.

[223] I^

[224] See Table 4G.

[225] See App. E, question 16.

[226] Derived from Table 8A.

[227] Derived from Table 8C.

[228] Derived from Table 8B.

[229] See In re: New Jersey Dep't of Human Servs., HHS Grant
App. Bd., Dec. No. 115 (Aug. 8, 1980), aff 'd. New Jersey v.
Department of Health & Human Servs., 670 F.2d 1284 (3d Cir.),
cert, denied. 459 U.S. 824 (1982) ; In re: Montana Dep't of Social
& Rehab. Servs., HHS Grant App. Bd. , Dec. No. 119 (Sept. 29,
1980), aff 'd. Montana Dep't of Social & Rehab. Servs. v. United
States Dep't of Health & Human Servs., No. CV-80-208-H (D. Mont.
Feb. 10, 1982); In re: New Jersey Dep't of Human Servs., HHS
Grant App. Bd. , Dec. No. 135 (Nov. 28, 1980) & In re: New Jersey
Dep't of Human Servs., HHS Grant App. Bd. , Dec. No. 146 (Jan. 29,
1981) & In re: New Jersey Dep't of Human Servs., HHS Grant App.
Bd., Dec. No. 153 (Feb. 27, 1981) & In re: New Jersey Dep't of
Human Servs., HHS Grant App. Bd. , Dec. No. 195 (June 30, 1981) &
In re: New Jersey HHS Grant App. Bd. , Dec. No. 199 (July 31,
1981) .aff 'd. New Jersey v. Department of Health & Human Servs.,
670 F.2d 1262 (3d Cir. 1981); In re: California Dep't of Benefit
Payments, HHS Grant App. Bd. , Dec. No. 160 (Mar. 31, 1981),
aff 'd. California v. Heckler, No. 81-2443 (N.D.Cal. May 8, 1984),
aff |d. 765 F.2d 149 (9th Cir. 1985); In re: Montana Dep't of
Social & Rehab. Servs., HHS Grant App. Bd., Dec. No. 171 (April
30, 1981), aff 'd. Montana Dep't of Social & Rehab. Servs. v.
United States Dep't of Health & Human Servs., No. 77-78 (D.Mont.
Nov. 1983 & June 28, 1984); In re: Washington Dep't of Social &
Health Servs., HHS Grant App. Bd., Dec. No. 176 (May 26, 1981),
aff 'd. Washington v. Schweilcer, No. C81-1197R (W.D. Wash. Feb 28,
1983), aff 'd sub nom. . Washington v. Heclcler, 722 F.2d 1451 (9th
Cir. 1984); In re: Colorado Dep't of Social Servs., HHS Grant
App. Bd. , Dec. No. 187 (May 31, 1981), reconsideration denied. In
re: Colorado Dep't of Social Servs., HHS Grant App. Bd. , Dec. No.
377 (Jan 27, 1983), aff 'd. Colorado Dep't of Social Servs. v.
Department of Health & Hximan Servs., 585 F. Supp. 522 (D. Colo.
1984), aff 'd. 771 F.2d 1422 (10th Cir. 1985); In re: Maryland
Dep't of Health & Mental Hygiene, HHS Grant App. Bd. , Dec. No.
210 (Aug. 31, 1981), aff 'd. Maryland v. United States, No. 132-82
(Ct. CI. May 22, 1985); In re: Colorado Dep't of Social Servs.,
HHS Grant App. Bd., Dec. No. 218 (Sept. 30, 1981), aff 'd.
Colorado Dep't of Social Servs. v. Department of Health & Human
Servs., No. 83-1395 (10th Cir. May 9, 1984); In re: Joint
Consideration: Institutions for Mental Diseases, HHS Grant App.
Bd., Dec. No. 231 (Nov. 30, 1981) .rev'd. Connecticut, Dep't of
Income Maintenance v. SchweiJcer, 557 F. Supp. 1077 (D. Conn.

CASE MANAGEMENT 783

1983), rev'd sub nom. . Connecticut Dep't of Income Maintenance v.
Heckler, 731 F.2d 1052 (2d Cir. 1984), aff d, 105 S. Ct. 2210
(1985) ; In re: Joint Consideration-Abortion Funding, HHS Grant
App. Bd., Dec. No. 260 (Feb. 26, 1982), aff d. Illinois ex rel.
Illinois Dep't of Pub. Aid v. United States Dep't of Health &
Human Servs., 594 F. Supp. 147 (N.D. 111. 1984), aff *d. 772 F.2d
329 (7th Cir. 1985); In re; Massachusetts Dep't of Pub. Welfare,
HHS Grant App. Bd. , Dec. No. 262 (Feb. 26, 1982), rev ' d .
Massachusetts ex rel. Dep't of Pub. Welfare v. Secretary of
Health & Human Servs., 749 F.2d 89 (1st Cir. 1984), cert, denied,
105 S. Ct. 3478 (1985); In re: Michigan Dep't of Social Servs.,
HHS Grant App. Bd. , Dec. No. 290 (April 30, 1982), aff 'd.
Michigan Dep't of Social Servs. v. Schweiker, 563 F. Supp. 797
(W.D. Mich. 1983), aff 'd sub nom. . Michigan v. Secretary of
Health & Human Servs., 744 F.2d 32 (6th Cir. 1984); In re: Hawaii
Dep't of Social Servs. & Housing, HHS Grant App. Bd., Dec. No.
295 (May 7, 1982), aff'd in pt. & rev'd in pt. . Hawaii v.
Heckler, No. 83-0506 (D. Hawaii June 21, 1984) , aff'd. 760 F. 2d
1031 (9th Cir. 1985); In re: Florida Dep't of Health & Rehab.
Servs., HHS Grant App. Bd. , Dec. No. 296 (May 14, 1982), aff'd.
Florida v. Heckler, No. 82-0935 (N.D. Fla. Jan. 5, 1984); In re:
New York State Dep't of Social Servs., HHS Grant App. Bd., Dec.
No. 311 (June 16, 1982), aff'd. Perales v. Heckler, 611 F. Supp.
333 (N.D.N.Y. 1984), aff'd per curiam. 762 F. 2d 226 (2d Cir.
1985) ; In re: Joint Consideration: Reimbursement of Foster Care
Servs., HHS Grant App. Bd. , Dec. No. 337 (June 30, 1982), aff'd.
Oregon, Dep't of Human Resources & Children's Servs. Div. v.
Heckler, No. 83-1466 (D. Ore. Feb. 6, 1984) ; In re: Maryland
Dep't of Human Resources, HHS Grant App. Bd. , Dec. No. 344
(Sept. 29, 1982), aff'd. Maryland Dep't of Human Resources v.
Department of Health & Hiiman Servs., No. 82-3402 (D.D.C. Oct. 12,
1983), aff'd. 763 F.2d 1441 (D.C.Cir. 1985); In re: Maryland
Dep't of Human Resources, HHS Grant App. Bd., Dec. No. 358 (Nov.
29, 1982), aff'd. Maryland Dep't of Human Resources v. Department
of Health & Human Servs., No. 83-586 (D. Md. Feb.l, 1984), aff'd.
762 F. 2d 406 (4th Cir. 1985); In re: North Carolina Dep't of
Human Resources, HHS Grant App. Bd. , Dec. No. 361 (Nov. 30,
1982), aff'd. North Carolina v. Heckler, 584 F. Supp. 179
(E.D.N.C. 1984); In re: Pennsylvania Dep't of Pub. Welfare, HHS
Grant App. Bd., Dec. No. 398 (Mar. 18, 1983), aff'd.
Pennsylvania, Dep't of Pub. Welfare v. Heckler, 730 F. 2d 923 (3d
Cir. 1984); In. re: Ohio Dep't of Pub. Welfare, HHS Grant App.
Bd., Dec. No. 453 (July 29, 1983), aff'd. Ohio, Dep't of Pub.
Welfare v. Heckler, No. 2-84-0184 (S.D. Ohio July 31, 1985); In
re: Illinois Dep't of Pub. Aid, HHS Grant App. Bd. , Dec. No. 457
(July 29, 1983), aff'd. Illinois ex rel. Illinois Dep't of Pub.
Aid V. Heckler, 616 F. Supp. 620 (N.D. 111. 1985); In re: Puerto
Rico Office for Human Dev. , HHS Grant App. Bd. , Dec. No. 474
(Nov. 9, 1983), aff'd. Puerto Rico v. United States, No. 84-0388
(D.P.R. April 19, 1985); In re: Wisconsin Dep't of Health &
Social Servs., HHS Grant App. Bd. , Dec. No. 482 (Nov. 30, 1983) &
In re: Wisconsin Dep't of Social Servs., HHS Grant App. Bd., Dec.
No. 525 (Mar. 30, 1984), rev'd & remanded. Wisconsin, Dep't of
Health & Social Servs. v. Heckler, Nos. 84-C-75, 84-C-334,
84-C-682 (W.D. Wis. Dec. 11, 1984Lrev'd sub nom.. Wisconsin

784 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Dep't of Health & Social Servs. v. Bowen, 797 F.2d 391 (7th Cir.
1986); In re: Oklahoma Dep't of Human Servs., HHS Grant App. Bd. ,
Dec. No. 484 (Nov. 30, 1983), aff 'd. Oklahoma, ex rel. Dep't of
Human Servs. v. Heckler, No. 84-865 (W.D. Okla. Jan. 15, 1985);
In re: Mississippi Medicaid Comm'n, HHS Grant App. Bd. , Dec. No.
504 (Jan. 31, 1984), aff 'd. Mississippi Medicaid Comm'n v. United
States Dep't of Health & Human Servs., 633 F. Supp. 78 (S.D.
Miss. 1985), aff 'd mem. . 786 F.2d 1161 (5th Cir. 1986); In re:
Illinois Dep't of Pub. Aid, HHS Grant App. Bd., Dec. No. 517
(Feb. 29, 1984), aff 'd. Illinois v. Heckler, 609 F. Supp. 1421
(D.C. 111. 1985); In re: Granville House, Inc., HHS Grant App.
Bd., Dec. No. 529 (April 1984), aff 'd. 772 F. 2d 451 (8th Cir.
1985); In re: Vermont Dep't of Social & Rehab. Servs., HHS Grant
App. Bd. , Dec. No. 546 (June 27, 1984), rev ' d . Vermont Dep't of
Social & Rehab. Servs v. United States Dep't of Health & Human
Servs., No. 84-325 (D. Vt. Aug. 28, 1985), rev ' d . No. 85-6320 (2d
Cir. Aug. 12, 1986); In re: Texas Dep't of Human Resources, HHS
Grant App. Bd. , Dec. No. 617 (Jan. 17, 1985), aff 'd in pt. and
remanded in pt. for clarification. Texas Dep't of Human Resources
V. Heckler, No. 85-CA-183 (W.D. Tex. Oct. 9, 1985); In re:
Maryland Dep't of Human Resources, HHS Grant App. Bd. , Dec. No.
639 (April 15, 1985), aff 'd. Massinga v. Bowen, No. 85-2340
(D.Md. Aug. 28, 1986) .

We have not counted two cases which reversed Board decisions
but whose reasoning was rejected by the courts of appeals of
other circuits. See In re: Arkansas Dep't of Human Servs., HHS
Grant App. Bd., Dec. No. 423 (April 29, 1983), remanded for
further consideration. Arkansas v. Heckler, No. 83-467 (E.D.
Ark. Sept. 17, 1984), reinstated after rehearing. In re: Arkansas
Dep't of H\iman Servs., HHS Grant App. Bd. , Dec. No. 717 (Jan. 8,
1986); In re: Missouri Dep't of Social Servs., HHS Grant App.
Bd. , Dec. No. 448 (June 30, 1983), rev ' d . Department of Social
Servs. V. Heckler, No. 84-4106 (W.D. Mo. Sept. 24, 1984).

[230] See In re: Hawaii Dep't of Social Servs. & Housing, HHS
Grant App. Bd. , Dec. No. 295 (May 7, 1982), aff 'd in pt. & rev'd
in Pt. . Hawaii v. Heckler, No. 83-0506 (D. Hawaii June 21, 1984) ,
aff 'd. 760 F.2d 1031 (9th Cir. 1985); In re: Pennsylvania Dep't
of Pub. Welfare, HHS Grant App. Bd. , Dec. No. 346 (Sept. 30,
1982) , rev ' d . Pennsylvania v. Department of Health & Human
Servs., 723 F.2d 1114 (3d Cir. 1983); In re: Massachusetts Dep't
of Pub. Welfare, HHS Grant App. Bd. , Dec. No. 438 (May 31, 1983),
rev ' d . Massachusetts v. Heckler, 616 F. Supp. 687 (D. Mass.
1985); In re: Texas Dep't of Human Resources, HHS Grant App. Bd. ,
Dec. No. 381 (Jan. 31, 1983), remanded for clarification. Texas
Dep't of Human Resources v. Heckler, No. 83-CA-159 (W.D. Tex.
Aug. 2, 1985), disallowance rev'd. In re: Texas Dep't of Human
Servs., HHS Grant App. Bd. , Dec. No. 381 (June 18, 1986).

[231] See, e.g. . In re: Texas Dep't of Human Servs., HHS Grant
App. Bd. , Dec. No. 381 (June 18, 1986).

[232] See CHURCH, supra note 45, at 54. See also FLANDERS,
supra note 14, at 69-70.

CASE MANAGEMENT 785

[233] We cannot be more precise because our reporting category
was indefinite: "6 or more." See App. E, question 4.

[234] We scattered questions rather than organize them by
category so as not to influence the responses.

[235] See Table 8A.

[236] See Section IV-D.

[237] See ELLIOTT, supra note 58, at 321-22 (worrying about
standardless narrowing of issues by managerial judges) .

[238] This is proportionately higher than the direct evaluation
of Board procedures (7.01/10). We shall offer an explanation
later. See Section VIII-C.

[239] See PRACTICE MANUAL, supra note 215, at 6-9.

[240] See Fed. R. Civ. P. 26(b) advisory committee note.

[241] See Section X-D.

[242] 424 U.S. 319 (1976).

[243] See PRACTICE MANUAL, supra note 215, at 9.

[244] See Insurance Corp. v. Compagnie des Bauxites de Guinee,
456 U. S. 694 (1982) .

[245] For example, inadequate discovery favors the United States
since the grantee has the burden of proving that the fiscal
disallowance was unlawful. See FEDERAL GRANTS . supra . note 2, at
$8:78. Indeed, placing such burden on one side can itself be seen
as a procedural bias.

[246] See Section IV-D.

[247] See also Table 8C for a cross-tabulation of the views of
winners, losers, and splitters. We attempted three other rating
cross-tabulations: 1) number of cases an attorney had litigated
at GAB; 2) number of years practicing law; and 3) date of last
litigation at GAB. Such brealcdowns produced too few attorneys
reporting in several categories to have statistical meaning.
Also, we noted few differences dramatic enough to pursue further.

[248] See Table 8A.

[249] For interesting information about the kinds and volume of
motions filed in federal district courts, see Connolly & Lombard,
JUDICIAL CONTROLS AND THE CIVIL LITIGATIVE PROCESS: MOTIONS
(Fed. Judicial Center 1980) .

[250] See Table 8A. Although the Board will rarely order

786 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

discovery of the Agency, depositions or production orders for
ex2unple, it will sometimes arrange for the Agency to agree to
show specified documents to the appellant, or to make a person
available for questions or to answer certain grantee
interrogatories. This discovery by agreement often satisfies the
appellant's need for information while avoiding formal motions
and rulings. See generally PRACTICE MANUAL. supra note 215, at 8.

[251] See Table 6A.

[252] See Table 9A.

[253] See Table 8B.

[254] See Section IV-D.

[255] See Fuentes v. Tucker, 31 Cal.2d 1, 187 P. 2d 752 (1947)
(Gibson, C.J. ) .

[256] 187 P. 2d at 754.

[257] See Rosenberg, "Devising Procedures That Are Civil to
Promote Justice That is Civilized," 69 Mich. L. Rev. 797, 800
(1971).

[258] Cf . MASHAW, supra note 9, at 780 (adjudicating
entitlements to benefits under public laws is a "regime of strict
law") .

[259] This reasoning applies with equal vigor to grantees'
defaults since the law might direct public funds into their hands
absent the procedural sanction.

[260] See generally Rosenblum, "Contexts and Contents of 'For
Good Cause' as Criterion for Removal of Administrative Law
Judges: Legal and Policy Factors," 6 Western N. Eng. L. Rev. 592,
620-33 (1984) (low productivity as cause for judge's removal).

[261] See, e.g. . Annual Report of the Director of the
Administrative Office of the United States Courts.

[262] Cf^ MASHAW, supra note 9, at 791-804 (quality
control systems applied to public benefit adjudications) .

[263] See CHURCH, supra note 45, at 36.

[264] See Table 5E.

[265] See FLANDERS, supra note 14, at ix.

[266] Studies have shown that the early months a case sits on a
federal district court docket are mostly lost, the attorneys
being busy on other matters. See FLANDERS, supra note 14, at
69.

CASE MANAGEMENT 787

[267] In effect, the judge is supervising the lawyers'
preparation and tactics rather than the client (or supervising
officer) , who is often unable or unwilling to perform this
function. See generally ELLIOTT, supra note 58, at 330-32.

[268] The Board has yet to reach a constitutional issue, having
found a statute or regulation on point and controlling in cases
where constitutional issues were pressed.

[269] See Fed. R. Civ. P. 1. Differentiation is beginning to
occur, as in the 1983 amendments which allow district judges to
tailor discovery to the "amount in controversy" and the "needs of
the case." See Fed. R. Civ. P. 26(b)(1). For an elaborate
proposal to amend the federal rules to create a "fast track"
option, see McMillan & Siegel, "Creating a Fast-Track Alternative
Under the Federal Rules of Civil Procedure," 60 Notre Dame L.
Rev. 431 (1985) . See also RESNIK, supra note 1, at 547 (need
special procedures for subsets of cases) .

[270] See 45 C.F.R, $16.23 (1985).

[271] See CHURCH, supra note 45, at 54.

[272] See Section VIII-C.

[273] See Section VIII-B.

[274] See, e.g. . In re: New York State Dep't of Social Servs.,
HHS Grant App. Bd. , Dec. No. 673 (July 19, 1985).

[275] See Section V-F.

[276] See FEDERAL GRANTS, supra note 2, at $$1:03-1:06.

[277] See R. Cappalli, RIGHTS AND REMEDIES UNDER FEDERAL GRANTS
86 (1979).

[278] See Section IV-A.

[279] The impetus for the 1981 reform was more than academic. By
that time GAB had inherited and accumulated a large backlog of
unresolved disputes.

[280] Compare ALSCHULER, supra note 26, at 1845-59.

[281] See notes 130-131, supra, and accompanying text.

kPF^DlX A I JURISDICTION AND PROCEDURES OP THE

GRANT APPEALS BOARD, DEPARIWEWT OP HEALTH AND HUMAN SERVICES

CASE MANAGEMENT 789

J^— ^

» iT

Monday
August 31, 1981

Part IV

Department of
Health and Human
Services

Office of the Secretary

Grant Appeals Board; Process for
Appeals From Final Written Decisions

790 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

43816 Federal RegiMter / Vol. 46. No. loa / Monday. AuRUMt 31. V3UI / RuIcb and Retjulalions

DEPARTMENT OF HEALTH AND
HUMAN SERVICES

Offtc« of th« Sflcraury

45 CFR Pvtt 16 and 74

Gnuit Appeal* Board; Procata for
App««la From Ftnat Writlan Oaclalona

aocmct: Depurtment o/ Health and
llum«n Sorvicui.
action: Final rule.

•UMMAAv: The Oeparlmenl of Health
and Human Service! (HHS) reviiea 45
cm Part le to lubslilule new
re({ulre(nenli and proceJuroa applicabla
to Jia()utef anaing under certain HHS
grant and cooperative agreement
programa. HHS alao udda certiiin related
proviaiona to 45 CFR Part 74. which
containa gencrul rcqulrumeiita
applicable to all HHS Krunt and
cooperative ayreomeni pruyrama. The
proviaiona will improve the
Departmeni'a capability to provide a
(air, quick and flexiblo procaaa fur
appeal* from final written deaaiona.
date: E/lective September 30. luai.

FOM FUMTHKM INFORMATIOM CONTACT

Juhn Settltt. Chair. Ucparimcntal Grant
Appaala Board, Koom 2tXM. Swiuer
Building. 3J0 C Street. S. W..
Wakhington. D.C 20201; Telephone:
(202) 245-0222.
•UPMJIMENTAMV INFORMATION:

I. Back|;rouod

On January 6. I'Jtil. HHS publibhcd a
Nutica of Fropoaed Rulemulf^ing in tha
Federal Hoptlat contjiaing propoaed
nesy requiremenU and procedure!
applicable to the Oepartmonlul Grant
Appeal* Board and thoae who uae the
Doard'a diaputa reaoluiion aervice* (4d
FR 1M4). The rule* beluw contain
change* made in reaponae to comment*
received.

U. Suaxmary o/ commaaU and dtaagaa

Overall, the comnivnia were very
aupportiva uf the propoaed procedure*.
The few chticiam* are diacuaaed below.

Small cases. We invited cunimeiil on
whether we ahould eliminate Board
review of amull caaea. auggeaiing a
thruahold uf $S.(X)0. Conimdnia were
negative: furihermoru, aince we recaiva
few caaea under S5,000, the aavmga of
tune by the Board would bo mininiul.
We therefore have not eliiiiinaicd amall
Ciiaea from floard jun'adictiun. The
procedurea do contain un expedited
review proceaa fur cuaea of $25,000 or
Icaali 10.12).

Subj^nmivest. One cuiiuiienter ijrgued
thai aubgraitloea uf i 11 IS grantcea
ahould have a right tu appeal to the

Board. We have not provided auch a
general right of acceaa. The Board'a
primary reaponaibilily la lu deal with
dikpuiea between HHS and ita grantee*,
and Board reaourcea are not great
enuugh lo permit u* to aubklantially
expand our rola. Furthermore. HHS ha*
no direct reluiionahip with the
aubgrunice. and diaputea between iha
aubgrunJee and the grantee generally
ahuuld be reaolved between thoae
pariiea. The rulea do cuntuin u proviaion
(i IC.IO) under which a aubgraotae
which I* the real party in interaat can
iiilervene if the appellant doua not
ubjecl. and any party wtih un
Idcniifiablu inlereat in a cuae may. in iha
diacrction of the Board, participate in
the proceaa in aoine leaaer manner (for
example, by aubmitting a brief).

StaiMlard of ntvtitw. One commenler""
auggualed that the Board adopt a
atundard of review, auch aa a
"aubatantial evidence" teat. Wa hava
nut dona ao becauae the wide range of
prugruiua the Board aervea. and iha
complexity of laauea witKin thuae
program*, cannot be adequately covered
by a aingle atandard of review or burden
of proof aiatement.

Conflict of uiiereil. One commenler
fell thai the propoaed rulea were weak
concerning potential con/licta uf Inlereat
on the part of Board personnel. Wa hava
modified the provision* to atate an
affirmative but general aiandard. baaed
on the Coda uf Judiciul Conduct and
caae law auch a* Cindenllu Career St
Fiixuhms Schools, inc. v. FTC. 425 F.2d
5113. 5U1 (DC. Clr. 1U70|. ThI* ca*a atate*
that the te«t for diaqualificalion 1*
whether a diainlereated obverver could
conclude that the declaioitiuuker "ha* in
*ome meaaure adjudged the facta a*
well as (he law of a particular caae in
advance of hearing it." Canon 3.C.(1) of
the Code aaya that "a judge ahould
diaqualify himself m a proceeding in
which III* iiiipartiality might reaaonably
ba queallonod," and liata example* of
Circuinaiancea. The Board will uae the
Code and relevant cuae law aa guidance
in applying ila rule (see f 10.5(d)J.

Ftluig lime limns. Three comnientars
felt the time framea in (} 16.7 and ia.8
were too ahort. We have nol modified
these proviaiona, becauae we believe
that the commenlera failed to realize
that the new proviaiona actually
rcpreaeni a aubatanttal expansion of
front-end filing time over exiaiing
reguldtiona. Under proviaiona curranlly
in effect, the grantee la required lu file
an application for review within 30 dayp
after the adverse agency deciaion. The
applicaliuii for review coiilaina both
notice of an appeal and the appellant'*
aubsUinuve argumunl. Under the new

rule, an uppullaiit hua 30 days to file a
notice of appeal (which can be very
brief) and then has a further 30 days lo
prepare iia argument after the Board
acknowledges Iha notice of appeal.
Thus, li 10.7 and 10 8 more Ihan double
the amount of Ironlend time the
appellant has lo prepare its position.

In return for this expanded time at the
beginning uf the appeal, the Board
expects greater coinpleleneas in grantee
bnefing. so thai the Boaid will save lime
laler by avoiding successive requests for
information or briefing.

Uscs of conferences. Section 1(i.l0 haa
been modified slightly lo clarify that the
conference is provided nol only lo elicit
answera lu apecific quealiona from the
Board, but also lo give the parlia* an
opportunity to make un oral
praaentalion. The Board still Intend* to
keep the scope of the cunfc-rence. to the
maximum extent praclicable, restricted

10 consideration of material in the
appeal file. The conference i* not an
evidentiary hearing.

EJeciiun a hearing. One commenler
found t 10-1 1(a) loo restnciive, reading

11 to muan Uiat unless a parly
specifically requested a heanng at Iha
outset of a case, none would t>e granted,
regardless of Iha issues involved. The
commenler sug)<esled this would lead to
pro forma requests for bearings In all
cases. This mierpretaiion wa* not
Intended, and we have added language
lo make it clear thai the Board can
respond lo a later request for a hearing
or can schedule one on it* own.

Prehearing conferences and iha
record. One conimenlor ataled that it
wa* "uneasy" about | 10.11(b), which
atate* that the Board, "after coiuulting
with the partiea." may reduce the reaulta
of an informal prehearing conference lo
writing in a document which would be
made part of the record. The commenler
fell that both partiea ahould be given the
oppurtunity of reviewing and
coiiunenimg on what the Board propo***
lu include in die record. The Board
Intk-nda to provide preciaely that
opportunity, and thai la how the Board
will interpret the "cooaulluig" phraae.

Sanctions. Two commenler* felt the
proviaiona of | ltt.l5(b). providing for
poaaible dianiiaaal of an appeal for
failure to meet deadlinea. were loo
aevere or unfair compared to peaallie*
applicable to the Hi IS component The
procedure* give the Board ample
aulhorlly lo acconunodale the legitimate
needs of granleea which need
exienaiona for valid reaaona. but we
cannul allow umeaaonable delay*. The
rea*on the procedure* do not
contemplate disiniaaal againat the fiilS
component for failure to meet deadline*
1* that there 1* a aubaluntial legal aod

CASE MANAGEMENT

791

Faderal RHgisler / Vol. 46. No. 168 / Monday. August 31. 1981 / Rulea and Regulalions 43817

policy question whether the Board could
or should lake an action effectively
precluding MfiS from recouping funds
which HHS determined Ihe grantee
poasetsca or claims lllngully. by virtue,
for example, of having Incurred an
unallowable cost. If the Hi IS component
does unreusonubly delay, (he Doard can
^Ireal the IIMS case as submitted for
decision bused on the record assembled
to thai point.

Secretarial nfview. Tlio provision
which provoked the most comments was
proposed ] 18.21(c), which provided that
Dpard decisions would not be final and
would be subject to modification In
whole or part at the discretion of the
Secretary. Ilia Department continues lo
study whether Board decisions should
be "final" or should be suhjeci to
Secretarial review. In order to avoid
further delay in implementing the other
provisions, these' procedures are being
published without J 16.21(c). and that
section Is reserved for the addition of a
provision dealmg with the matter of the
finality of Board decisions. In the
interim, the decisions of the Board will
be the Hnal administrative action of the
Department on the matter in dispute.

Staying agency action. Several
commentcra objected to { 1A.22(b), on
the basis that II gives an I II IS
component loo much uulhurily lo lake
action pending the outcome of Iha
appeal. The range of actions an MHS
component may lake under the
provisions of i 10.22(b) (1) through (3)
are reasonably limited; the broadest
authority is contained in I ie.22(b)(4),
which provides for any other action
"specifically authorized by statute or
regulation." The tatter provision merely
restates what would be the rule even if
this provision were not included here,
and we believe that commenters'
attention generally should focus on the
adequacy or dcairHbility of any specific
provlNiun uf !<iw ur rci;ulaliun that mny
be proposed by an ill IS component to
authorize or require predecision action.
However, we have clarified
i lU.22(b)(3). It is intended toopply only
lo certain Social Security Act programs
In situations where a disallowance is
taken, based un a report of actual
expenditures, before lhe<di8ullowcd
claim has ever been u|)proved.

Prvviaions related tu jurisdiction. The
final rule adds disalluwances under
Title 111 uf the OUIer American Act.
Under a finul rule published by the
Social Security Adminiatralion (4A V^
2U1U0. May 2U. lOfll). the (JoHrd will also
review certain audit determinaliuns. and
provide a hearing on a proposed finding
of "subslantiul failure." in disputes

arising under section 221 of the Social
Security Act.

One commenler expressed
"disappointment" that the Board would
rely so heavily on l-iHS component input
in situations where Board jurisdiction la
unclear, since we will be bound by an
MHS opinion thai is not clearly
erroneous (Appendix A, Paragraph C).
Ihu determination that the Board should
tuive jurisdiction for certain programs
reflects a policy decision by
Departmental managers. Thus, 11 would
be inappropriate for the Board to extend
jurisdiction to cases where we did not
clearly have it. Kurthemiore. it is
important to have a rapid decision-
forcing mechanism In these unclear
cases, to let the grantee and the agency
involved know quickly what their
■eviaw options are.

"Final" anency decisions. Concerning
proposed f 74.304. one commenler
observed that there can be a problem
with an I IMS component delaying a finul
decision, so that failure to provide a
final decision should trigger a right to
appeal. We have not included such a
provision. It is administratively very
difficult to determine the scope of an
undefined dispute, and thus in most
cases virtually Imposs^ile to adjudicate
it. The Board's regulation does indicate
that an agency should issue a decision
"promptly." Board personnel who,
participate in agency training sessions
continually try lo Impress upon agency
personnel the need to Issue timely finul
decisions, both to reduce legal and
political risk and to foster good grantee/
grantor relationships.

Minor wording chaixges. A number of
other minor changes have been made lo
assure consistent terminology, tu clarify
meaning without substantial change,
and to Improve grammar and style.

III. CoQlinuing conunanls invited

Although this is a final rule, we invite
comment and criticism on a continuing
baniff, Mild we will make modiftculiuns
in thu future as they are needed. Please
communicate with tho Chair,
Uepartmentul Grunt Appeals Board,
Room 2U04. Switzcr Building. 330 C
Street. S.W.. Washington. D.C. 20201
(telephone 202/24S-0222).

IV. Implemanlalloo

These procedures apply to all appeals
filed on and after the effective date.
These procedures also apply to all
appeals pending on the effective date, lo
the extent practicable and not
Inconsistent with fairness to the parties.
I'he iltiard will conduct all hearings and
conferences in pending appeals in
accordance with the new }) 16.5. 16.10
and 16.11, but the parties in these cases

are not required to duplicate earlier
effort by developing the appeal fila
under new ] 16.8. Unless the parliet
otherwise agree, the expedited procAsa
in I 16.12 does not apply to pending
appeals. The Board will consult with th«
parties In each pending appeal
concerning the transition lo the new
procedures, and will apply the old
procedures whure a party shows why
they would bo fairer In that appeal.

Accordingly, the Department amends
45 CKR as follows:

1. By revising Part 18 as follows:

PART 18— PROCEDURES OF THE
DEPARTMENTAL QRANT APPEALS
BOARD

16 1 What this part does.

1tt.2 Drrinillon*.

lit.3 Whon these procedure* becoma

avttilnblo.
ie.4 Summary of proc«durei below.
10.5 How the Board operates.
lU.a Who rcpresenit the parties.
ltt.7 The first sleps In Uie appeal pra4:e«s:

the nuiica of appeal and the Board's

response.
16.d 1 ha nnxt step in the appeal process:

preparation of an app««l ilia and wrillsn

argument.

16.9 flow tho Board will promote
development of the record.

10 10 Using a confarance.

la.n Hearing.

16.12 The cxpedllod process.

10.13 Power* and rasponsibllitlts.

10.14 I low Uuurd review I* ilmllad.

10.16 Kulluro tu meet deadline* and otbar.
requiremHni*.

10.10 Parlle* lu the appeal.

16.17 fclx parte conitnuiiicaiion*
(communications ouulde ihe record).

10.18 Mediulion.

10.19 How lo calculate deadlines.

M.m How to submit material lo ihs Board.

10.21 Record and declaiuna.

10.22 The eflecl of an appeat.
ia.23 How lunu an appeal lakes.

Appendix A— What Disputes Ihe Doard
Reviews.

Aulhorily: ft U.S.C 3m and sections 1. 9. 0.
and 7 of Ruordanlzalion Plan Nu. I of 10&3. 16
l-'R 21)63. 07 Slat. 031 and authorities dtad la
the Appendix.

I U. t WtMl thla part doas.

This part contains requiremenia and
procedures applicable lo certain
disputes arising under the HHS
programs described in Appendix A. Thif
part Is designed lo provide a fair,
impartial, quick and flexible process for
appeal from written final decisions. Thia
pari supplements Iha provisions In Part
74of Ihis lllle.

f 16.2 Oatlnltiona.

(a) "Board" means the Departmental
Grant Appeals Board of Ihe Department
uf Health and Human Services.

792

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

43810 Fodcrol Renislcr / Vol. id. No. ICa / Mond.iv. Ai.v;iisl .11 1"MI / Uul. i .uul ll.vnl.ilii.i»>

Reference below lo an acliun uf "the
Dourd" niffunt un ticlion of lite Chmr,
unollier Dour J member, or UouiJ staff
MClmii a( (he (lireclion of u UoarJ
member. In ccrum insUnces. llie
pruvibioiii reiilricl action lo particular
DuurJ personnel, ouch m ihe Chair or a
UoHrd niembcr assij^nuJ to a cabu.

(b) Other lermi shall hovo the
mcininK »el forth in Purl 74 of tins lillu,
utiles* the conlHxl below olhcrwiite
requires.

i 16.3 Wh«n thMt proodurat become
available.

before the Board will take an appeal,
three circumstances must be pre:>en(:

(a) Tha dispute must arise under a
program which uses the Oourd for
dispute resolution, and must meet ai.y
■pecial conditions established for that
program. An explanation ia contained In
Appendix A.

(b) The appellant must have received
a final written decision, and must
appeal that decision within 30 days after
receiving it. Details of how final
decisions are developed and issued, and
what must be in them, are contuincd in
45 CFR 74.304.

(c) The appellant must huva
exhausted any preliminary appeal
process required by regulation. For
example, see 42 CFK Fart 50 (Subpart D)
for Public ftealth Service programs and
Part 75 of this title for rule
detorminotions and cost allocation
plans. In such cases, the "final written
decision" required for the EJoard's
review is the decision resulting from the
prclimininry review or appeal process.
Appendix A contains further details.

i 18.4 Sumniary o( procaduraa baiow.

The Board's basic process ia review of
a written record (which both parties are
given ample opportunity to develop),
consisting of relevant documents and
statements submitted by both parties
(sue J 16.d|. In addition, the Board may
hold an informal conference (see
S 10.10). The informal conference
primarily involves questioning of the
participants by a presiding Board
member. Conferences may be conducted
by telephone conference call. The
written record review also may be
supplemented by a hearing involving an
opportunity (or examining evidence and
witnesses, Cfoss-examinaiion, and oral
argument (see S 16.U). A hearing is
more expensive and time-consuming
than a determination on iha written
record alone or with an informal
conference. Generally, therefore. Ihe
Board will schedule a hearing only if Ihe
Dourd determines that there are complex
issues or material facts in dispute, or
thai the Board's review would otherwise

bo significantly enhanced by a hu.irinit.
Where the ainuuiit in (lis|jtitc is S<:S.OOU
or less, there are special expedited
procedures (see \ IG.i;! of tins purt). in
ull cases, the Board has the flexibility lo
modify procedures to ensure faii'iic;is. to
avoid delay, and to accommodate Ihe
peculiar needs of a given case. 1'he
Board makes maximum feasible use of
preliminary informal steps to refine
issues and to enrouruga resolution by
the parties. The Boord also has the
capability to provide mediation icrviccs
(see i lU.ia).

{ 16.S How Ihe Board operate*.

(a) The Board's professional staff
consists of a Chair (who is also a Board
member) and full- and part-time Board
members, all appointed by the
Secretary: and a staff of employees and
consultonts who are attorneys or
persons from other relevant disciplines,
such OS accounting.

(b) The Chair will assign a Board
member to have lead responsibility for
each case (the "presiding Board
member"). The presiding Board member
will conduct the conference or hearing,
if one is held. Each decision of the Board
IS issued by the presiding Board member
and two other Board members.

(c) The Board staff assists the
presiding Board member, and may
request information from the parties;
conduct telephone conference calls lo
request information, to clarify issues, or
to schedule events; and assist In
developing decisions and other
documents in a case.

(d) The Chair will assure that no
Board or staff member will participate in
a case where his or her impartiality
could reasonably be questioned.

(e) The Board's powers and
responsibilities are set forth in J 1U.13.

S 16.6 Who represents the parties.

1'he appellant's notice of appeal, or
the first subsequent submission to the
Board, should specify the name, address
and telephone number of the appellant's
representative. In its first submission to
the Board and the appellant, the
respondent (I.e.. the federal parly to the
appeal] should specify Ihe name,
address and telephone number of the
respondent's representative.

§ 16.7 The llrsi steps In ma appeal
process: tn* notice o( appeal and the
board's response.

(a) As explained in 45 CFR 7l..ny\. a
prospective appellant must submit .i
notice of appeal to the Board vviltnn 30
days after receiving the final decision.
The notice of appeal must include a
copy of the final decision, a statement of
Ihe amount in dispute in the appeal, and

a brief slateiiunit of tvliy ilie decision i>
wrong.

(b) Within It'll d.iyi after roceivins •!»•
iiulicc of appial. the Board »\i|| send an
(icknowledsnu.nt. enclose a copy of
ihei(e prttceduius, and advise the
appellant of the next steps. The Board
will also send a copy of the notice of
iippeal. Its utlachments, and Ihe Board'i.
uckiiowleilKDienl to the respondent. If
till! Buard Chair has determined that thi
appeal does not meet Ihe conditions of
<i 10.3 or if (urihor information is needed
lo make this determination, the Board
will notify Ihe parlies at this point

§16.8 Tha noil siep in Ihe appeal process
preparation o( an appeal lile and wrlllen.
argu,nenL

Except in expedited cases (generally
those of S25.UUI) or less: sea | 10.12 (or
details), the appellant and Iha
respondent each participate in
developing an .ippeal file for Ihe Board
to review. Each also submits written
argument in support of its position. The
responsibilities of each are as follows:

(a) Tiw appellant's respoiisibihly.
Within 30 days after receiving tha
acknowledgment of tha appeal, thu
appellant shall submit the following to
the Board (with a copy to tha
respondent):

(1) An appeal file containing the
documents supporting the claim, tabbed
and organised chronologically and
accompanied by an Indexed list
identifying each document. The
appellant should include only those
documents which are important to the
Board's decision on the issues in the
case.

(2) A written statement of tha
appellant's argument concerning why
the respondent's Anal decision is wrong
(appellant's brief).

(b) The rcsponJttiit's rcspoiiaibiltiy^
Wiiliin 30 d.iy.i .ificr receiving ihe
uppellanl's submission under paragraph
|a| of this section, the respondent shall
submit the followinx to the Board (with
a copy lo the appellant):

(t) A supplement to Ihe appeal file
coiiiaiinng any uddiiional documents
supporting the respondent's position.
or>;.iiiized and indexed as indicated
undt:r pHra(;riiph (ii) u( this section. Tb«
icspondcnt should avoid submitting
duplicates of documents submitted by
Ihe appellant.

(2) A written statement (respondrni't
briel) rispondiii\< In Ihe .ippitllanl's brief.

(c) The appclliiul's n-ply. Within IS
d.iys after letciv ui^ tlu; respondent's
submission, the .ippell.ini ni.iy submit a
sliurl reply. 1lie appellant should avoid
repealing arguments already made.

(d) Cuvperuli\ c efforti. Whenever
possible, the parties should try lo

CASE MANAGEMENT 793

Federal Rcqisler / Vol. -16. No. 108 / Monday. August 31. 19H1 / Rulus und RcRulations 43019

develop a joint appeal file, agree to
preparation of the file by one of them,
n;jree to fucts to eliminate the need for
some documents, or ugrec ihal one puity
u:ll subntil documents identified by the
ulher.

(c) Voluminous docuniuiUalion.
Where submission of jII n-levaiit
dociiiiii.Mits would li'Hd lu .1 V'uluniiiioiis
ttppeul lile (for example where review of
tf disputed audit findinK of in.idcquaie
documcntiition mi^ht involve thousands
of receipts), the lioard will consult with
the p. lilies aGoul how tn ri:dure the si/c
of tlte file.

§ 16.9 HoM lh« Ooard will promol*
doveiopmeni ol ir>« record.

Ttie Hoard may. ul ilic time il
a( knuwlcdjies an .ippoul nr ul iiny
iippropriatv lat<.-r point. ie(|tii-bt
additional documents or iiifiirnt.iiiun:
request IxiennK on issurs m ihe case:
issue orders to khuw i:.tii<ii! why a
prttposod findinfi or ih.xision of ihn
lloiird should nut bcLuine final; hiild
preliminary coiif.'fi'nrr^ ImMiiT.illy by
telephone) to esi.ibh^h schedules and
refine issues: anil luke such oihur steps
as the Hoard dcii rnnnes •i|ipro|iii.iiir lu
develop u prompt, tuund ih-nsion.

f IS. 10 Using • conlertnct.

(a) Oitco ihc Oo.ird h<is ntvicwcd the
appi'dl file, the Ihiuril m.iy. on iis own or
in response to u party's r< quest,
•chedulc un inri)riii.il cuiiM-ri'nce. The
conference im.'I le i.uiiJucii-d by Ihi:
presiding Uoacd :ni.miicr. The purposes
of (he conference are to !;ivc ihc p.iriies
an opportunity lo mukc .m oral
presentation and il.i! Bo.ird aa
opportunity to L.'.inly issues and
<)uetllon both p.irties about mailers
wliich the (lo.ird n'..iy not \el fully
underaiand fruiii iho rccurd.

(b) If the Ooard has deeded lo huld a
conference, ihe D.j.ird will consult or
correspond vx.m i.'-.c p.irn.js to schedule
the conference. idc:-.i.fv issues, and
difcuss proccdares. The doard bvill
Identify the p.-rsons who wil! be allowed
10 participate, aiunjj kviih (he pariiej'
reprcseiiiat.ves. in ihu conference. The
parties ran SLbmil with iheir briefs
under i 1GB a li&t of persons who might
panic. pale uiin them, indic^ilir.i; how
each ^•l.■r•;o(l is involved in the matter. If
the p.irccs wish, iney muy alio su^^ust
qL;LSi.u:i3 or areas ul inquiry which the
lio>.f;i iiijy wish lu pursue wilh eucli
pji.ic.pam.

|( ) Unless the parties and the Ooard
othi'fwise agree, the following
procedures apply:

(1) Conferences will be recorded at
Department expense. On request, a
party will be sent one copy of the
transcript. The presiding Doard member

v\ ill insure an orderly transcript by
controlling the sequence and
identification of speakers.

(2) Only in exceptional circumstances
will documents be received at a
conference. Inquiry will focus on
material in the appeal file. If a party
finds that further documents should be
III the record for the conference, llic
parly should supplement the appeal file,
submiliing a supplementary index and
copies of the documents lo the Ooard
and the other parly not less than ten
d.i> s jirior lo the conference.

(J) llach parly's representative may
make an oriil presentation. Generally,
Ihe only oral communications of other
participants will consist of statements
requested by Ihe Ooard or responses to
itie Oiiiird s questions. I'he Uuard will
allow reply comment, and muy .illow
.short closing sialemenls. On request, the
Uu.ird may .illuw the participaiils to
(juesiion each other.

(■I) rhcre will be no post-conference
submissions, unless the Ooard
determines they would be helpful lo
resolve the case. Tlie Ooard may require
or allow the parties to submit proposed
fi.idings and conclusions.

3 16.11 Hearing.

(a) Electing a hearing. If the appellant
believes a hearing is appropriate, the
appellant should specifically request
one at the earliest possible time (in Ihe
notice of appeal or wilh the appeal lilc).
1 he Ooard will approve a request (and
may schedule a hearmg on its own or in
re.spunse lo a later request) if it finds
there are complex issues or material
facts in dispute the resolution of which
would be significantly aided by a
hearing, or if the Board determines that
its decisionmaking otherwise would be
enhanced by oral presentations and
arguments in an adversary, evidentiary
hcai mg. The Uoard will also provide a
hearing d otherwise required by law or
regulation.

(b) Preliminary conference before the
hoanni'. The Doard generally will hold a
prehearing conference (which may be
conducted by telephone conference call)
to consider any of the following: the ,
possibility of settlement: simplifying and
clarifying istues: stipulalions and
admissions: liniitalions on evidence und
witnesses thai will be presented ul the
hearing: scheduling ihe hearing, and any
ulher mailer Ih.il muy aid in reauK ing
the appeal. Noimully. this conference
will be conducted informally and olf the
record, however, the Ooard. after
consulting wilh ihe parlies, may rrdccc
results of the conlerence to writing in a
ducuinenl which will be made part of
the record, or may transcribe

proceedings and make the transcript
part of ihe record.

(cj Where hearinns are held. Hearings
generally are held in Washington. O.C.
Ill exceptional circumstances, llio Ooard
may hold Iho hearing al an MI IS
Kegional Office or other convenient
facility near the appellant.

(d) Conduct of the hearint". (1) Tho
presiding Uoard member will conduct
the hearing. Hearings will be a* informal
us reasonably possible, keeping in mind
the need to establish an orderly record.
Ihe presiding Ooard member generally
will admit evidence unless it ia
determined lo be clearly irrelevant,
immaterial or unduly repetitious, ao the
parties should avoid frequent objections
lo questions and documents. Both aide*
may make opening und closing
stalemeiits, may present witnesses as
ai^reed upon in the prehearing
conference, and muy cross-examine.
Since Ihe parties have ample
opportunity lo develop a complete
.ippeal flic, a party may introduce an
exhibit at ihe hearing only after
cxpl.iining to ihe satisfaction of the
presiding Ooard member why the exhibit
was not submitted eurlier (for example,
because tho information was not
available).

(2) The Ooard may request the parties
to Submit written ilatcinents of
witnesses to the Board and each other
prior to the hearing so that the hearing
will primarily be concerned wilh crosa-
examination and rebuttal.

(3) False statements of a witness may
be the baaia for criminal prosecution
under sections 2U7 and lOUl of Title IB
of the United States Code.

(•1) The hearing will be recorded at
Department expense.

(e) Procedures after the hearing. The
Doard will send one copy of the
transcript to each party as soon as it is
rei-eived by the Board. At the discretion
of Ibe Ooard. the parties may be
required or allowed to submit potit-
hearing bciefa or proposed findings and
conclusions (Uie parlies will be informed
at Iho bearing). A party should note any
major prejudicial transcript errors in an
addendum lo ila post-hearing brief (or if
no brief will be subndtted, in a letter
submitted within a lime limit set by the
Board).

$16.13 TTm aipAdilad process.

(a) Appltcabiltty. Where ihe amouni
in dispute IS Si:6.lX)0 or less, the Ooard
will use these expedited procedures,
unless the Ooard Chair determines
otherwise under paru^r.iph |b) of this
section. If the Ooard and Ihe parties
agree, the Ooard may use these
procedures in cases of more than
5^5.000.

794

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

43020 Federal Rogislcr / Vol. 40. No. TOO / Mond.«y. Au^usl 31. 19Q1 / Rulc-s anJ Rcsiilalions

(b) Exceptions. If lliere arc unique or
unusually complex ijsuet involved, or
other excepiional circumstances, the
Board may use addiiional procedures.

(c) Renulor expedited procedures. (1)
Within 30 ddys after receiving (he
board's Hcknuwled^menl of the appeal
(see i 16 7). each party khall submit to
the Uoard and the other parly any
relevant background documents
(organized as required under | 10.0).
with a cover letter (generally not to
exc«ed ten pages) containing any .
argumunts the parly wishes lo make.

(2) Promptly after receiving the
parlies' submissions, the presiding
Board member will arrange a telephoae
conference cull to receive the parlies'
oral comments in response to each
other's submissions. After notice to the
parlies, the Board will record the cull.
The Board member will advise the
parties whether any opportunities for
further briefing, submissions or oral
presentations will be established.
Cooperative efforU will be encouraged
(see J ia.8(d)).

(3) The Board may require the parties
to submit proposed findings and
conclusions.

(d) Special exp&ditod procedures
where there has already been review.
Some HHS components (for example,
the Public Health Service) use a board
or olher relatively independent
reviewing authority to conduct a formal
preliminary review process which
results In a written decision based on a
record including documents or
statements presented ufler reasonable
notice and opportunity lo present such
material. In such cases, the following
rules apply to appeals of S25.0U0 or lest
instead of those under paragraph (c) of
this section:

(1) Cenerally, the Board's review will
be restricted to whether the decision of
the preliminary review authority was
clearly erroneous. But if ihe Board
determines that the record it
inadequate, or that the procedures under
which the record was developed in a
given instance were unfair, the Board
will not be restricted this way.

(2) Wilhin 30 days after receiving the
Board's acknowledgment of appeal (see
i 16.7), Ihe parlies shall submit the
following:

(i) The appcllunt shall submit lo the
Board and the respondent a statement
why Ihe decision was clearly erroneous.
Unless allowed by the Board ufler
consultation with the respondent, the
appellant shall not submit further
documents.

(ii) The respondent shall submit to the
Board Ihe record in ihe case. If Ihe
'espondent has reason lo believe that all
'\mioriuls in the record already are in

the possession of the appellant, the
respondent need only send the appcllunt
a list of the materials submitted lo the
Board.

(ill) The respondent may. if il wishes,
submit a slaiemenl why the decision
was not clearly erroneous.

(3) The Board, in its discretion, may
ulluvv or require the parlies lo present
further arguniciiU or inforinutiun.

{16.13 Powers and respontibiilllet.

In addition to powers specified
elsewhere in these procedures. Board
members have the power to issue orders
(including "show cause " orders); to
examine witnesses: lu lake all steps
necessary for the conduct of an orderly
hearing: to rule on requests and motions,
including motions to dismiss: lo grant
extensions of tune for good reasons: lo
dismiss for failure to meet deadlines and
other requirements: to close or suspend
cases which are not ready for review; lo
order or assist the parlies to submit
relevant information; to remand a case
for further action by Ihe respondent; to
waive or modify these procedures in a
speciHc case with notice lo the parties;
lo reconsider a Board decision where a
parly promptly alleges u clear error of
fact or law; and to lake any other action
necessary lo resolve disputes in
accordance with the objectives of these
procedures.

1 1ft. 14 How Board review It limited.
The Board shall be bound by all
applicable laws and regulations.

{ 16. IS Failure lo meet deadlines and
olher requtremenlt.

(a) Since one of the objectives of
administrative dispute resolution is lo
provide a decision at fast as possible
consistent wtlh fairness, the Board will
not allow parties lo delay the process
unduly. The Board may grant extensions
of lime, but only if ihe party gives a
good reason for the delay.

(b) If Ihe appellant fails to meet dny
filing or procedural deadlines, appeal
file or brief submission requirements, or
other requirements established by the
Board. Ihe Board may dismiss the
appeal, may issue an order requiring -the
parly to show cause why the appeal
should not be dismissed, or may take
other action the Board considers
appropriate.

(c) If Ihe respondent fails lo meel any
such requirements, ihu Board may issue
a decision bused on Ihe record
Bubniilled lo that point or take such
olher measures as the Uoard considers,
apprupiiate.

{ 16.16 Parties to the appeal.

(a) The only parlius lo llie appeal are
the appellant and ihe respondent. If Ihu

Board determines that a third person is
a real party in interest (for example,
where the major impact of an audit
disallowance would be on Ihe grantee's
contriictor. not on the ^rnntee), the
Board may allow Ihe third person lo
present the case on appeal fur the
appellant or to appear with a parly in
the case, after consullation with the
purtius and if the appellant dotit nut
object.

(b) The Board may also allow other
participation. In lliu manner and by the
deadlines established by Ihe Board,
where Iho Board decides that the
intervenor has a clearly identifiable and
substantial interest In Ihe outcome of
the dispute, that participation would
sharpen issues or otherwise be helpful
In resolution of the dispute, end that
participation would not result in
substantial delay,

§ 16.17 El parte communicaUona
(communicatlona ouiaMe the record).

(a) A party shall not communicate
with a (ioard or staff member about
matters involved in an appeal without
notice lo the other parly. If such
communication occurs, the Board will
disclose il lo Ihe other party and mak^lt
part of the record after the other party
has an opportunity to comment. Board
members and staff shall nol consider
any information outside the record (see
i 16.21 for what Ihe record consists oQ
about mailers involved in an appeal.

(b) The above does nol apply lo the
following: communications among Boerd
members and staff; communications
concerning Ihe Board's administrative
functions or procedures: requests from
the Board to a party for • document
(although Ihe mntchal submitted in
response also must be given to the other
party): and material which the Board
includes in ihe record after notice and
an opportunity lo comment,

i 16.18 Medlailon.

(a) //I ca:^rs p fading before the Board.
If the Board decides ihal mediation
would be useful to resolvea dispute, the
Board, in consultation with the parties,
may suggest use of mediation techniques
and will provide or assist In selecting a
mediator. The mediator may take any
slept agreed upon by the paxlles to °
resolve the dispute or clarify Issues. The
results of medi.iiion ure nol binding on
the parlies unless the p.irlict to agree in
writing. The Uoard will internally
insiilale ihe medialor from any Board or
staff members assigned lo handle the
appeal.

(b) In uther LOits. In any other grunts
dispute, the Board may, wilhm Ihe
liniiuilions of its resources, offer pcrtoiy
Iruuied in mcdialion skillt lo aid ut

CASE MANAGEMENT

795

Federal Register / Vol. 46, No. 168 / Monday, August 31. 1981 / Rules and Regulations 43821

resolving the dispute. Mediation
services will only be offered ul the
. request, or with the concurrence, of a
responsible federal program official ui
the program under which the dispute
arises. The Board will insulate the
mediator if any appeal subsequently
arises from the dispute.

1 16.19 How to calculala dsadllnaa.

In counting days, include Saturdays,
Sundays, and holidays: but if a due date
would fall on a Saturday, Sunday or
federal holiday, than the due date is the
next federal working day.

{ 16.20 How to submit material to tha
Board.

(a) All submissions should be
addressed as follows: Departmental
Grant Appeals Board, Room 2004,
Switzer Building. 330 C Street SW..
Washington. D.C. 2U201.

(b) All submissions after the notice of
appeal should identify the Board's
docket number (the Board's
acknowledgement under $ 16.7 will
specify the docket number).

(c) Unless the Board otherwise
specifies, parlies shall submit to the
Board an original and two copies of all
materials. Each submission other than
the notice of appeal, must include a
statement that one copy of the materials
has been sent to the other party,
identifying when and to whom the copy
was sent.

(d) Unless hand delivered, all
materials should be sent to the Board
and the other party by certified or
registered mail, return receipt requested.

(e) The Board considers material to be
submitted on the date when it is
postmarked or hand delivered to the
Board. -

( 16^1 Record and daclslona.

(a) Each decision is issued by three
Board members (see S ia.5(b)). who
base their decision on a record
consisting of the appeal file; other

. submissions of the parties; transcripts or
other records of any meetings,
conferences or hearings conducted by
the Board; written statements tesulting
from conferences; evidence submitted at
hearings: and orders and ather
documents issued by the Board. In
addition, the Board may include other
materials (such us evidence submitted in
another appeal) after the parties are
given notice and an opportunity to
comment.

(b) The Board will promptly notify the
narties in writing of any disposition of u
Use and the basis for the disposition.

i 16 J2 The atfact of an appeal.

(a) General. Until the Board disposes
of un appeal, the respondent shall take
no action to implement the final decision
appealed.

(b) Exceptions. The respondent may —

(1) Suspend funding (see \ 74.114 of
this title):

(2) Defer or disallow other claims
questioned for reasons also disputed ii
the pending appeal;

(3) In programs listed in Appendix A.
B.(a)(l), implement a decision to
disallow Federal financial participation
claimed in expenditures reported un a
statement of expenditures, by
recovering, wiihliolding or offsetting
payments, if the decision is issued
before the reported expenditures are
included in the calculation of a
subsequent grapt; or

(4) Take other action to recover.

. withhold, or offset funds if specifically
authorized by statute or regulation.

1 16.23 How long an appaal Ukas.

The Board has established general
goals for its consideration of cases, as
fallows (measured from the point when
the Board receives the Hrst submission
after the notice of appeal): ..
— for regular review based on a written

record under \ 10.8. 6 months. When a

conference under $ 16.10 is held, the .

goal remains at 6 months, unless a

requirement fur post-conference

briefing in a particular case renders

the goal unrealistic '
— for cases involving a, bearing undei

i 16.11. U months.
— for the expedited process under

S 16.12. 3 months.

These are goals, not rigid
requirements. The paramount concern of
the Board is lo take tht) time needed to
review a record fairly and adequately in
order to produce a sound deciniun.
Furthermore, many factors are beyond
the Board's direct control, such as
unforeseen delays due to the parlies'
negotiations or requests for extensions,
how many cases are filed, and Board
resources. On the other hand, the parties
may agree to steps which may shorten
review by the Board; for example, by
waiving the right to submit a brief, by
agreeing to shorten submission
schedules, or by electing the expedited
process.

Appendix A — What Dispulaa the Board
Kaviaws

A. What this Appendix coyera.

This Appendix describes programs
which use the Buard for dispute
resolution, the types of disputes
covered, and any conditions for Board
review of final written decisions

resulting from those disputes. Disputes
under programs not specified in this
Appendix may be covered in a program
regulation or in u memorandum of >
understanding between the Board and
the head of the appropriate I LflS
operating component or othi.-r agency
responsible for administering the
program. If in doubt, call the Board. - •
Even though a dispute may be covered,
here, the Board still may not be able to«
review It if the limits in paragraph F >
apply.

B. Mandatory a. jnt projf rants.

(a) The Board reviews the following
types of final written decisions in
disputes arising in liHS programs
authorizing the award of mandatory
grunts:

(1) Disallowances under Tidea L IV, ,
VI. X. XIV, XVl(AABD), XIX, and XX ol
the Social Security Act, Including
penalty disallowances such as those
under sections 403(g) and 190J(g) of tha
Act and fiscal disallowances based on
quality control samples. • ■• '

(2) Disallowances in mandatory grant
programs administered by the Public
Health Service, Including Title V of tha
Social Security Act.

(3) Disallowances in the programs
under sections 113 and 132 of tha
Developmental Disabilities AcL > ■

(4) Disallowances under Title Ui of tha
Older American Act.

(b) In soma of these disputes, there ia
an option for review by the head of the
granting agency prior to appeal to the ^
Board. Where an appellant has .j^
requested review by the agency head ;.
first, the "final written decision'' ' ^-t
required by } 16.3 for purposes of Boaid
review will generally be the agency -
head's decision affirming tha
diHuliuwanca. If the agency head
declines to review the disallowance or if'
the appellant withdraws its request for
review by the agency head, tha original
disallowance decision is the "final '.
written decision." In tha latter cases, (he
30-Juy period for submitting a notice of
appeal beginawith tha date of receipt of '
the notice declining review or with the i
date of tha withdrawal letter.' ('•^i ' '.^m

— _. '/"..•' ■. '■'tv.'- ».; J ■ ^',

C. Diivci, ajjj^rctioiiqiy pix^t-ct^^- . ♦■
prvurumsi'j^ ■ -• , ,,....

(a) The Board reviews the following
types of final written decisions in
dmputes arising In any Hi-iS program
authorizing the award of direct,
discretionary project grants or
cooperative agreements:

(1 1 A disallowance or other
determination denying payment of an
amount claimed under un award, or
requiring return or set-off of funds
already received. Tins does not apply lo

796

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

43322

Federal Ro>{ibler / Vol. 40. No. IGH / Mundav. AuqusI 31. 1981 / Rules and RcRulationa

dcterminulioni uf awMrii umuuni or
ditpotilion ol unobliti<ilt:(i b«l<inccs. or
tel«clion in the awdrd JocumenI of aa
option for disposiliun of program-related
income.

(2) A (erimndtion for failure to comply
M/ith the terms uf dn uvvdrd.

(J) A denial of a nc.ncompeling
continuation award under the projecl
period tyfelem of funding where the
denial is for failure to comply with the
lerma of a previous award.

(4) A voiding (a deciiiion that an
award is invalid bccauue it was not
authorized by statute or regulation or .
because it was fraudulently obtained).

(b) Where an HHS component uses a
preliminary appeal proceas (for
example, the Public Health Service), the
"final written decision" for purposes of
Board review is the decision issued as a
result of that process.

D. Coit allocation and rate disputes.

The Board reviews final written
decisions in disputes which may affect a
number of HMS programs because (hey
involve cost allocation plans or rate
determinations. Thcie include decisions
related to cost allocation plans
negotiated with State or local
governments and negotiated rates such
as indirect cost ratiis, fringe benefit
/ates, computer rates, research patient
care rates, and other special r.ites. The
"final written decision" for purposes of
Board review uf these disputes is the
decision issued as a result of the
preliminary appeal process at Part 75 of
this tide.

E. SSI ayreoiuL'nl disputes.

The Board reviews disputes in the
Supplemental Security Income (SSI)
program arising under agreements for
Federal admiaistraiioii of State
supplementary payments under section
lUltt of the Social Security Act or
mandatory minimum supplements under
section 212 of Hub. L 'i^-m. In these
cases, the Board provides an
opportunity to be heard and offer
evidence at the Secretarial level of
review as set out in the applicable
Agreements. Thus, the "final written
decision" for purposes of Hoard review
is thai determination appeal.iblo to the
Secretary under the agreement.

f. irVhciv B^ard levww is not available.

The Board will not review a decision
if a hearing under 5 U.S.C. 534 is
required by statute, if the basi:> uf the
decision is a vioUition of applicable civil
rights or nondisciinuaation laws or
regulations (fur example. Title VI of the
Civil Rights Act), or if some other
hearing process is established pursuant
to alatulc.

C. I low the Board dclerniincs whether il
will rfvm^v a cu»e.

Under } 10.7, the fluard Chair
determines whether an appeal meets the
requirements of this Appendix. If the
Cliair finils that there is Nome question
about this, the Board will request the
written upinion of (he Hi IS component
which issued the decision. Unless the
Chair determines that the opinion is
clearly erroneous, (he Board will be
bound by (he opinion. If the HHS
component does not respond within a
lime set by the Chair, ur cannot
determine whether the Board clearly
does or does not have jurisdiction, the
Board will take the appeal.

PART 74— ADMINISTHATION OF
GRANTS

2. Part 74 of Title 45 of the CFR is
amended at set forth below:

a. Subparts R and S are reserved us
follows:

Subpart R— (Reserved]

Subpart S — [Reserved]

b. The table of contents is rev'sed by
adding entries for a new Subpart T, as
follows:

Subpart T— Mtscallancous

Sec
74.2.^0-^4.303 |Re8erved|
74.304 Final Uecisiuni in liiipute*.

Subp<(rt T — Miscellaneous
ii 74.2SO-74.303 (Re»«r>«d]

{ 74.304 Final deciaJon* In dispute..

(a) Granting agencies and other
Departmental components attempt to
promptly issue final decisions in
disputes and in other matters affecting
the interests of grantees. However, they
do not issue a final decision adverse to
the grantee until it is clear that the
mat(er cannot be reaolved informally
through further exchange of information
and views.

(b) Under various I IHS statutes or
regulations, grantees have the right to
appeal from, or to have a hearing on,
cert.iin final decisions by Departjnenta!
components. (See, for example. Subpart
D of 42 CFR Part 5U and t5 CFR Parts 10
and 75.) Paragraphs (c) and (d) of this
section set forth the btandards the
Depai'(ment expects lis cuinpuneiUs lo
meet in stating a final decision covered
by any of llie slatutcb or regulations.

(1) A complete Bta(cmen( of the
background and b.isis uf the
component's decision, including

refeience to the pertinent statutes.
iL-gul.idons. or oilier governing
dociimenl:>: and

(2) Enou)jh information to enable the
grantee and any reviewer to understand
the issues and the position of the I IHS
component.

(d) The following or similar language
(consistent with the terminology of the
applicable s(a(utcs or regulations)
appears at (he end of the decision: "Thi:
is the final decision of the [title of grunt:
officer or other official responsible for
the decision). It shall be the final
decision of the Department unless,
within 30 days after receiving this
decision, you deliver or mail (you shouli
use registered or certified mail to
establish the dale) a wnticn notice of
appeal to (name ond address of
appropriate contact: e.g.. the
Departmental Grant Appeals Board,
Department of Health and Human
Services, Washington. DC. 20201). You
shall attach to the notice a copy of this
decision, note that you intend an appea
state the amount in dispute, and briefly
state why you think that this decision ii
wrong. You will be notified of further
procedures."

(e) If a decision docs not contain the
statement, information, and language
described in paragraphs (c) and (d) of
this section, the decision Is not
necessarily the granting agency's final
decision in the mutter. The grantee
should notify the granting agency that
wishes a formal final decision foUowii
any further exchange of views or
Information that might help resolve thi
mutter ird'ormally.

Dated: AuKust 3, 1981.
Richard Schvwaikar.

Secretary.

II'R Owe <i-'lJiSKilca»-:«-t1.&U<ai|

BILLMta COOC 4IIA-U-M

CASE MANAGEMENT 797

APPENDIX B: PROJECT METHODOLOGY

I. PROJECT DESIGN

We knew generally that our task would be to measure the
"effectiveness" and "efficiency" of the Grant Appeals Board,
meaning a study of the workings of a particular court. Our
natural starting place was, therefore, the literature of "court"
or "adjudication" theory and practice, with special emphasis
on empirical studies of judicial-type systems. After
gathering some relevant works by routine use of card catalogs and
literature indices, we started "networking" by contacting those
writers, like Professors Maurice Rosenberg of Columbia and
Laurens Walker at the University of Virginia, who dominate the
literature. These personal contacts helped us identify
institutions sponsoring research such as ours, namely:

* National Center for State Courts;

* American Bar Foundation;

* National Science Foundation, Division of Law and
Social Science;

* Federal Judicial Center;

* Administrative Office of the United States
Courts ; and

* Rand Corporation, Institute for Civil Justice.

We called the research director of each of these institutions and
studied their publications catalogs, thereby completing and
updating our literature search and "networking."

The end result of this phase was a court theory and
reform library of modest size. These works underlie Sections
II and III, the analytical foundation of our study. We
quickly ascertained the existence of a superabundance of studies,
both empirical and experiential, of particular reform efforts of
particular courts. These turned out to be much too narrow in
focus to be helpful. Fortunately, there remained about one
hundred works of sufficient breadth to guide our undertaking.
From these we greedily borrowed ideas, definitions, empirical
methodologies, and even forms and questionnaires.

Besides structuring our analysis and empirical methodology,
we hoped to find several comparable court studies into which we
could "plug" ourselves. Our good luck did not stretch so far.
On the one hand, many studies were of such ample
magnitude — thousands of cases in dozens of courts — that the
researchers used only gross data about cases in such courts. On
the other hand, many other studies focused on a particular
practice or procedure in a single court or system of courts. In
the end our project, which aims to study the workings of all
significant procedures on the complete calendar of a single
court, turned out to be unique. We were blessed in the
opportunity to blaze some trails; we were cursed in vour limited
ability to compare our empirical findings with those of others.

798 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

II. CASE FILE DATA BASES

We would be working with closed cases at GAB by extracting
from them data relevant to our measures of court success: speed;
cost; impartiality; procedural fairness; flexibility; finality;
effectiveness; and competence. In addition, while we knew about
certain theoretical management practices from reading GAB's
published procedures, we could learn about GAB's operational
management practices from these case histories. Similarly, while
we knew from our experience and readings what types of procedural
opportunities lawyers normally request during litigation, in our
study of the GAB closed cases we could identify and quantify the
particular requests made in those disputes.

We started our data design by analyzing the GAB written
procedures set forth in Appendix A and by studying several case
files from different procedural "tracks." In Appendix C we
reproduce the coding sheet that ultimately resulted. We refined
it as we worked through the files.

A. Identification Data. The early items served to
identify the file. The "case name," Item 1, is the title of the
action, normally the name of the grantee organization appealing
an adverse agency decision. "Docket #," Item 2, is the Board's
code for identifying and filing cases. As in most court systems,
cases are numbered seriatim as filed; 86-35 would be the 35th
appeal filed in 1986. The Board's written decisions are numbered
consecutively as rendered; so, "Decision #," Item 3, would be a
single number between No. 268 and No. 672, the beginning and
ending decisions rendered from the dockets which comprised our
sample. Item 4, "Joint Consideration," represents the Board's
practice of consolidating cases with common questions of law and
fact. Here we would enter the other docket niimbers (cases) being
jointly considered with the case being coded. Item 5,
"Appellant," is the name of the party bringing the appeal, and
Item 7, "DHHS resp.,"is the Agency (operating division of DHHS)
defending the case.

B. Standard Variables. A case's procedural
history and substantive result might be affected by a number of
variables, for example, the type of organization appealing. Item
6, "Type Grantee," represents this variable: state agency;
university; non-profit organization; local government; and Indian
tribe. Because the categories of variables are mostly
self-explanatory, we will simply list them, and the main entries
in each category, below.

Item 7. DHHS Respondent:

* Office of Child Support
Enforcement (OCSE)

* Health Care Financing
Adminstration (HCFA)

* Office of Human Development
Services (OHDS)

* Social Security Administration

CASE MANAGEMENT

799

(SSA)

* Public Health Service (PHS)

Items 8 & 9. Program name/ lav:

* Child Support Enforcement Program
(SSA, 4-D)

* Medicaid (SSA, 19)

* AFDC (SSA, 4 -A)

* Social Services Program (SSA, 20)

* Headstart Program (Headstart Act)

* Low Income Energy Assistance
Program (LI E AA )

Item 10. Type decision appealed:

disallowance (return; set-off)

noncompliance termination

denial of noncompeting continuation

award
voiding of grant
cost allocation plans/rates

Item 14. Board members:

Ford

Settle

Ballard

Teitz

Garrett

Item 15.

Staff Attorney:

Lauscher

Reines-Grubard

Stern

Horvath

Kaufman

Selzer

McFadden

Cafasso

Choppin

Ruiz-Sedivich-0 ' Hare

Rosenthal

Golkowicz

Young

Ballard

Stone

Jenner

Items 16-19. HHS Attorney:

85 different entries

Item 20. ilHS Non-lawyer Repesentative:

15 different entries

Item 21. Grantee Attorney:

132 different entries

Item 24. Grantee Non-lawyer Representative:

80 different entries

C. Financial Data. We collected financial data
about the "stakes" involved in each case and its financial
results. "Total dollars appealed," Item 11, would serve as a

800 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

measure of the magnitude of the disputes before the Board as well
as their range. The next items, "Amount Settled" (12) and
"Amount Adjudicated" (13), would serve to measure the Board's
propensity, for whatever reason, to promote voluntary agreements
between the parties as opposed to Board adjudications. For cases
in which a Board decision was needed to resolve the financial
claims, Items 45 to 48 captured the final financial results
for each disallowance appealed, in other words, who won. We also
coded for split decisions, remands, and settlements.

D. Case Complexitv. Several variables could be

used to measure the relative complexity of cases. The most
important variable. Item 28a, was the procedural "track" to which
the case was assigned. The possibilities were, in order of
increasing complexity [1] :

* special expedited;

* expedited;

* written submissions;

* conference;

* hybrid conference; and

* hearing.

For each process involving a form of "hearing," whether formal or
informal, we also ascertained in Item 28b whether the hearing was
conducted by telephone or in person, and in Item 25 whether
witnesses testified.

A significant number of cases never reached the "merits" but
terminated prior thereto in one of the following ways: lack of
Board jurisdiction; withdrawal of appeal; settlement; dismissal
for procedural noncompliance; and dismissal without prejudice to
reinstatement. These cases followed a different path to
disposition and had to be measured separately for economy and
efficiency. Item 27 recorded these instances, as well as the
time required to dispose of them. Finally, we noted in Items 49
and 50 whether jurisdictional and other technical objections had
appeared in the case by means of party motions or Board sua
sDonte action.

E. Resources Invested. The volume of paperwork
generated by civil litigation may also reflect the degree of
complexity of a case. One may assume that normally the size of
briefs and appeal files is directly related to the number of
facts, rules, and other matters involved in the dispute. In Item
29 we simply counted the number of pages of briefs, documents,
and transcripts we encountered in each case file.

We had hoped to be eible to measure the "cost" of litigating
at GAB. However, it was impossible to get meaningful cost data
directly. The great majority of attorneys practicing at the
Board are salaried government employees, meaning no billings
exist. We theoretically could have questioned the
participating lawyers about the time spent in each case. We
judged, however, that the small benefit of such an inquiry, given
the likely unreliability of lawyer estimates was far

CASE MANAGEMENT 801

outweighed by its cost. Tracking down the lawyers and asking
them to remember their time spent on an old case was not
feasible given the small project budget.

F. Processing Time. Careful recordkeeping by the

Board enabled us to record the dates of action points and events.
We listed such anticipated events in Item 30 and recorded the
dates found on the documents in the files. In most cases the
following procedures would appear chronologically [10 ]:

(a) final written decision;

(b) appeal filed;

(d) appeal aclcnowl edged;

(e) appellant's brief;

(f) respondent's brief;

(g) appellant's reply;

(h) first preliminary conference;

(i) second preliminary conference;

(j) conference or hearing;

(k) GAB decision.
Occasionally, additional material for the appeal file would be
submitted at some time between submission of appellant's brief
and the conference or hearing. Similarly, additional briefs
might be submitted in this interval.

We measured appellants' and respondents' requests for time
extensions and the Board's actions thereon. See Items 37-42.
The project also tried to ascertain whether objections were
lodged against such requests and whether GAB had granted lesser
time extensions than the number of days requested.

Occasionally cases would be "stayed" (put on hold) pending
the outcome of some event, such as a settlement negotiation or
the decision of a parallel case. Items 43 and 44 recorded such
stays, as well as information about the party making such a
request.

G. Board Controls. The heart of the study would

be the Board's use of case management techniques, which we called
"Board controls." Several could be identified on the face of the
Board rules, see Appendix A, and from the sample case files we
used to design the search. As we executed the data collection
phase we discovered several more. The list below contains the
distinct management techniques we encountered and recorded in
Item 31.

1. GAB formulates issue (s) in dispute;

2. parties required to submit specified information to Board
or to other side (includes "order to develop record") ;

3. parties ordered to address written questions at a
conference or hearing or by mail;

4. questions to clarify parties' legal positions, factual
assertions, and significance of doc\iments;

5. questions seeking information about facts or law;

6. parties directed to specify issues;

802 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

7. cases consolidated by Board;

8. establish procedure for side dispute;

9. locate hearing outside District of Columbia;

10. procedural directions to party;

11. order to show cause why tentative, adverse Board decision
should not be finalized;

12. warning on time extensions and possible sanctions;

13. seek concessions from parties;

14. require specified person to be at conference or hearing;

15. order to respond to tentative findings;

16. detailed preliminary analysis of issues and tentative
findings;

17. parties ordered or invited to submit additional briefs;

18. Board separately dockets a disallowance item;

19. Board orders parties to file status reports;

20. parties ordered to identify witnesses and substance of
testimony;

21. order to consider mediation;

22.

23. summary decision

H. Participatory Recniests. In Item 32 we
registered information aibout distinct types of participation
requested by parties to GAB litigation. For each such request we
identified whether the request was made by appellant or
respondent, whether there was opposition to the request, and what
action the Board took on it.

Below are listed all types of participation requested by
parties to GAB litigation. Requests were for:

1. fact hearing;

2. discovery;

3. submit document;

4. put on witness (none found);

5. add an issue (none found) ;

6 . change procedural "track" ;

7. conference;

8. submit additional brief;

9. change formulation of issue (none found) ;

10. information (e.g. . past case record) from GAB;

11. presence of particular person/party requested in
litigation;

12. make substantive changes in transcript;

13. intervene;

14. advisory opinion;

15. mediation;

16. withdraw appeal without prejudice to reinstatement;

17. change of venue;

18. consolidate cases;

19. motion for summary judgment;

20. summary decision;

21. leave to amend notice of appeal.

III. CASE SAMPLE

CASE MANAGEMENT 803

We startled our sample of closed GAB cases with the first case
subject to the new GAB procedures, Docket 81-172, which was filed
(postmarked) on the effective date of the 1981 rules, September
30, 1981. We included every third closed case [3]. The Board
separately dockets motions for reconsideration, which are simply
extensions of the principal case; thus, we eliminated such
dockets from our sample and chose the next valid docket. In
Appendix D we list the 274 GAB dockets included in our sample. We
closed the sample with Docket 85-79 (filed April 16, 1985;
dismissed for non-prosecution on June 10, 1985) . Because cases
are continuously being decided and "closed," the sample is
inevitably a smaller percentage of the total universe with each
passing day.

The 274 cases in our sample represent 29.5% of the 927 cases
docketed at the Board in the period between September 30, 1981
and April 16, 1985. The sample spans three years and seven
months of Board activity. It included 137 cases, exactly 50% of
the sample, which resulted in written Board opinions between
March 31, 1982 (No. 268) and July 10, 1985 (No. 672).

IV. LAWYER QUESTIONNAIRE

While the raw data collected from the closed cases would
provide an important statistical profile of the Board's
efficiency, such data had to be contrasted with the perceptions
of those practicing before the Board in order to obtain a
complete picture. The questionnaire served several purposes.
First, knowing the lawyers' general views as to the Board's set
of procedures would help us understand tne ease or difficulty of
implementing such procedure both at the Board and elsewhere. We
can call this the lawyers' "efficiency outlook." Lawyers
from all parts of the country litigate at GAB; consequently,
their views would represent those of a "national bar" and have
particular importance. Based on legible postmarks, eighty
questionnaires were returned from the following states:

Ariz. (1) Me. (1) Okla. (1)

Cal. (4) Md. (7) Pa. (5)

Colo. (3) Mass. (1) S.D.(l)

D.C. (7) Mich. (1) Tenn. (1)

Fla. (1) Minn. (2) Tex. (3)

Ga. (1) Miss. (1) Utah (1)

111. (6) Mont. (1) Vt. (1)

Iowa (1) N.J. (4) Va. (2)

Kan. (3) N.M. (1) Wash. (4)

Ky. (1) N.Y. (10) Wise. (1)

Ohio (3)

Second, we could identify particular facets of Board practice
which the attorneys strongly liked or disliked. This might serve
as a helpful guide for the Board to improve its practices, as
well as alerting reformers to troublespots — areas where
efficiency reforms are likely to encounter stiff resistance from

804 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES
the bar.

Third, we knew of no reasonable method of ascertaining the
"correctness" of Board decisions other than to ask the advocates
and hope they would give objective views. We would, of course,
double check by comparing their views with the particular results
in their cases.

Fourth, we could measure the lawyers' sense of fair play.
When both the judge and the defendant come from the same family,
the plaintiff's sensibility to unequal treatment is acute. While
the rules on their face were neutral, grantee lawyers might have
a sense that some parties were "more equal than others."

The questionnaire, which is reproduced in Appendix E along
with cover letters, was designed after we completed our
study of the case files at GAB. By then we were alert, through
file documents and conversations with Board members, to
particular points of procedure, like discovery and accessibility
of Board opinions, which appeared to be troublesome. We could,
therefore, sprinkle general questions about procedural likes and
dislikes with inquiries about more specific matters.

We did not have the resources to subject the questions to a
verification process. The Board Members and staff reviewed them
and made helpful suggestions. Dr. Larry Rosen reviewed them for
built-in biases and other facial flaws. That the questions
worked well is evidenced by the ease with which the respondents
answered them. Very few questions went unanswered and the
questionnaires were remarkably free from marginal notations
indicating doubt about the questions

The questionnaire was administered on an anonymous basis. We
compiled a mailing list from the case files dating back to 1981.
Many of the names and addresses on the mailing list were
doubtlessly of attorneys who had moved on to different work and
who would never receive our mailing. The mailing list numbered
290; of these, we guess that about one-third are attorneys who no
longer represent the grantee institution they represented at the
time of the GAB litigation. We therefore guess that some 2 00
attorneys actually received the questionnaire. We received 131
completed questionnaires, or, roughly 65% of the reachable
addressees.

We had no reason to correlate the attorneys who litigated the
cases in our case file data base and those who answered the
questionnaire. We could ascertain no reason why those who
answered the questionnaire would not be representative of those
attorneys who litigated the cases in the files studied. Even if
there were differences in the two populations and some "skewing"
was inevitable, we saw no impact on study results. The file
study would produce an empirical reality, valid in itself
regardless of any "fit" with the "perception of reality" captured
by the questionnaire results. Also, the questionnaire was
administered anonymously, meaning we could not compare

CASE MANAGEMENT 805

information in the case file with questionnaire answers.

V. OBSERVATIONS and INTERVIEWS

We observed the Board at work in the summer months of 1985.
When we had completed a first draft a year later, we forwarded it
to Board Members and various attorneys who had substantial
litigation experience at the Board. The Members and attorneys
were interviewed in depth, and their reactions and observations
are sprinkled throughout the report.

APPENDIX C. GAB CASE PILE DATA FORM

CASE MANAGEMENT

807

C«s« nana

25.

2. OockPt t

3. Oecisian tf

A. Joint cons Idarat Ion

5. Appellant

6. Typa grantea

7. DHHS rasp. _

8. Prograa nasia

19.

22.

23.

9. Law (titla)

10. Type decision appealed

11.
12.
13.
U.

15.
16.

17.

18.

Total $ Appealed

Aaount settled

Amt. Adjudicated
Bd. nembers pre».

a. other

b. other

Staff attorney

HHS Attorney I

title

address

HHS Attorney 2.

title '_

address

HHS Attorney 3

title \

address

HHS Attorney 4

title '_

address

20. HHS Non- lawyer rep.

title

address

21. Grantee Atty.

title

address

Grantee Atty.

title

address .

Grantee Atty. 3_

title '_

address

24. Grantee Non- law. rep.

title

address

Witnesses at hearing/conf .

a. 1/ for CE

a tur DHMS

26. Mediation Keturral

Yes No

a. date

27,

b. date reiwrred back

c. elapsed days

d. amount settled

Suwnutry lii&po^iit ion

a. date

b. elapsed days ^^^______^_______

c. type:

1. lurisdictlon

2. appeal w/ drawn

3. settleaent

4. dlsBissal for non-pros. /proced.

other

28.

29.

Appeal

a. type process ___^__^__^^^_

16. 10 conference

16. 1 1 hearing

16. 12 expedited

16.12 (d) special expedited
16.0 hybrid conference
16.00 written submissions

b. type conference/ hear ing

1. telephonic ______^_^_^_

2. In person

U of paKCM

a. appellants brief

b. respondents brief

c. appellants reply

d. suppieotental briefs

1. appellant

2. respondent

e. transcript

1. N/A

2. telephonic tape

3. telephonic suassary

It. verbatioi in person

appeal file

supplemental appeal flle_

h. BOtions/meAuranda

1. appellant

2. respondent __^____
30. Dates

a. final written declsion_

b. appeal filed

c. appeal 'received_

appeal acknowledged^

appellant's brief

respondent's brief

appellant's reply

first supp. appeal file

second supp. appeal file_

third supp. appeal file

first supp. brief

second supp. brief

third supp. brief

first preliminary conference

second prelminary conference^

conf . /hearinn

C.A.B. decision

r. post decision a>otion_

808 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

31. Board controls
a. Type

. Respondent #1

a. Days requested

b. Granted

50. Type issue

b. Type

c. Dented

d. Days Kfantod

e. Obtected

Raised by:

c. Type

a. Apt.

f. Unobiected
Respondent «'2
a. Days requested

b. Resp.

d. Type

c. Board
Hot ion/ Br let - Paaea

«. Type

b. Granted

c. Denied

d. Days tiranted

d. Apt.

e. Kesp.

f. Type

f. Date raised

e. Obiected

K. Days to d«clda

K. Type

f. Unobiected
. Respondent </3
a. Days requested

h. Type

—

51. Evidentiary Rulings:

b. Granted

c. Denied

d. Days Ktanted

Apfel laiit

i. Type

—

s.ExcludM

1. Type

—

e. Objected

Admit

f. Unobjected
Stav VI
Requested by:

a. HUS

b. Gt

c. Both

Crourul

Participatory requests
32. Type

Party

Denied

Obiected
Unobjected
b. Exclude
Admit

Granted

—

Ground

Withdrawn

d. Board

e. II Days
Stay 1/2
Requested by:

a. HHS

b. GK

c. both

d. Board

e. U Days

Dl Sal liiwaiii'es

Aatount

UotaU

For HHS

For Gt

Split

Objected

AicreeoMint

Unobjected

33. Type

44.

c. Exclude

Party

Adait

Denied
Granted

Ground
Obiected

Withdrawn

Unobiected

AKreement

d. Exclude

34. Type

H *^'

Adait

Party

Denied

Granted

Ground

Objected

Unobjected

Withdrawn

• . Exclude

Agreeoent

AdAit

35. Type

Ground

Party

Settled

Obiected

Denied

Granted

Withdrawn

~ '*(*•

Reaand
AoMunt
(total)
For HHS
For GE
Split

Unobjected

52. Evident lary Rulings:

Agreeaent

Kesp«.)nderit

36. Type
Patty

—

a. Exclude

Denied

Settled

AdiBit

Granted

Reaaiid
Aauunt

Ground

Withdrawn

47.

Objected

Aereenent

(total)
For HHS
For Ge
Split

Unobjected

b. Exclude

37. Appellant HI

a. Day:* KequeiiCed

AdiBit

Ground

b. Granted

■^

Settled

Objected

c. Denied

— 48.

Reoand

Unobjected

d. Days Granted

e. Objected

AiBOunt
(total)
For lUlS
For GE
Split

c. Exclude

AdAlt

f. Unobjected
38. Appellant H2

a. Daysi requested

b. Granted

—

Ground

Obiected

Unobjected

Settled
Remand

biJe Jiiputus (Jurii-iProt.

d. Exclude

C. Denied

Adnit

d. Days Granted

e. Objected

— 49.

eJure) Ground

a. Type issue

Objected

f. Unobjected
39. Appellant 112

a. bays requested

—

Unob lected

e. Exc iude

Rai;>ed by:

a. Apt.

b. Kesp.

Admit

b. Granted

c. Denied

Ground
Objected

d. Days Granted

■~"

c. Board

Mot ion/ Br let - Pages

d. Apt.

e. Kesp.

f. Date r.4lsAd

g. Date decided

UnobjectLid

e. Objected

f. Unobjected

—

CASE MANAGEMENT 809

APPENDIX D: GAB DOCKETS IN RESEARCH SAMPLE

81-172 82-19 82-87 82-159 82-221 83-39 83-109 83-178

81-175 82-22 82-90 82-162 p2-224 83-42 83-112 83-181

81-178 82-24 82-93 82-156 82-228 83-45 83-115 83-184

81-181 82-27 82-96 82-159 82-230 83-48 83-118 83-187

81-184 82-30 82-99 82-162 82-233 83-51 83-121 83-190

81-187 82-33 82-102 82-165 82-236 83-54 83-124 83-194

81-189 82-36 82-105 82-168 82-239 83-57 83-127 83-197

81-192 82-39 82-108 82-172 82-242 83-60 83-130 83-200

81-195 82-42 82-111 82-175 82-245 83-63 83-133 83-201

81-198 82-45 82-114 82-178 82-251 83-66 83-136 83-203

81-201 82-48 82-117 82-181 82-254 83-69 83-139 83-206

81-204 82-51 82-120 82-184 83-3 83-72 83-142, 83-209

81-207 82-54 82-123 82-187 83-6 83-75 83-145 83-213

81-210 82-57 82-126 82-190 83-9 83-78 83-148 83-216

81-213 82-60 82-130 82-193 83-12 83-81 83-151 83-219

81-216 82-63 82-133 82-196 83-15 83-84 83-154 83-222

81-219 82-66 82-137 82-199 83-18 83-87 83-157 83-225

82-1 82-69 82-140 82-202 83-21 83-90 83-160 83-228

82-4 82-72 82-143 82-206 83-24 83-93 83-163 83-231

82-7 82-75 82-146 82-209 83-27 83-93 83-166 83-234

82-10 82-78 82-149 82-212 83-30 83-96 83-169 83-237

82-13 82-81 82-152 82-215 83-33 83-99 83-172 83-240

82-16 82-84 82-156 82-218 83-36 83-105 83-175 83-243

810 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

APPENDIX D (CONT.)

83-246

84-19

84-89

84-150

84-227

83-249

84-22

84-92

84-154

84-230

83-252

84-25

84-95

84-157

84-233

83-255

84-28

84-98

84-163

84-239

83-258

84-31

84-101

84-166

84-250

83-260

84-35

84-104

84-172

85-1

83-263

84-40

84-106

84-175

85-5

83-266

84-46

84-109

84-179

85-12

83-269

84-49

84-112

84-184

85-18

83-272

84-52

84-115

84-184

85-26

83-275

84-55

84-118

84-189

85-37

83-278

84-58

84-121

84-192

85-49

83-281

84-63

84-124

84-195

85-55

83-284

84-66

84-127

84-198

85-59

83-287

84-69

84-131

84-201

85-71

84-2

84-72

84-134

84-205

85-79

84-5

84-75

84-137

84-212

84-9

84-79

84-140

84-215

84-13

84-83

84-143

84-221

84-16

84-86

84-146

84-224

APPENDIX E. QUESTIONNAIRES AND COVER LETTERS

812 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

TEMPLE UNIVERSITY SCHOOL OF LAW 1719 N Broud Slicti

A Commonwealth UnivereUy Philadelphia. K-niibyivuiua 19122

October 24, 1985

Dear Counselor:

You may love it or you may hate it, but you are sure to
have strong opinions about the Grant Appeals Board at the U.S.
Department of Health and Human Services. The Board has some
truly unique ways of managing cases, and the Administrative
Conference of the United States has commissioned me to study
the Board and report back on its efficiency and effectiveness.

You have litigated at least one case before the Grant
Appeals Board and are in a position to stand up and be counted.
Please take a few minutes to answer and return the enclosed
questionnaire. Do it now! Don't throw it in "tomorrow's"
stack.

After three months of preliminary study, I presently have
a high opinion of the Board's practices. It may, indeed, be a
"national model" for court reform. Help me confirm my preliminary
findings or tell me where I err.

Many thanks.

Sincerely,

Richard B. Cappalli
Professor

RBC: jp
Enclosure

Theltmpie Cenieniiial.AHib-iOK^oe bit-\i-'i.v.Ti il iirii Hi„k^ -isb^.

CASE MANAGEMENT

TEMPLE UNIVERSITY

A Cuminonwealih Uitivt-rbity

SCHOOL OP LAW

813

1719 N Broad Si reel
Philadelphia, PennMylvunitt 19122

January 31 » 1986

Dear Counselor:

This is the same questionnaire I sent last fall (without the
typos). If you answered that one» you pan throw this away. If not,
please answer and return. Most of your colleagues found it easy and
interesting to answer.

For those who are newly on my mailing list, this is a study of
the Grant Appeals Board commissioned by the Administrative Conference
of the United States. With your help we can better understand what
makes for litigation efficiency and effectiveness.

Thanks for your help.

Sincerely,

Richard B. Cappalli
Professor

TheTtmple Centennial.AHJSiDKS'OPSHAPiNG'n if. FiniJKLiAJ4-w84.

814 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

HHS Grant Appeals Board Study
Sponsored by the Adnlnistrative Conference of the United States

Attorney Questionnaire
Instructions. Circle or mark the answer which is most accurate in your mind.
If you have appeared in more than one case before the HHS Grant Appeals Board
("GAB") , answer case-specific questions on the basis of your experience in the
most recent closed case in which you appeared.

This questionnaire should take no more than 15 minutes to answer. Your
cooperation is greatly appreciated.

Definitions

"Case management": Techniques used by Board members and staff to move cases
along efficiently and to achieve correct results. Exaqples include
orders to develop the record, orders that particular information or
documents be provided, questions to clarify parties' legal and factual
positions, and GAB formulation of t;he issues in dispute.

"Efficiency": Reaching and deciding an issue with mininiim investment of tiine
and resources.

"On the merits": If your case terminated on a jurisdictional or procedural
ground, treat this as the "merits" and answer questions accordingly.

"Resources": Technical capability of p^ty and amount thereof available for
the case.

CASE MANAGEMENT 815

Questions

1. Year of your last closed case at GAB:

1985 1984 1983 1982 1981

2. Case result for your party: 1.. Win

2. Loss

3. Split

3. You represented:

1. United States

2. Grantee

4. Please specify the number of cases In which you have appeared at GAB:
1 2 3 4 5 6 or more

5. Please Indicate the number of years you have been practicing law:

1. 1-5 years

2. 6-15 years

3. 16 or more years

6. If you have been a government attorney representing federal* state or
local government, please specify the approximate number of years you have
practiced in that capacity:

7. Have you participated in a GAB conference or hearing on the merits (see
definition)?

1. yes (Answer questions 8A-8H)

2. no (Skip to question 9)

8. Please evaluate the GAB conference or hearing on the merits (see
definition) of the following criteria:

A. clarity of issues

4 3 2 1

VERY ADEQUATE INADEQUATE VERY

GOOD POOR

816

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

VERY
GOOD

ADEQUATE

INADEQUATE

VERY
POOR

compleceness

fac

t presentation

VERY
GOOD

ADEQUATE

INADEQUATE

VERY
POOR

gaps In evldi

ence

VERY
INFREQUENT

INFREQUENT

FREQUENT

VERY
FREQUENT

(or none)

redundant ev:

Idence

VERY
INFREQUENT

INFREQUENT

FREQUENT

VERY
FREQUENT

(or none)

surprise witness/document

VERY
INFREQUENT

INFREQUENT

FREQUENT

VERY
FREQUENT

(or none)

judge's evidentl

ary

rulings

VERY
GOOD

ADEQUATE

INADEQUATE

VERY
POOR

substitution

telephone for traditional In persor

1 hearing

VERY
GOOD

ADEQUATE

INADEQUATE

VERY
POOR

CASE MANAGEMENT 817

9. PloAHC rnce Che CAH i>rnredurefi no ro their efficiency, which meanM
reaching and deciding an Issue with minimum Invescmenc of Clme and
resources.

4 3 -2 1

VERY
GOOD

ADEQUATE

INADEQUATE

VERY
POOR

10. Please evaluate the GAB procedures with respect to their conduclveness to
sound decisions:

4 3 2 1

ADEQUATE INADEQUATE

VERY
GOOD

11. Please rate the following aspects of GAB procedures:
A. notices

4 3 2

VERY
POOR

VERY
FAIR

FAIR UNFAIR

VERY
UNFAIR

parties*

opportunities to present facts

3 2

VERY
FAIR

FAIR UNFAIR

VERY
UNFAIR

parties'

opportunities to present law

3 2

VERY^
FAIR

FAIR UNFAIR

VERY

UNFAIR

joint consideration practice (If you have ever
jointly considered case)

appeared in a

4 3 2

N/A

STRONGLY
APPROVE

APPROVE NEUTRAL DISAPPROVE

STRONGLY
DISAPPROVE

DID NOT
APPEAR IN
SUCH CASE

818

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

E. opportunity for discovery

VERY
FAIR

F. GAB deadlines

VERY
FAIR

UNFAIR

VERY
UNFAIR

FAIR

2
UNFAIR

VERY
UNFAIR

Board's evenhandedness In applying deadlines

A 3 2

VERY FAIR UNFAIR

FAIR

VERY
UNFAIR

If you answered Che preceding question (ll-G) with 1 or 2, pleas*
Indicate which party received the more favorable treatment:

1. U.S. -respondent ________

2. Grantee-appellant

Please evaluate the presiding GAB Judge In your case with respect to Ch«
following qualities:

A. competence

VERY
GOOD

ADEQUATE

INADEQUATE

VERY
POOR

B. Impartiality

VERY
GOOD

ADEQUATE

INADEQUATE

VERY
POOR

C. dellberateness

VERY
GOOD

ADEQUATE

INADEQUATE

VERY
POOR

CASE MANAGEMENT

wise use

sere

tlon

3 2

VERY
GOOD

ADEQUATE INADEQUATE

VERY
POOR

819

13. A. Did the GAB presiding Judge (directly or through the staff attorney)
employ one or more "case management" techniques (see definitions) in
your case?

1. yes (Answer questions 13B, 13C, 13D)

2. no (skip to question 14)

3. don't know (skip to question 14)

B. Did the case management technique (s) make for a more efficient
proceeding?

1. yes

2. no

3. don't know

C. Did the case management technique (s) help achieve a correct result
on the merits (see definitions)?

1. yes

2. no

3. don't know

D. Please give your general opinion of this particular instance (s) of
case management:

STRONGLY

APPROVE

NEUTRAL

DISAPPROVE

STRONGLY

APPROVE

DISAPPROVE

820 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

14. The procedures at GAB are distinguished by the large extent to which the

CAB presiding Judge nay manage n case. See definition of "case

managenent." Overall, what is your general opinion of this approach?

5 4 3 2 1

STRONGLY APPROVE NEUTRAL DISAPPROVE STRONGLY
APPROVE DISAPPROVE

15. Overall, what is your general opinion of all the procedures (formal and
informal, written and unwritten) employed at GAB?

5 4 3 2 1

STRONGLY APPROVE NEUTRAL DISAPPROVE STRONGLY
APPROVE DISAPPROVE

16. Overall, to what extent do you feel that the final outcome of the case
was fair to all involved?

4 3 2 1

VERY FAIR UNFAIR VERY

FAIR UNFAIR

17. To what extent did the GAB procedures provide you with an opportunity to
present all of the evidence and arguments favoring your side of the case?

4 3 2 1

VERY ADEQUATE INADEQUATE VERY

GOOD POOR

18. The authority of GAB is not coextensive with that of a federal or state
court. For example, GAB cannot invalidate a departmental regu.acion.

A. Please provide your opinion about such limits on GAB's
authority:

STRONGLY

APPROVE

NEUTRAL

DISAPPROVE

STRONGLY

APPROVE

DISAPPROVE

CASE MANAGEMENT 821

B. Did Che llmltu on GAB'a authority produce an Incorrect decision
In Che most recent closed case In which you appeared?

1. yes

2. no

3. possibly

C. Please describe changes In CAB's authority which you believe

would Improve Its functioning:
1.

822 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

19. When GAB decides a case on the merits, It issues a written decision and

opinion, in mimeographed form, which It may subsequently cite as a

precedent. Please give your opinion about the accessibility of such CAB

opinions.

4 3 2 1

VERY ADEQUATE INADEQUATE VERY

GOOD POOR

20. The following question compares the relative resources (see definitions)
available to the U.S. -respondent with those available to the grantee-
appellant in litigation at CAB.

A. Compared to the resources available to the U. S. -respondent , th«
grantee's resources were:

3 2 1

SUPERIOR EQUAL INFERIOR

B. Compared to the participatory opportunities available to the

U.S. -respondent for the case« the grantee-appellant's opportunities
were:

3 2 1

SUPERIOR EQUAL INFERIOR

21. A. Please evaluate the impartiality of GAB members and staff with

respect to equal and impartial treatment of the parties appearing
before it.

4 3 2 1

VERY IMPARTIAL PARTIAL VERY

IMPARTIAL PARTIAL

B. If you marked 1 or 2 above (Question 21A), indicate toward which

side GAB members and staff demonstrated partiality:

1. U.S. -respondent

2. Grantee-appellant

CASE MANAGEMENT 823

22. A. Please evaluate Che lmpartlall,ty of GAB's procedures vlch respecc to
equal and Impartial treatment of the parties appearing before It:
4 3 2 1

VERY
IMPARTIAL

IMPARTIAL.

PARTIAL

VERY
PARTIAL

If you marked 1 or 2 above (Question 22A) , Indicate toward which
side gab's procedures are partial:

1. U.S. -respondent

2. Grantee-appellant

23. Please rate GAR procedures on a scale of 1 to 10.

VERY
BAD

1 2 3 4 5 6 7 8

24. Please rate GAB judges on a scale of 1 to 10.

VERY

BAD

12 3 4 5 6 7 8

25. Please rate GAB staff attorneys on a scale of 1 to 10.

VERY
BAD

VERY
GOOD

12 3456 789 10
26. If you have had significant state pourt experience, please rate state
court procedures on a scale of 1 tp 10.

VERY
BAD

VERY
GOOD

12 34567 89 10
27. If you have had significant federal court experience, please rate federal
court procedures on a scale of 1 to 10.

VERY
BAD

VERY
GOOD

824 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

28. CooBcnCs on GAB:

29. Coomencs on chla questionnaire:

Thank you for your cooperation.
RC/db/5

APPENDIX F: STANDARDS FOR GAB MEMBERS' PERFORMANCE

826

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

JOB ELfMENT tl (CRITICAL)

A Board Monber prodac«« written work that addresses issues, facts, and law
and revises mudtx work in aooordanoe with OGnments. I^m Board produpes
fin/ty written work through a process of dialogue; a draft of a piece of
work is aooeptable if it reflects a reasonable approach, even though
the approach is not the one ultijnatcly adopted.

PTforroance Standard A

A Board Heirber demonstrates in hisA«r %ork an ability to be cle^r, con-
cise, well-reascned and orgemizad. ITiis ability is dernonstratad if
(1) other Board members believe that no changes eure necessary to correct
poor organization of a major nature or failwire to logically develop
a major point; (2) the viork does not show a pattern of carelessness
in style and editing requiring corrections for spelling, granmar, or
citation errors; (3) the Board Members revises suc^ work effectively in
accordance with clear directions.

The nature and difficulty of the work, the grade level of the individual,
and the time allotted for producing the work will be taken into account
v^^en evaluating the en^iloyee's performance. Successive drafts of one
docifnent will not be rated separately unless a decision is made to change
the approach or result in such a way that more than minor revisions
are required.

Level 0 - Failed to Meet- Less than 75% of the written work meets the
standard.

Level 1 - Partially Met - 75% of the written work meets the standard.

Level 2 - Fully Met - 90% of the written work meets the standard.

Level 3 - Exceeded - Board Member meets the standard 100% of the time and
in 80% of the cases, work needs no organization changes, all
points are logically developed, and no necessary editing for
other U^ui minor 'points needs to be done.

Level 4 - Substantially Exceeded - Board Member meets the standard 100%

of the time and in 90% of the cases, work needs no organization
changes, all points are logically developed, and no necessary
editing for other than minor points needs to be done.

CASE MANAGEMENT 827

PTforroance Standard B

A Board Mazier '• rasearch and analyBis (1) identifies issues; (2) imXes
findings of fact, thoroughly oonsxdering the evidence in the raooid
and acooztiing it the proper weight; and (3) analyzes ani resolves issues
in a wsll-raasoned way« ocnsidering the constitutional, statutory, regulatory
pspi/isions, and case law, applicable Departmental policy anl precedent,
and Grant Appejds Board precedent.

Laval 0 > F^led to Meet - A Board Member's work frequently fails to
identify mterial issues, or meets the rest of the staivlard
in less than 70% of the written work.

Level 1 - Partially Met - A Board Ment)er's work almost always identifies
all material issues, or meets the rest of the standeoid in
70% of the written work.

Level 2 - Fully Met - A Board Mentier's vnritten work always identifies all
material issues, and meets the rest of the standarl in at
least 80% of the written work.

Level 3 - Exceeded - A Board Menber's written work always identifies all
material issues, and meets the rest of the standard in at
least 90% of the written work.

Level 4 - Substantially ^ceeded - A Board Monber's written work always
identifies all material isswtes, and meets the rest of the
standard in at least 95% of the written work.

828 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Prformance Standard C

A Board Hentxr doses cases within 30 days of the last action in tha
caae^ aocept in circunstances beyond the Board Meniber's control.
I>r>ftpf<<-Mv»i circur^tanccs include the Board rtortier's caaeload, excused
absences within the critical period, th« nature and difficulty of the
work., clerical constraints, unreasoneible delays caused by other Board
mmriyerB, failure of the Board mentjers to roach consensus. T^>e Board
Manber's failure to submit worJc for review within a time vAuch reasonably
allows the case to be closed within 30 days is not considered an exceptional
circunstance . Exceptional circvmstances also do not include situations
%*uch could have been avoided if the Board Member had brought the situation
to the attention of the Boeu^d Chair in advance. All exceptions must
be justified in writing, to the Board Chair's satisfaction.

Level 0 - Failed to Meet - Less than 65% of cases eure closed within

30 days of last action in case, or one or more cases is not
closed within 60 days of the last action in the c^lse.

Level 1 - Pjurtiedly Met - At least 65% of cases closed within 30 days
of last action in case, and the renainder are closed within
60 days.

Level 2 - Fully Met - At least 75% of cases closed within 30 days of
last action in case, and the renainder are closed within 60
days.

Level 3 - Exceeded - At least 90% of cases are closed within 30 days
of last action in case and the roiainder are closed within
45 days.

Level 4 - Substantially Exceeded - All cases closed within 30 days of
last action in case.

CASE MANAGEMENT 829

JOB ELZME^TT «2 (CRITICAL)

A Board Mamber conducts hearings and conferences (including telephone
oonfarences).

PerfoTCTanoe Standard

A Board Meniber conducts hearings and conferences (including telephone
conferences) efficiently and effectively by keeping good order; inter-
acting with the parties and witnesses tactfully; assuring development
of a sound txjuiscript; eissuring that the parties address all matters
necesseiry to oaiplete and fair resolution; keeping to a miniimm redun-
dant« inrelevant, and imnaterial testimony and arguments; and assuring
that the parties have no vzdid oonplaints about procedural fairness.

Level 0 * Failed to Meet - Perfozmance does not meet the stzmdard at
least 75% of the time.

Level 1 - Partially Met - Perfornance meets the «tAnd£urd 76 - 89% of
the tme.

Level 2 - Fully Met - Perfozmance meets the standard 90 - 100% of the
time.

Level 3 - Exceeded - Board Merriber meets Level 2, and there is evidence
that in two or nore hearings or oonferenoes, a BoanS Member
successfully handles caiplex evidentiary matters, difficult
parties or witnesses* or other neitters requiring sane sen-
sitive and tactful handling with little advance preparation.

Level 4 - Substantially ^ceeded - Board Ment)er meets Level 2, and thnre
is evidence that in two or more hearings or conferences, a
Board Member successfully handles mutually ramplex eviden-
tiary matters, acrimonious or recalcitrant parties or witnesses,
or other matters requiring sensitive and tactful handling with
little advance preparation.

830

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

JOB ELCMENT 13 (CRITICAL)

A Board Mentser reviews the draft written vork of staff, si^ierviaory'
attorneys and other Board Honbers and provides suggestions, ochiiks its ,
and critlcisni as needed, to assure that Board work prodcuts are of the
highest quality. A Board Honber returns drafts prariptly and within tine
to meat established deuillines and goals.

PerfoniMUK» Standard

A Board Mentier's critique and oonments on draft written work t^re construc-
tive and are oonikriicated clearly. Tttey are precise, ooncise, informa-
tive, and useful, and are given in a tactful manner. Drafts are re-
lumed pranptly and within time to meet established deadlines and goals.

Level 0 - Failed to Meet - Oversight does not meet the standard at least
75% of the time.

Level 1 - Partially Met - Oversight meets the staMard 76 - 89% of the
tijne.

Level 2 - Fully Met - Oversight meets the standard 90 - 100% of the
tire.

Level 3 - Elxceeded - Board MBn\ber meets Level 2 standard, and written
decisions ^/erseen primarily by a Board Meniber thereafter
frequently require no further substantial revision by the Board
Chair and other Board Mentbers.

Level 4 - Substantially Exceeded - Board Menber meets the Level 2 stan-
dard, and decisions c^^erseen primarily by a Board Monber there
after usually require no further subetemtial revision by the
Board C3iair and other Board Mafnbers.

CASE MANAGEMENT 831

JOB EL01E3fr #4 (CRITICAL)

A Board Henber takes steps to prtxress caAes* such as reportirq on status
of oases* preparing oorrespondence in cases « and identifying areas of a
case vyhich need to be developed.

Performance Standard

A Board Member provides tijnely information to the Board Chair on case
status; monitors cases to ensure that the need for further developing
a record is identified as soon as possible; prepares oorrespDndence
or taXes other actions necessary to prevent undue delay in a case; and
prc^oses alternative solutions to procedural problons.

The levels belo%«r are deteimined by a systen of pluses and minuses, which
can offset each other. A minus is given for actions suc^ as failure
to report or provide advice in a timely manner and failure to identify
need for developing a record or need for action to prevent delay v^ien
need was clear, A plus is given for actions such as suggesting creative
procedural alternatives « identifying problon areas at an early stage
of a case vi^ere this took careful analysis, accepting a particularly
heavy caseload.

Level 0 - Failed to Meet • A Board Member has an overall tally of less
than -3.

Level 1 - Partially Met - A Board Member has an overall tally of between
-1 and -3.

Level 2 -> Fully Met - A Board Member has an overall tally of 0.

Level 3 > Exceeded «• A Board Member has no minuses ani receives a plus
in at least 20% of the cases.

Level 4 ~ Substantially Exceeded - A Board Member has no minuses and
receives a plus in at least 30% of the cases.

832 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

JOB ELEMENT #5 (NDN-CRITICAL)

A Board Henber vorks in a professional manner.

PerforTBance Standard

A floard Heniber (1) ocnrijucates with other Board monbers, colleagues,
and Board Qv&ir an articulate, tactful, sensitive, and cooperative
manner; (2) volinteers to mlertake new and varied assignments and
duties Vivien current wor)cload permits; (3) shows em interest in new
developments in related areas of the law; (4) participates in training
or learning opportunities on a regular basis; (5) is responsive to
guidance, instruction, advice, and constructive criticism; (6) consults
with Board Chair about caseload roaneigement in order to avoid backlog.

Level 0 - Failed to Meet - A Board Member meets less than three of the
oonponents.

Level 1 - Partially Met * A Board Member meets three of the con^ments.

Level 2 - Fully Met - A Board Member meets (1) and (5) and two other
ocn^ponentS'

Level 3 - Exceeded - A Board Member meets (1) and (5) and three other
coT^XYients.

Level 4 - Substantially i::xceeded • A Board Member meets all of the
oarponent^.

CASE MANAGEMENT 833

JOB ZLEi^Em «6 ()0)-CRmCAL)

A BottfxS Honber oomplies with admijiistratlve prc3cedures« •yBtflms, and re-
quir«Mnt« isapomed by his/her sqpexvioor and with the established policy
of the Board, such as filling out leave slips, providing statistical
Infomation, responding to need for action in oourt cases reviewing Board
decisions, and providing information for litigation status r^xsrt.

Performance Standeird

A Board Honber carries out administrative responsibilities in a tiniely,
accurate, and ccnplete manner.

Level 0 - Fiiiled to Meet -> A Board Member fails to meet the standard.

Level 1 - Partially Met - A Board Ment>er occasionally meets the standard.

Level 2 - Fully Met - A Board Member generally meets the standard.

Level 3 - Exceeded - A Board Menber almost always meets the standard.

Level 4 - Substantially Exceeded •> A Board Member always meets the standsu'd.

BACKGROUND REPORT FOR RECOMMENDATION 86-7

AGENCY TIME LIMITS AS A TOOL FOR REDUCING REGULATORY DELAY

Charles Pou, Jr.

and
Charlotte Jones

Report to the Administrative Conference of the United States

836

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

AGENCY TIME LIMITS AS A TOOL FOR

REDUCING REGULATORY DELAY

The problem of delay in federal agency decisionmaking has become a major source
of complaint, receiving considerable congressional and academic attention in recent
years. The Senate Governmental Affairs Committee's 1977 six-part study on federal
regulation devoted one volume to the topic, and, along with several "regulatory reform"
bills, would have required all agencies to establish time limits for certain actions and
report on their progress in enforcing them. Hundreds of proceedings already operate
under statutory time limits, and agencies have paid millions to consultants for purposes
of reducing delay. The Administrative Conference of the United States, charged with
advising agencies and Congress on ways to improve the administrative process, has
spoken to the problem several times, as have the American Bar Association and numerous
others. While myriad aspects of the problem have been examined, and all manner of
"solutions" tried or proposed, relatively little attention has been given to examining in
detail agencies' successful actions against delay, or to considering if these cases hold
lessons for other agencies plagued by slow decisionmaking.

\J Delay in the Regulatory Process, 95th Congress, 1st Session (1977). Delay

problems have has been studied also in particular agencies, like the Federal
Energy Regulatory Commission ("FERC") and the Federal Trade Commission.
E.g. Report of the ABA Task Force Studying the Federal Trade Commission
(1969); General Accounting Office, Additional Management Improvements Are
Needed to Speed Case Processing At the Federal Energy Regulatory Commission
(July 15, 1980); see also, Bermann, Administrative Delay and Its Control, Law in
the U.S. for the 1980's 473 (1982).

2/ Administrative Conference Recommendations 82-2 (Resolving Disputes under

Federal Grants); 78-3 (Time Limits on Agency Action); 78-1 (Reduction of Delay
in Ratemaking Cases); 78-2 (Procedures for Determining Social Security
Disability Claims); 73-3 (Quality Assurance Systems in the Adjudication of
Claims of Entitlement to Benefits or Compensation). 1 C.F.R. §305 (1983).
These are discussed below, as are the recommendations of the Committee, ABA
committees, GAO and others. See also Ogden, Reducing Administrative Delay:
Timeliness Standards, Judicial Review of Agency Procedure, Procedural Reform
and Legislative Oversight, 4 Dayton L. Rev. 71 (1979), for a more detailed
summary of some of these groups' views.

y There have been a few such inquiries, like Thomas Morgan's "Toward a Revised

Strategy of Ratemaking," 1978 Reports and Recommendations of the
Administrative Conference 23 (1980) ("ACUS"), 78 U. Illinois L.F. 21 (1978), and
sections of the Senate Committee on Governmental Affairs report, supra note I
at 133-140.

AGENCY TIME LIMITS 837

I. BACKGROUND THOUGHTS ON DELAY

Delay, which is simply an agency's failure to initiate or conclude action on a
timely basis, ® harms regulated entities because it is expensive, heightens their
uncertainty, costs business opportunities, discourages innovation, renders data for
decision stale, and is wasteful Its deleterious impact on agency morale and on the public
at large, while less measurable, is significant. Countering these manifold burdens, of
course, are factors like the need for accurate decisionmaking and effective use of agency
resources. This paper is premised on the view that well-informed agency officials, who
in most instances are charged with weighing these considerations and deploying agency
resources accordingly, are the ones who ultimately are most apt to make inroads on
delay. Based on a review of several successful agencies' experiences, we seek to help
agency officials to undertake certain recommended internal measures to ameliorate the
problem, including use of self-imposed time limits at all agency levels.

Other potential sources of improvement — Congress and the courts — are not
located where they can deal effectively with delay. The numerous legislated deadlines
for agency licensing, rulemaking and adjudication have had quite limited success, to the
point where the Administrative Conference of the United States has recommended that
Congress ordinarily not use them. Statutory deadlines fail to address many fundamental
causes of delay, often are rigid or unrealistic, and tend to undermine an agencies' ability
to establish priorities and control the course of its proceedings. They may foreclose the
use of procedural techniques valuable to enhancing participation and obtaining
information. Courts have had difficulty when faced with enforcing these time limits,
since Congress often fails to specify their legal effect. In cases where courts haye
imposed their own deadlines, the remedy has suffered from many of the same troubles.

Slow decisionmaking cannot simply be legislated away or handled via any other
single approach. Giving an agency new personnel sometimes may be merited when
caseloads rise dramatically, but is usually impractical or undesirable. At its most
elemental, ameliorating delay requires imbuing agency officials and employees with skills
and habits that place more emphasis on timely decisionmaking. As the Senate
Governmental Affairs Committee recognized, agency personnel — particularly higher
level officials — must examine regularly their own agency's difficulties, and take steps
that will, over time, allow the agency to do its business efficiently. Agencies may, for
example, promulgate general rules that decide in advance certain issues or categories of

3a/ Bermann, supra note 1 at 474.

AJ Professor Edward Tomlinson's Report on the Experience of Various Agencies with

Statutory Time Limits Applicable to Licensing a Clearance Function and to
Rulemaking, 1978 Reports and Recommendations of the Administrative
Conference 119 (1978), amply demonstrates the difficulties with these limits.

^/ See Administrative Conference Recommendation 78-3, Time Limits on Agency

Action, 1 C.F.R. §305.78-3 (1983).

%J See, Tomlinson, Report on the Experience of Various Agencies with Statutory

Time Limits Applicable to Licensing a Clearance Function and to Rulemaking,
supra note 4; Ogden, Reducing Administrative Delay: Timeliness Standards,
Judicial Review of Agency Procedure, Procedural Reform, and Legislative
Oversight, 4 Dayton L. Rev. 71 (1979): Judicial Control of Administrative Delay,
3 Dayton 345 (1978).

838 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

cases likely to recur. Officials may streamline procedures by delegating authority to
make decisions, removing or consolidating layers of review, or eliminating other steps in
the process. They may hire management specialists and seek to improve their planning
and oversight, or implement settlement policies to encourage parties to compromise. In
addition to these changes, the Senate Governmental Affairs Committee and others have
suggested appointing agency heads who are sensitive about delay problems, developing
streamlined procedures for some cases, and creating an APA requirement that agencies
set their own time limits for general classes of proceedings.

Given that the reasons for delay range from growing caseloads with increasingly
sophisticated litigants to complex cases requiring hard decisions, from statutorily-
im posed procedures to stalling and occasionally even sloth, none of these remedies is
likely to succeed alone. Even taken together, they may not work smoothly at first and
will succeed only if agency managers oversee their use conscientiously.

Virtually all of those who have examined the problem agree that potentially one of
the most effective tools to ensure that officials and employees recognize timeliness'
importance has been an internal system of monitored time guidelines. Compared to
solutions involving generic rulemaking, reorganization and settlement policies, agency
use of time limits is far less inextricably bound up with hard questions of law, policy and
even politics. And while hardly a panacea for every cause of delay, time limits can work
to inculcate awareness of the importance of time, alert managers to bottlenecks as they
occur, and help keep routine items moving. For these reasons agency successes in
reducing delay with time limits should be more readily replicated by others than
approaches to reducing delay that are more agency-specific and substantive. As opposed
to statutory or court-imposed deadlines, agency-level limits are flexible, can be more
readily tailored to suit different kinds of proceedings, and are less likely to provoke
judicial intervention. The Administrative Conference of the United States, even while
opposing legislatively imposed deadlines, has called on agencies to develop internal time
limits for all of their rulemakings and adjudications. This recommendation was
seconded by the ABA's Committee on Law and the Economy in 1979, which went even
further and called for requirements that agencies establish and enforce deadlines.

While time limits have been widely prescribed, practical advice on implementing
them (and other techniques to reduce delay) has been hard to come by. The
Governmental Affairs Committee Report, in examining the roles of agency management
and planning in reducing delay, contains an instructive look at agency case handling
procedures. Like GAO's report on case processing at FERC, it identifies key areas for

2/ Several sources have recommended use of rules, including the Senate

Governmental Affairs Committee, GAO, and the Administrative Conference.
Supra, notes 1 and 2.

S/ Delay in the Regulatory Process xvii-xxii (1977).

9/ See Conference Recommendations 78-3 (Agencies should impose their own time

limits on rulemakings and adjudications); 82-2 (There should be internal deadlines
for resolving disputes under grant programs), 1 C.F.R. §305 (1983).

10/ Federal Regulation; Roads to Reform 101,103 (1979); See also, GAO report,
supra note 1.

11/ Delay in the Regulatory Process 133-140 (1977).

AGENCY TIME LIMITS 839

improvement. Conference Recommendation 73-3, which drew on a study by Professor
Jerry Mashaw, stated,

Positive caseload management should be recognized as essential to
the accurate, timely and fair adjudication of claims of entitlement
to benefits or compensation. A positive caseload management
system should include three connected operations: (1) the
development of standards and methods for measuring the accuracy,
timeliness and fairness of agency adjudications; (2) the continuous
evaluation of agency adjudications through the application of those
standards and methods; and (3) the use of the information gathered
in the course of such evaluation to identify needed improvements
in adjudicative performance.

The Conference called on agencies to implement statistical reporting systems that will
indicate the accuracy, timeliness and fairness of claims processing and identify "the
management unit or, where appropriate, the individual adjudicator involved in order that
effective action may be taken to reinforce success and to improve performance". But
aside from such general advice, there has been little systematic examination of how
specific agencies can, or should, use case monitoring systems, generic rulemaking,
streamlined hearings, or other procedures.

Seeking to begin filling this gap, we assess processes for combatting delay at four
federal agencies (including some that have exhibited notable long-term success) in hopes
of serving as a source of principles and information for others. We examine case
monitoring techniques used by the Civil Aeronautics Board ("CAB"), the Office of the
General Counsel at the National Labor Relations Board ("NLRB"), the Federal Trade
Commission ("FTC"), and the Departmental Grant Appeals Board at the Department of
Health and Human Services ("HHS") to expedite decisions in rulemaking proceedings,
formal adjudications or informal proceedings. Some are simple methods that can be
implemented if one agency official takes the time to formulate time guidelines and
enforce them intelligently. Others are complex, involving comprehensive computer case
tracking and reporting systems. Some operate mainly within higher echelons, like the
FTC's policies for expediting Commission decisions; others cover all workers involved,
from investigators to ALJs to top officials. Our observations suggest that agency-
imposed time limits are not a cure-all, but, where systematically monitored and
enforced, they have markedly increased efficiency and reduced delay.

n. RECOMMENDATIONS TO AGENCIES

Promulgating, time limits to aid in reducing delay, should be only a first step, the
catalyst for additional related agency actions. It should not be considered an end in
itself, but rather as a management device supported by other internal components that
help cultivate time-conscious work habits. Otherwise, deadlines may serve as a
temporary palliative to avert congressional action, or provide the public with the legal
means to prevent agency action egregiously delayed, but they are not likely to cure the
problem alone.

12/ Recommendation 73-3 (Quality Assurance Systems in the Adjudication of Claims
of Entitlement to Benefits or Compensation), 1 C.F.R. §305.73-3, 3 ACUS 160
(1974).

840 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

As is revealed in the following analyses of the four federal agencies, innovations
to reduce delay can sap precious resources such as time, human effort, and money.
Without this allocation of resources, success is unlikely. Internal agency time limit
systems require an initial investment of time to accumulate data and set limits for
various kinds of cases. Once the limits are in place, an agency must make sure that they
are monitored and enforced by the proper employees.

This study suggests that the implementation of time limits at the CAB and NLRB
has worked quite well in the long run to lessen delay while the HHS Grant Appeals Board
has reduced its backlog considerably. An added advantage to these agencies is that their
case monitoring systems record rough evidence of their productivity. This can help
agency managers evaluate some personnel, and can be a useful tool during the budget
authorization process. Though hard evidence is scarce, many agency officials believe
that these systems pay for themselves.

Necessary Components for Reducing Delay

Each successful program had four constant factors. These were (1) a program of
interim step-by-step time guidelines, (2) agency regulations complementing the informal
internal timetables, (3) a monitoring system that pinpointed problem areas or cases, and
(4) a management committed to expeditious processing. Agency variances in personnel
and other resources, caseload, complexity of cases, applicable procedures, and missions
are too great for one particular system to be effective for all, but these four components
appear basic.

First, a time-limit system that has step-by-step interim time targets, such as the
"Pipeline" structure at the NLRB, appears to produce the best results. The idea is
simple, but implementing it often can be a complicated process, and the agency should
seek to involve decisional officials and other employees and persons with expertise to
help in developing targets. The time limits, in the form of specific informal guidelines,
should serve to move the case constantly through each step of the proceeding in a timely,
predictable manner. They should be fixed in all cases for all decisional levels within the
agency, from investigation to initial decision to final agency review. The guidelines
should be flexible enough to encompass exceptional cases, though firm enough to ensure
that any delays are reasonable and justified. This approach should force each employee
or office involved in a case to set a time schedule, resulting in more efficient time
allotment at each step. At the least, it should keep routine items moving and draw
attention to delays.

An added advantage to fixed timetables for each stage is predictability. If
deadlines are used, and if they are common knowledge, "... then as the deadline time
approaches, people in the organization will know what others are probably doing and cap
make reasonably valid inferences about what they themselves should be doing. . ."

13/ Interviews with Joseph DeSio, Associate Director, Office of General Counsel,
NLRB; John Settle, Chair, HHS Departmental Grant Appeals Board; Norbert
Kaus, CAB.

14/ A somewhat similar prescription was set forth briefly by the ABA Committee
studying the FTC in the late 1960's, supra note 1, which stated that continuing
supervision should be exercised over agency proceedings, deadlines should be
established, and some group should cause these deadlines to be met.

(cont'd)

AGENCY TIME LIMITS 841

Thus, when a case or decision is handled within a predictable duration, it is easier for an
agency to organize its own internal work schedule to match the work flow.

Second, time limits actually promulgated as agency rules should be broad
guidelines reflecting only the overall time targets for the main stages of the
proceeding. They should not be rigid specifications for each minute intervaL Formally
announced time limits that are too detailed can inhibit the positive effect of rules
because inflexible and hard to adjust to the needs of a complex case or changing
caseload. Most agencies need the flexibility to fine-tune when problems occur without
dealing with a lengthy rulemaking process.

Moreover, the public interest is best protected when the rules are not so binding
that speed becomes more important than reason and fairness. Thus, each agency we
reviewed treated its rules as general guidelines, not absolutes. When an unusual case
entered the docket room, it could be tagged and treated according to its particular
circumstances.

Third, no system is complete without a monitoring capacity to measure how the
time objectives set by the agency are being met. At the CAB, the managers handle
problems as they arise within each division, and the Chief of Minutes handles agency-
wide problems. At HHS' Grant Appeals Board, the Chair double-checks each overage
case. At the NLRB, regional directors maintain a surveillance of problem areas
highlighted by monthly case reports to the Office of the General Counsel. Without this
oversight, which alerts managers who can then make sure that there is a valid reason for
delay, the rules have little meaning.

Each of these agencies has adopted a monitoring system that fits its own
situation. While an overly rigid operation can be counter-productive and even inhibit
thoughtful decision, a lax approach that permits repeated delays to occur without any
penalty will have little impact. The CAB's struggle to find a balance can serve as one
example of an appropriate solution to the problem. Briefly, the CAB's initial method of
requiring that time extensions be granted by the Boeird itself was altered to enable
middle managers, instead of the Board, to change target dates if a justifiable explanation
were given. Now, the explanation is recorded in the case file, which is reviewed
regul€irly. As a result, the system is more flexible and much less threatening to staff
members, yet still discourages delay.

Finally, the commitment of those who are in charge of implementing time limits
is crucial. Agencies have great difficulty instituting an effective caseload management
system unless key agency officials are willing to accept long-term responsibility for
enforcing time limits. Although this seems an obvious point, it is worth examining. At
each successful agency the system was implemented by capable people committed to
reducing delay and backlog. Their commitment may have been fostered by psychological
motives or external incentives ranging from merit awards to productivity requirements
stated explicitly in their Senior Executive Service or other agreements. Whatever the
motivation, there must be one or more responsible employees willing, able and authorized
to devote the time and energy needed to develop flexible, yet clear, objectives designed
to achieve the overall target date; monitor cases consistently; and deal promptly and
effectively with delays that do occur.

15/ Francis D. Tuggle and Charles B. Saunders, "Control and Its Organizational
Manifestations," 14 Review of Business and Economic Research, 1, 11, 12 (1979).

842 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Agencies should consider using available tools to ensure that their officials — and
especially key employees charged with reducing delay — are properly motivated. These
tools might include employee job descriptions and, where available, periodic performance
evaluations. NLRB regional directors and the Chair of HHS' Departmental Grant Appeals
Board, for instance, have specific obligations written into their SES contracts concerning
responsibility to reduce delay and ensure timely case handling. Timeliness considerations
have been written into some adjudicative officers' job descriptions or merit pay criteria
— an approach agencies should consider. If more senior executives and employees
worked under such criteria many agencies would become far more committed to
promptly resolving their cases. Another tack — imposing limits on high level agency
officials — has been tried by the FTC, and may serve as an example for others in the
agency.

Implementation Problems

Two major problems faced most of the agencies that developed time limits. One
was the immense amount of time and patience frequently required to create a successful
system. The other was the need to overcome negative employee attitudes.

At each agency, and particularly at the CAB, some staff members resisted
changes that altered existing work habits. After initial transition periods, ranging from
less than six months at HHS to 18 months at the CAB, much of this resistance dwindled.
Moreover, at the outset, each successful agency had to invest time and manpower
resources to create appropriate fca'mal and informal timetables. This process can be
tedious and frustrating. First, it can entail gathering information from offices and
bureaus within the agency pertaining to the nature of their various proceedings and the
time and resources spent on case processing within each office. Next, the data must be
analyzed to break down the patterns of common case proceedings and fix appropriately
expeditious time frames for each interim step.

The amount of time invested and the procedures used to accumulate and compile
the information varied. At the CAB two computer specialists needed eighteen months to
collect data, and six additional months to analyze it. The process was lengthy because so
much of the pertinent information was undocumented. In contrast, the NLRB's team of
lawyers and managers used an existing time study of case handling within the Office of
the General Counsel to set up a structure of interim case stages and applicable time
goals in slightly less than a year. The HHS Grant Appeals Board's system simply calls for
cases handled under an expedited procedure to be completed in three months, cases with
no hearings needed in six months, and cases with hearings in nine months.

Obviously, the more diverse an agency's caseload the more difficult it will be to
develop appropriate time frames at the outset. But, as evidenced by both the CAB and
HHS Departmental Grant Appeals Board, after the initial overhaul fine-tuning the system
as new cases enter it can be done rapidly and efficiently. At the CAB, for example,
when an unusually complex work item enters the docket room, it is labelled a "special
case" and a manager and responsible staff members meet briefly to establish an
appropriate time schedule and step sequence. In this manner, conscientious agency
management can employ time limits flexibility in a variety of eases.

Another important barrier affecting time-monitoring systems is the dollar
investment required. This need not be a drawback, since agencies can choose from a
wide range of approaches that vary according to the size, function and complexity of the
system. A smaller agency may wish to keep costs at a minimum, and keep track of time
limits manually. If so, the cost should not impede an agency's decision to establish time

AGENCY TIME LIMITS 843

limits. On the other hand, an agency with a substantial caseload may wish to develop a
fully automated program that covers every proceeding, even though a computerized
information tracking system is a significant investment. Agency costs will vary
according to their size, organization and functions and the number and complexity of
their proceedings.

The case studies herein suggest that a committed agency can invest a minimal
amount of funds and still reduce delay; or it can do more and to create a fully automated
system to help manage an unwieldy caseload. Initially, the NLRB's information system
was monitored manually, and was quite effective. Now, the NLRB is switching to a
computer system because it appears to be economically feasible. While a computerized
time limit system has real benefits, as discussed in the report on the CAB, some agencies
may not find it necessary. Fortunately, organizations need not decide between a costly
system and none at alL

III. AGENCY AUTHORITY TO IMPOSE LIMITS

Before examining specific agencies, it will be useful to consider briefly the legal
context within which federal agencies operate, particularly the extent of their authority
to impose decisional deadlines for various agency personnel.

There appear to be few legal impediments to placing timeliness or backlog
considerations into high level officials' Senior Executive Service agreements. A few
agencies, like HHS, already have done this in some cases. Even commissioners of
regulatory agencies can be bound if deadlines are adopted officially. Most employees can
be dismissed "for the efficiency of the service," which includes failure to meet
performance standards and a variety of other situations. Since the APA mandates timely
decisions, agencies surely can use promptness as a criterion for supervising and assessing
their personneL Unless a collective bargaining or other agreement provides otherwise,
imposition of case handling standards appears allowable with most employees.

One group of employees, however, occupies a unique position within an agency;
the relationship between many agencies and the administrative law judges ("ALJs") they
employ has been a thorny one.^^ While some agencies routinely impose limits on all
personnel, and incorporate ALJ decision time into these timeliness objectives, other
agencies' assertions of authority to use decision quotas, time limits, or similar devices
with ALJs has aroused considerable controversy. Emotions have been quite intense at
the Social Security Administration, where the ALJs have twice sued to block efforts to
regulate their productivity. In 1978, following the first challenge, SSA and its ALJs
entered into a consent agreement prohibiting use of numerical quotas or goals. Imminent
court decisions in litigation now pending over SSA's recent attempts to dismiss four ALJs
for inadequate productivity may help settle the uncertainty in this area.

16/ See e.g.. Professor Victor Rosenblum's report to the Administrative Conference,
Contexts and Contents of "For Good Cause" as Criterion for Removal of
Administrative Law Judges: Legal and Policy Factors, 6 Western N. E. L. Rev.
593 (1984); Scalia, The ALJ Fiasco, A Reprise, 47 U. Chi. L. Rev. 57 (1979).

VU E.g., SSA V. Robert W. Goodman, Docket No. HQ 7521821001, MSPB. At
present, an ALJ at the Merit Systems Protection Board has ruled in favor of SSA;
his decision is being appealed to the Board. See Rosenblum, supra note 16, for a
fuller discussion.

844 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Until now, the courts have not had to face the question of an agency's right to
discipline an ALJ for failure to produce. In Ramspeck v. Federal Trial Examiners'
Conference, the Supreme Court appeared to reject the notions that ALJs (then "trial
examiners") were totally independent of their agencies or "very nearly the equivalent of
judges" in tenure. It viewed ALJs' status as intended to prevent "devious practice" by an
agency detrimental to an ALJ's integrity or impartiality. Upholding an MSPB decision
against an ALJ, the U.S. District Court for the District of Columbia stated that an ALJ
"is not immune from review for procediyal misconduct, incompetence or other failings in
the performance of his or her duties." A Seventh Circuit decision has described ALJs
as having a "qualified right of decisional independence."

Questions as to the ALJ's role pose difficult problems for administrators. On the

one hand. Congress, wishing to insulate them from some kinds of agency pressure as to

decisions, has created a unique system for selecting ALJs, prohibited certain kinds of

communications with ALJs, protected them from performance evaluations by their

agencies, and provided several other safeguards. Unlike federal employees, who can be

fired "for the efficiency of the service", ALJs can be disciplined only "for good cause,"

22
which appears to be a higher standard. In addition. Congress has authorized ALJs to

"regulate the course of [an agency] hearing"; it might be argued that agency attempts

to impose time limits usurps this power.

On the other hand, the ALJs' special status does not render them immune to
discipline or dismissal Authoritative decisions have allowed judicial sanctions for a
variety of derelictions, and, if productivity standards cannot be enforced, an indolent
ALJ might do nothing (or little) and remain immune to discipline. As Professor
Rosenblum found. x)reced en t exists for disciplining even court judges who fail to keep up
with their work. Also, if agencies cannot amend their productivity expectations to
meet rising caseloads, especially when providing additional services (e.g., word
processing, law clerks, technical advice, training seminars) to increase employee output,
then the only alternatives to backlog would be to dismiss cases wholesale, have agency
jurisdiction altered or hire additional ALJs and support personnel None of these are

_18/ 345 U.S. 128 (1953).

29/ Chocallo V. Prokop, No. 80-1053, slip op. at 3 (Oct. 10, 1980).

20/ D'Amico v. Schweiker, 698 F.2d 903 (1983).

21/ The full standard reads, "Any action may be taken aginst an administrative law
judge appointed under section 3105 of this title by an agency in which the
administrative law judge is employed only for good cause established and
determined by the Merit Systems Protection Board on the record after
opportunity for hearing before the Board." 5 U.S.C. 7521(a).

22/ But see Rosenblum, supra note 16, which suggests that recent MSPB decisions
may have confused the two standards.

T^ 5 U.S.C. § 556(c)(5).

24 See Rosenblum, supra note 16, at 639.

25/ Rosenblum, supra note 16.

AGENCY TIME LIMITS 845

attractive prospects.

Courts that have faced the ALJ question have had to consider how Congress, in
providing ALJs with the aforementioned protections, intended to limit agencies'
supervisory influence over the work of ALJs. Pressure of any sort relating to factual
findings would be improper. The less the supervision, or communication, have to do with
the facts or outcome of a particular case, presumably the less suspect it would become.
Communications to ALJs of substantive agency policy intended to obviate an issue in
future cases seems quite appropriate, as the Seventh Circuit recognized in D'Amico v.
Schweiker."^^

Promulgation of time limits is, in one sense, the most general kind of policy
statement imaginable. It applies to all cases, potentially all employees, and thus would
seem an unobjectionable statement of agency goals and procedures. Moreover,
promptness is one of several goals to which agencies should aspire and presumably they
should have considerable discretion in deciding how to reach it (assuming that the
resultant procedure is not so summary as to deny due process). The mere fact that some
employees, even ALJs, sometimes would like more time for decision than the agency
wishes to afford should not itself be a disabling factor. On the other hand, a deadline can
affect an ALJ's handling of particular cases. A deadline arguably could even influence
the substance of a decision, by preventing relevant factual inquiry, discovery, or
hearings, or by forcing issuance of a decision before the ALJ has considered all the
evidence. Whether such influence, combined with potential agency discipline,
contravenes the "qualified right of decisional independence" is not an easy question.

Of course, legal precedents become crucial only when an agency seeks to dismiss
or discipline an employee for failure to perform. An agency decision to promulgate time
limits and monitor all employees' compliance for informational and oversight purposes,
would seem secure from legal objection. Also, agencies can avail themselves of oth^r
means of averting confrontation, such as ALJ participation in developing time frames
and regular discussion of potential problems between Chief ALJs and program and
management personneL In that case, agencies' use of case monitoring and time limits
should not provoke the kind of resistance that could be crippling,

IV. NATIONAL LABOR RELATIONS BOARD

The NLRB's case management and information system has been a model of
performance amongst federal agencies. Implemented in 1959, this system was devised by
lawyers and managers who studied the agency's delay and related performance
problems. After an extensive time study was completed, the Office of the General
Counsel established overall time goals that were promulgated in 1960 as part of the
agency's Rules of Practice. Internally, the agency formed interim time targets for
specific stages of the case process. Finally, the Office developed an information system
that permitted managers to measure and compare productivity, caseload and case type
for each of the NLRB's 33 regional offices.

26/ 698 F.2d 903 (1983).

27/ See Administrative Conference Recommendation 73-3, supra note 12;
Rosenblum, supra note 16.

28/ See GAO report on FERC, supra note 1.

846 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

External criticism, more than statutory time limits, constituted the impetus
behind the NLRB's self-imposed guidelines. The few time limits imposed on the agency
by the National Labor Relations Act of 1935 (NLRA) did not deal with case
processing. ^ Shortly before the NLRB acted, Senator John F. Kennedy berated the
agency's case processing speed and stated that "justice delayed is justice denied."
Faced with congressional pressure and internal backlog, the NLRB decided to create a
thorough time goal system that was applicable agency-wide.

Agency Structure and Duties

The NLRB is an independent agency whose functions are divided between a five-
member Board and its General Counsel It has 33 regional offices which are responsible
for investigative and prosecutorial functions. The agency employs approximately 3,000
people. Two-thirds are employed in the regional offices, 350 work with the Board and
600 are assigned to the Washington Office of the General Counsel. The NLRB handles
approximately 55,000 cases per year, and its caseload has been increasing steadily.

The NLRB has two primary statutory missions. One is the conducting of secret
ballot elections among employees in appropriate collective bargaining units to determine
whether or not the employees desire to be represented by a labor organization. The
other is preventing and remedying of unfair labor practices of employers and labor
organization or the agents of either. In addition, the Board also hears jurisdictional
disputes.

The General Counsel exercises general supervision over the bulk of attorneys
employed by the Board (other than Administrative Law Judges, legal assistants to Board
members, the Executive Secretary and the Solicitor, and a few others) and over the
offices and employees in the regional offices. Also, the General Counsel has final
authority with respect to the investigation of charges and issuance and prosecution of
complaints before the Board.

The General Counsel's staff is separated into several divisions. The Division of
Operations-Management has full responsibility for supervising all field operations as well
as monitoring and directing case flow through the various Washington offices. It is
headed by an Associate General Counsel who has six Assistant General Counsels
reporting to him.

All cases originate in the regional offices through the filing of unfair labor
practice complaints or the filing of representation petitions, and most are resolved at the
regional level without any formal participation by the Board. Specifically, approximately
90 percent of the 55,000 unfair labor practice and representation cases coming before
the National Labor Relations Board annually are resolved informally by the agency's 33
regional offices. The regional offices operate under the general supervision of a regional
director, who is assisted by a regional attorney, and a staff of field attorneys, examiners
and clericals. They investigate petitions and charges of unfair labor practices, prosecute
unfair labor practice cases and process jurisdictional dispute cases.

29/ As amended in 1947 by the Labor Management Relations Act (Taft-Hartly Act)
and in 1959 by the Labor-Managment Reporting and Disclosure Act (Landrum-
Griffin Act).

30/ "Twenty Years of Productivity," 2 Performance 1 (1981).

AGENCY TIME LIMITS 847

The regional office's investigation of an unfair labor practice complaint usually
will be completed within 30 days. The regional director then decides whether the
evidence is sufficient to substantiate the charge. If so, the Regional Director may seek a
settlement or may issue a formal complaint and a notice of hearing. The case is tried
before an ALJ, nca-mally in the geographic location where the conduct in question
occurred.

After the hearing is concluded and briefs are submitted, the ALJ prepares a
decision stating findings of fact, conclusions of law and a recommended order. If
exceptions are filed, the case will be reviewed by the Board, usually acting through a
three-member paneL

Besides their role in processing unfair labor practice cases, the regional offices
also play an important part in the processing of representation cases. These cases begin
with the filing of a petition with a regional office by a union, an employer, or an
employee, and proceed with a regional office investigation. In cases where the parties do
not sign an agreement consenting to hold a representation election, a hearing may be
conducted to determine whether an election should be held. The Board may review a
decision if substantial questions of law or policy are raised or if there is a clecir error by
the regional directcx* on a substantial factual issue.

The NLRB's "Pipeline" System

The time limits scheme that the NLRB established in response to congressional
criticism took considerable time to develop, but is not particularly complicated. In fact,
a key to meeting the agency's self-imposed goals is found in the system's simple
structure. The NLRB's "Pipeline" system sets up objectives for each step in handling
the predecisional stages of every unfair labor practice case that the f^ency handles. The
goals are as follows:

Step 1. Charge is filed Day 1

Step 2. Commence Investigation 7 days from charge

Step 3. Complete Investigation and

Determination 30 days from charge

Step 4. Issue Complaint 45 days from charge

Step 5. Case Hearing 90 days from charge

These timetables were established in 1959 and still apply in 1983. The cases involving
representation petitions are processed according to similar time guidelines.

These guidelines can signed problem areas as they arise and permit the origins of
time lags to be traced. Once the root of the delay is found, the problem can usually be
alleviated before the problem is compounded. Otherwise, backlogs may ensue, leading to
further difficulties caused by handling current cases concurrently with older ones.

The complementary monitoring system is nearly as simple as the timetable;
basically, it is based on management by exception. The system is impersonal and
concentrates on overall office results. Individual employees are monitored by their team
supervisor. The supervisor reports to the Assistant Director, who is responsible to the
Regional Director. The process continues in a hierarchical fashion until it readies the

31/ Interview with Mr. Joseph DeSio, Associate General Counsel, NLRB.

848 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

apex of the information and monitoring system, the Office of the General CounseU

The case management system is well disciplined. Each Regional Office is required
to submit a Regional Case Dispositions Report by the tired working day of each month.
The report includes information on a region's intake and investigations counts, pre-
complaint situations, methods of disposition, complaints issued, and other comprehensive
statistics (See Appendix A).

The Office of the General Counsel aids in the monitoring process by rapidly
compiling and distributing the data derived from each office to prepare comparative
charts. Each region can measure its performance against all other regions, and the
Office of the General Counsel can spot backlogs. Once a problem is spotted, discussions
are held with affected regional directors and their offices to determine the extent, cause
and possible solutions for lag in performance level.

The system also has built-in mechanisms to insure adequate flexibility. First, a
case may be delayed because of external factors, such as the unavailability of
witnesses. Instead of judging solely on the numerical statistics, a regional director will
determine the reasons for a delay before acting to expedite the handling of a case.
Secondly, the Regional Office statistics are based on median measurements as opposed to
averages. Thus, according to NLRB officials, it reflects a OLore accurate assessment of
the time it takes a typical case to move through the system.

While applied comprehensively, time limits at the NLRB are not specific
requirements, but serve as broad goals. The case handling system is effective also
because it is reinforced by additional strategems that strengthen internal discipline and
promote healthy competition, such as Senior Executive Service contracts, incentive
programs, personnel evaluations, promotions, and recognition awards. These encourage
agency workers to give priority to timeliness whenever possible.

Results of the "Pipeline" System

Since timeliness figures are compiled, tabulated and recorded, the quantitative
results of the case management system are easy to assess. Tthe median age of cases
pending under preliminary investigation prior to the establishment of time limits was
52.5 days in 1958 as compared to 20 days in 1978, a decline of 62%. Before the
implementation of the monitoring system. Regional Offices averaged 116 days to process
a case from the filing of charges to the issuance of complaints. Now the process is
accomplished within a median range of 44-45 days. Significantly, these reductions
occurred as the NLRB total case intake tripled. Within two years after the
implementation of the case management system, the backlog was virtually eliminated.^^

The system produced additional, less tangible benefits. First, it appears to have
helped the NLRB during the budget process. Because the agency has numerical evidence
as to performance and productivity, it has had relative success maintaining an adequate
budget during an era of budget-cutting. Secondly, the system can be useful to monitor

32/ Interview with Joseph DeSio, id.

33/ DeSio, J. and Higgins, John, "The Management and Control of Case Handling,
Office of the General Counsel, NLRB", The Bureaucrat, VoL 2, Number 4, Winter
i:-74, p. 394.

AGENCY TIME LIMITS 849

personnel performance, though timeliness is not, of course, the only measure of
performance. Thirdly, the system seems to create incentives by providing goals that
even the busiest offices strive to fulfill. Statistics have shown that most regional
offices, regardless of size or caseload, will consistently process their cases within the
system's time guidelines.

V. CIVIL AERONAUTICS BOARD

In order to reduce its sizeable backlog, the Civil Aeronautics Board was forced to
streamline its administrative processes. In 1976 two separate, but related improvements
were undertaken by the agency — the implementation of a computer tracking system and
development of a manually operated time limit program. The Work Item Tracking
System (WITS) initially instituted and overseen by the Board members and their
immediate managerial staff, maintained a tight surveillance over work item deadlines
and bureau adherence to them. The initial time limits system, overseen by the Managing
Director's office, permitted the Board to monitor the course of petitions for
rulemaking. This 120-day target period was divided up into component steps, each step
having an individual time deadline. When a routine petition was processed through all of
its various stages, the sum of the steps would be no greater than 120 days.

The WITS system has changed and expanded gradually, to take in other kinds of
cases, and it now has an impact on all CAB bureaus that deal with docketed
information. Its flexible case profile system places each incoming case under a time
schedule that is broken down into stages. As a case moves through various bureaus and
offices, a specific employee at each is responsible for it and must justify any request to
change a specified time target. The new deadline, and the reason, are logged into the
computer. This makes it difficult to blame others for delay. The CAB helps to enforce
the time limits by maintaining accurate, up-to-date status reports on all cases that are
monitored regularly. The comprehensive computer system keeps track of all areas of
case-handling. It keeps a case from "falling through the cracks" and can serve as an
objective method for motivating promptness via reports that remind employees of
deadlines. The managers play an important role in communicating with responsible
employees and applying pressure where needed.

The many work items that are monitored range from fare exemptions to domestic
route applications. The time limit program helps to reduce duplicative steps, and signals
problem areas as they occur. However, the quantitative impact of fixed deadlines at the
CAB is difficult to measure for two major reasons. First, the ^ency entered its "sunset"
era in 1978 just as the system was expanded and improved. Hence, both caseload and
resources to handle it decreased as WITS utilization increased. Secondly, caseload and
time statistics were not comprehensively recorded prior to 1976, so (with the exception
of the cases affected by 120-day statutory deadlines) no accurate comparisons can be
made to determine reductions in case-processing time. In statutory deadline cases, a
congressional study on federal regulation documented improvements. One year after the
standardized deadlines and complemaitary managerial programs went into effect, an
item's average case age dropped from 10 months to 5 months, and all petitions received
during that period, with one exception that required a 30-day extension, were processed
within the 120-day deadline. ^^

34/ Committee on Governmental Affairs, United States Senate, Delay in the
Regulatory Process 136 (1977).

850 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Structure and Duties

The Civil Aeronautics Board is an independent regulatory agency resDonsible for
the economic regulation of domestic and international air transportation. Among
other things, the CAB has been charged with licensing domestic and overseas airline
operations, regulating passenger cargo rates and air carrier practices, awarding financial
subsidies to eligible air carriers to encourage otherwise unprofitable air service,
approving or disapproving mergers, and prescribing uniform systems of accounting for
carries. Under the Deregulation Act of 1978, many of these powers have been greatly
reduced and the CAB will cease to exist shortly.

The Board consists of five members appointed by the President. The Managing
Director, under the Chairman's direction, oversees the Board's workload. The CAB is
fairly small (and diminishing) agency, now with approximately 450 employees. The staff
has considerable authority to act on a wide variety of regulatory matters under
delegations of authority from the Board. Even in matters finally decided by the Board
itself, the staff plays an important role in scheduling the work flow, processing
applications and other requests, conducting investigations, recommending action, and
drafting agency regulations and decisions. Most cases are decided on the basis of written
submissions by the parties without formal evidentiary hearings.

As mentioned above, the CAB is subject to several statutory time limits. License
applications must be dismissed, set for evidentiary hearing, or processed by nonhearing
means within 90 days. Applications set for hearing have an additional 240 days to
decision. Under section 1010 of the Federal Aviation Act , the CAB must approve or
deny within 180 days applications for interlocking relationships, mergers, or
exemptions. Except for merger cases, this period is extended to a year if the Board sets
the matter for an evidentiary hearing. The Board's own regulations require it to issue a
notice of rulemaking, or dismiss a request for rulemaking received from the public,
within 150 days after receipt. Thus, both agency-promulgated and statutory time limits
are integral to the CAB's operation.

Background of the WITS System

WITS is a computer-based, agency-wide management information system. It was
established with the following objectives in mind: (a) facilitate the setting and meeting
of overall target dates for individual work items; (b) signal delays as they occur; (c) keep
routine items moving; (d) provide a mechanism for top management to interpose
alternative priorities; and (e) build a central perpetual inventory of work in the CAB's
processing pipelines. Ideally, the goal is to expedite regulatory activities without
interfering with the quality of fairness of the agency's proceedings. In retrospect, the
CAB feels that present system has met those objectives.

The program was implemented in 1975 under the direction of Chairman John E.
Robson, who though that computer system would improve the CAB's capability to act and
react in the "timely manner" required by the Administrative Procedure Act.^ With the

35/ Its statutory responsibilities are set out in the Federal Aviation Act of 1958, as
amended, 49 U.S.V. §1301, et. seq. Those responsibilities were substantially
modified by the Airline Deregulation Act of 1978, P.L. 95-504, 92 Stat. 1705.

36/ 49 U.S. C. 1940.

Tcbnt'd)

AGENCY TIME LIMITS 851

aid of two data processing specialists, information was gathered from each office within
the CAB'S bureaus concerning 1,500 work items in 40 categories of administrative
proceedings. Their information-gathering stage culminated after 18 months. In addition,
it took six months to program and "flow-chart" the data and develop appropriate
guidelines.

Revisions have been made over the past six years. The most significant changes
have been the addition of a simplified computer language, a language that utilizes
conversational English as opposed to computer jargon, and the involvement of middle
managers in the monitoring procedures.

Developing Profiles and Internal Target Dates

1. Profiles

For each type of item that the CAB handles, it has devised a "profile," which is
like a flow chart outlining its course as it is processed by each of the CAB's various
departments in the most expeditious sequence, and specifying the amount of time each
step is alloted. It is similar to the NLRB's pipeline structure, though somewhat more
complex. Some profiles contain over 60 steps, such as a domestic route application. If a
work item requires a decisionmaking step, the profile repOTt will have the options listed,
as well as the set of procedures that would follow each option. For example, in the
profile of a fare exemption, after the third step the profile direction indicates possible
choices to be made in the proceeding. The directions state that if a problem exists after
a legal review then the work item should be sent to a staff member who can "recommend
action", but if no problem exists then the item's review and pursuant recommended
actions should be considered.

Systematically, the profile provides directives, a reliable sequence of events, and
an expeditious timetable, and it designates the employee responsible for each stage of
the casehandling process.

2. Procedures

Profiles are designed by the Management Systems Information manager with
assistance of affected personnel Together, they informally work out the sequence of
steps, and the time allotted to each step. Profiles are revised as problems arise within
each bureau. A suggested revision is discussed between the staffer and a Management
Systems Officer. Afterwards, the revision is sent to all other offices for approval.

The use of profiles has extended to each type of work item that flows in and out
of the CAB. As a document, request or complaint enters the CAB, it is docketed and
then logged into the computer which categorizes the work item under a specific profile
number. At this point, however, two additional options are available: (1) it may be
deemed a "special" case that cannot proceed through the agency at normal speed, or (2)
if the Board designates it a "priority" item, then target dates are altered accordingly.
This procedure is a necessary step to ensure that each case is treated with individual
attention and with the utmost efficiency where possible. This built-in flexibility helps to
subordinate the "process" to a secondary level and maintain purpose and fairness as the

37/ Speech by Rubin A. Caldwell on "The Work Item Tracking System: A Mechanism
for Improving Federal Productivity," at The Ninth Annual SMB Conference, 1977.

852 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

top priorities.

Problems with Implementation of Time Limits

The two major difficulties that arose within the CAB as the WITS system was
implemented were general resistance to change and defensive attitudes concerning the
tight surveillance of worker activity.

The first problem will occur within most agencies. The CAB dealt with the
resistance by stimulating participation at the managerial level. Once the managers
understood the system's benefits, they participated in the WITS system to aid them in
their administrative duties. Other staff members learned to use it, also, through the
educational program offered by the agency's computer specialists and the assistance of
the interested management.

However, middle management did not become actively involved in combatting
delay through computer tracking until the second problem, an overly rigid oversight
system, was addressed. The CAB discovered that too much "coercion" can cause
unfavorable attitudes that can harm worker productivity and diminish cooperation with
managers who wish to enforce firm time limits.

The WITS system began as a top-level management program. Target dates set on
a prioritized proceeding could not be altered by anyone except the Board's Managing
Director. He had to approve all time extensions and then his staff of computer operators
had to log the alterations into the computer.

In contrast, after 1977 the rigid system became less formalized and more
accessible, and hence, more accepted. Middle managers were trained to use the WITS
system and manage the time limits within each bureau. The CAB's Bureau division
managers were authorized to change target dates and approve other schedule alterations
and required to log explanations for time extensions into the computer. The division
manager's daily cases status report lists all reasons for time changes on the computer
printout, as well as the number of times a case's schedule has been revised. Because the
record of the delay is hard data that is accessible, visible, and updated regularly, it is
easier to enforce than less well-documented time limits. The program, while less
regimented than the original WITS system, appears more effective.

Currently, the established time limits ace overseen agency-wide by one person,
the Chief of Minutes, who monitors the system develops reports, indicates areas that
need revision, and highlights serious delay. He is responsible for contacting each office
to determine the reasons for the backlog and helping solve managerial problems by
working out more viable guidelines, streamlining proceedings or admonishing poorly run
offices. The system is no longer "policed" by the Managing Director's office.

The CAB'S experience shows the utility of developing a computer language that
can be learned quickly and used by staff members. At its inception, the WITS system was
not a program that a lay person could operate. It was a system designed by computer
specialists for computer specialists,* so that later, when the WITS system spread to the
mid-management level, most people had difficulty learning the computer language and
operating its complex programs. The CAB overcame much of its language barrier prob-
lems with the development of a complementary query system that is based in a language
similar to conversational English. Once it was implemented, time limit changes and

38/ Interview with Norbert Kaus, July 1982.

AGENCY TIME LIMITS 853

monitoring became a simpler, more accessible process. As a result, in 1983 90 percent of
all department management personnel used the WITS system in their daily routines.

Qualitative Advantages

Reliable data on the impact of the WITS system is hard to obtain because
manpower and caseload have been diminishing steadily as a result of airline
deregulation. Nonethless, the following advantages are evident.

1. It reduces duplication of effort. As a profile is designed, managers and staff
members in affected bureaus develop an organized format of steps that are charted from
stfiirt to finish. In creating the 120-day statutory time limit profile, the normal number
of process stages — formerly 20 to 25 — was reduced to about fifteen. What managers
discovered once they plotted a work item's course was that many procedures were
needlessly duplicated in a bureau. For example, a manager formerly had to approve a
work item after each staff member processed it, instead of one time at the end of its
departmental circulation. In another instance, prior to establishment of the system,
different bureaus sent one case to the Board three times. Under its present time
schedule the duplicative steps are omitted, thus saving days of paper shuffling.

2. WITS reduces time spent on monitoring deadlines. This is because of two
factors: the reduction in backlog and the designation of a responsible party for each
stage of the process. Because workers can concentrate more heavily on work that is "on
the track" arKl flowing, rather than pending, the tendency for delay is lessened. Workers
no longer have to contend with cases that are a year old. Instead, they can deal solely
with incoming work items that proceed along a predictable track. Furthermore, the
designation of a specific person responsible for a work item enables supervisors to survey
case progression without wasting time searching for the person handling the case. For
instance, when inquiries arise about a particular rule or other case's status, the computer
can display within seconds who has it and in what stage it is pending.

3. Items do not get lost as often. Within any agency where substantial paperwork
is transferred from office of office, papers often get misplaced or "stored". Under the
time frames within the WITS system and the monitoring of delayed proceedings, the
computer stores up-to-date information about case location and status.

4. It exposes problem areas. A Division Manager can spot delayed proceedings
daily as he reviews his General Case Manager's Report (GCMR). If a bottleneck begins to
form within one bureau, the manager can note it as it occurs and act more quickly.

5. Statistics and inquiry responses are compiled quickly. Because the centralized
WITS system also serves as a data bank, computations can be made and statistics
compiled within a matter of seconds. General inquiries about past cases or present cases
and their due dates can also be answered quickly.

6. It saves employee time. Time that was previously spent determining where the
file on a case was located, or when an item would be completed, can now be directed
towards more important matters. Docketing time is also reduced. Overall, it can make
the agency more responsive, and can reduce manpower requirements, particularly in
clerical areas. The WITS system enabled the CAB to reduce the number of workers in
its docket room substantially.

part o

7. It can substantiate productivity and help avert statutory deadlines. In 1978, as
f the Airline Deregulations Act, cfongress was considering implementing statutory

854 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

deadlines. With the information readily available under WITS, the CAB was able to
provide a comparison of its projected time limits to the congressional time limits.
Because the agency had a tracking system and self-imposed limits, the CAB was able to
avert overly rigid statutory time limits.

Conclusion

The CAB has developed techniques that can be adopted by other agencies suff ring from
delay. The usefulness of its organizational techniques is apparent. Convincing agencies
of the benefits of a computerized system will depend on agency size, caseload and case
type. Advantages exist, but they are not as important as developing a system to monitor
time limits conscientiously.

AGENCY TIME LIMITS 855

VI. DEPARTMENT OF HEALTH AND HUMAN SERVICES
GRANT APPEALS BOARD

HHS' Departmental Grant Appeals Board hears appeals by grant and cooperative
agreement recipients seeking to dispute decisions of the Social Security Administration,
Health Care Financing Administration and other component agencies of HHS.
Approximately three years ago, HHS' Departmental Grant Appeals Board had a large
backlog with each case taking, on the average, 368 days to complete. Recent statistics
show a current average case age of 159 days. Much of the reduction in processing time
and backlog (which has almost been eradicated) can be attributed directly to the
introduction of time limits, promulgated and informal, combined with related managerial
techniques.

Organization and Duties

Commencing in the 1970s, federal agencies charged with the responsibility of
administering federal grant programs increasingly have used grant appeals boards
established by regulation to decide many kinds of disputes between the granting s^encies
and their grantees. The first of these appeal boards— and one that has served as a
prototype ~ was established by the Department of Health, Education and Welfare in
1973. The recently revised regulation governing the Board accords states, local
governments and other HHS (formerly HEW) grantees under designated programs the
right to appeal certain types of final decisions of an HHS constituent agency on a dispute
arising under an existing grant. These cases may involve, for example, disagreements
arising out of an auditing procedure that determines that a state or local grant recipient
must repay some grant money. The grantee may contest the initial agency decision by
appealing to the Departmental Grant Appeals Board The Board, upon the basis of
written submittals by the grantee and the granting agency, and often supplementary
evidentiary hearings, renders a legally based, written decision resolving the dispute.

The Board
IS resolve

e Board, consists, of four. members, aided. by a legal and clerical staff. Each case
id qj^ informal adjudication or by a mediaiion process recently implementea for

some cases. The former is much like a APA adjudication, but usually involves less

discovery and is decided by a presiding officer who is not an administrative law judge.

The mediation process involves a Board staff attorney in a more active settlement role

and usually takes slightly less time. At present, the Board is handling between 225 and

250 ceises, of diverse size and complexity, involving disputes over amounts raiding from a

few thousand to several million dollars.

Time Limits System

In 1981, the Board had no time limits in its regulations, nor was it subject to any
statutory time limits. As part of their new Board Chair's Senior Executive Service
contract, however, he agreed with the Department to reduce the backlog in his office.

39/ Interviews with Norval D. (John) Settle, Chair, HHS Departmental Grant Appeals
Board, July and Aqgust 1983.

39a./ See, Barrett, Use of Mediation Procedures in Connection with More Formal
Adjudication of Grant Disputes (1982); Steinberg, P roc edures for Resolving
Disputes Under Federal Grant Programs, 1982 ACUS 137 (Vol 1.) (1984).

(cont'd)

856 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Asa by-product of his contractual obligation several "goals" were published as
part of the Board's procedural regulations in the Federal Register of August 31, 1981.
Section 16.23, "How Long an Appeal Takes", established "general goals" for its
consideration of cases. Its goals included time frames that apply to each step of agency
proceedings. First, for regular review based on a written record under §16.8 (preparation
of an appeal file and written argument) a six months time frame was set. After the
review of an appeal file the Board may opt to schedule a conference to clarify issues and
questions. Again, the deadline is six months; for cases which require a hearing, a hearing
must be held and decision written within nine months. And thirdly, a case can be
processed in an "expedited fashion"~those cases involving $25,000 or less and containing
no complicated or unusual circumstances— within three months. The expedited process
involves a streamlined document exchange and issue formation process, and generally
relies on a telephone conference involving all parties.

The Board's stipulations are goals rather than requirements, which is consistent
with its intent to allow flexibility and permit considerations of sound decisionmaking to
take precedence over speed. These self-imposed time limits are subject to periodic
review and revision.

It must be noted that implementation of the rules has been complemented by
internal time limits that are adapted to each case as it is assigned, and additional
managerial methods. The Board has two supervisors and two teams of lawyers who aid
the Board members and mediate cases. Each supervisor, a GS-15 level employee,
coordinates the activities of 7 or 8 attorneys. As cases are filed with the Board, one
employee receives and categc«"izes them. Next, he discusses the case allocation with
each supervisor to determine attorney assignments. Once determined, the supervisor,
the attorney and a Board member sit down at an informal "negotiating" session to
establish an appropriate timetable for the case, based on its complexity and the
attorney's workload. This process is implemented for all cases, whether they are to be
handled through adjudication or mediation.

Enforcement techniques vary with each employee. Once target dates are set,
personnel generally tend to adjust priorities accordingly. Problems that do arise are
handled by (1) actively discouraging delay, (2) posting a list of particularly overdue cases
in visible sites, and (3) channeling cases which can be diverted from the traditional
process through streamlined steps to promote more expeditious case handling.

Employees and parties are generally discouraged from asking for time
extensions. When the employee asks for an extension, for example, he might be informed
that it will be granted this time, but not the next In other cases, compromises may
occur, with a request for 40 days being negotiated so that a 25-day extension is granted
instead.

Charting overage cases, a form of peer pressure, is used only vih&n cases are noted

40/ This is reflected in the Chair's performance plan.

Alf 45 CFR Parts 16 and 74; 46 Fed. Reg. 43,816, Aug. 31, 1981.

42/ Another pertinent revision to the Grant Appeals Board Rules is found in
subsection 16.7. It states that "within 10 days after receiving the notice of
appeal, the Board will send an acknowledgment, enclose a copy of procedural
steps an appellant must take, and advise him of the next steps. The Board will
also send a copy of the notice of appeal, its attachments, and the Board's
acknowledgment to the respondent"

AGENCY TIME LIMITS 857

as particularly overdue, regardless of the reason. The chart of overage cases contains a
list of fixed, negotiated deadlines established with the responsible attorney in one
column, and the number of days the case is overage in the next. The chair compiles and
posts a master copy of the month's overage case chart in his office, and distributes
copies of the chart to each supervisor and attorney. This pressure, which stems from a
concern for image and credibility, appears to be an effective tool to use with self-
motivated employees.

The third techniques seeks to save time by directing cases through informal
proceedings where possible. The informal proceedings utilize an ombudsman-type format
to save several months of case handling time. By eliminating some steps, such as orders
to show cause and other niceties, hours of preparatory time may be saved. This permits
attention to be diverted to the complex cases that can require large amounts of attorney
time.

The Board's chair has no future plans to implement additional target dates or
rules, and feels that the Board is too small to implement a computer tracking system.
However, he receives comments and suggestions on the effectiveness of the time limits
through staff meetings. After two years of the time monitoring system, it was concluded
that too much policing hampered employee motivation and the pressure of certain
deadlines was eased by granting extensions more liberally and allowing more room for
employee discretion on complex cases. The balance point between "too much" and "too
little" is elusive and constantly fluctuating, but is one to which supervisors must remain
constantly sensitive.

Advantages of Time Limits

Time limits have helped to organize case proceedings and reduce backlog. The
reductiCTi in backlog frees more time for staff to engage in front-end activities,
particularly mediation which often leaves both parties with a more equitable result.
Also, deadlines foster more efficient handling of cases since both parties have a better
retention of case facts and are more productive when the case is "fresh" in their minds.
Many common procedural problems associated with delays are avoided, such as locating
witnesses or documents, educating new Board or party personnel, or rescheduling hearing
dates.

Implementation Problems

The largest obstacle at the Board was one overcoming old habits and adapting to
the self-imposed regulations. It took a period of several months to implement the system
completely with full participation. Also, there have been occasional complaints from
parties or outside agencies that felt the Board was moving proceedings too quickly. The
Board's published rules attempt to meet this problem by providing that any case with
complex circumstances will be allowed sufficient time to ensure a fair and equitable
treatment of the case. The Board's goals advocate that the timeliness of case handling
should not override the fairness of a trial, and that time limits be formulated with this in
mind. Flexibility in enforcement of the rules appears to reflect this goal.

Today, delay at the Board, while not insignificant, can be attributed primarily to
external factors, as opposed to managerial ones. To illustrate, the two leading causes of
delay in 1981-82 were (1) delays requested by the parties and (2) disagreements between
board members on what the outcomes of various appeals should be.

858 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Conclusion

The Board has found time limits an effective way to free resources, streamline
processes and monitor every item. Setting a time schedule with each lawyer as the case
enters the office places each case into a time frame that guides the speed and direction
of the cases. Also, use of backlog reduction as a performance measure in SES contracts,
as in Mr. Settle's, may prove generally useful to stimulate agency managers to take steps
to reduce delay. The Board's relatively simple monitoring techniques seem pertinent to
many agencies.

VII. FEDERAL TRADE COMMISSION

The FTC has received considerable criticism over the years for the time required
to complete its investigations and adjudications. For example, an ABA Commission to
study the FTC noted in 1969, "Problems of delay have vexed the FTC ever since it was
established . . .". More recently, the Commission's cumbersome trade regulation

rulemaking procedures have aroused similar complaints (among others). While the FTC
has taken steps to ameliorate delays, statistics developed by the Administrative
Conference show that in recent years it has taken between two and four years to
complete FTC adjudications and five years to conclude a rulemaking proceeding.

From time to time, FTC officials have attempted a variety of improvement
strategies, from continuous hearings to deadlines for ALJ decisions. Nonetheless, many
cases have proven virtually intractable, because of lengthy discovery and hearings,
complicated issues, or delay at the Commission leveL Last year, the FTC began a new
approach, streamlining the Commission's decisionmaking processes in several areas,
particularly those relating to Commission level review of initial decisions and voting and
assignment procedures. While these reforms'efficacy has not yet been proven over the
long haul, they merit consideration as an example of commitment at an agency's highest
echelons to combatting delay.

Structure of the Agency

The Federal Trade Commission is an independent agency, comprised of five
members (including a chairman) appointed by the President and confirmed by the
Senate. It is charged with protecting the public from deceptive advertising and unfair
trade practices and preventing unfair methods of competition. The FTC has about 1200
employees working at its Washington, D.C. headquarters and ten regional offices.

The FTC is authorized to undertake adjudications and rulemakings in carrying out
its duties. Ordinarily, the initial step in an FTC proceeding is investigation of an alleged
violation; during investigation, the FTC has considerable authority to compel production
of documents, take oral testimony, or hold hearings. If a staff investigation reveals a
violation, and a majority of Commission members agree to issue a complaint, an
adjudicatory proceeding before an administrative law judge is held to decide whether
violations of the law have occurred and if a cease-and-desist order should be issued. The
ALJ's initial decision can be appealed to the Commission and then to a federal Court of

43/ See note 1.

44/ Administrative Conference of the U.S., Federal Administrative Law Judge
Proceedings; Statistical Report for 1976-78, 159-63 (1980). Boyer, Report on
the l'radeKeguiati6h Rulemaking Pf06edUP6 of the FTC, 1980 ACUS 33, 1979
ACUS41. — — ^ '

AGENCY TIME LIMITS 859

Appeals. Adjudication typically involves one or more pr^earing conferences,
considerable discovery, evidoitiary hearings, and Commission review.

The FTC also conducts, from time to time, proceedings to develop substantive
rules defining unfair conduct and prescribing preventive safeguards. These rulemaking
proceedings, usually directed at industry-wide practices that are alleged to Unfairly
exploit consumers, entail procedures that by statute are considerably more complex than
those prescribed by the APA. They require informal oral hearings before a "presiding
officer," complete with cross-examination. After the hearing, the FTC's rulemaking
staff prepares a repcx't analyzing the record and recommending a final rule. Then, the
presiding officer recommends a decision and, after additional input from the public and
other parts of the FTC, the Commission decides whether to issue a rule regulating the
conduct in question.

Commission Reforms to Reduce Delay

In September 1983, the Commission met and adopted a series of new deliberative
procedures based on recommendations developed by Chairman James C. Miller. The
major changes affected decisionmaking at the commissioners' level. Several involved
voting, where commissioners previously had almost unlimited time to cast votes on many
matters before them; the new procedures subject them to time limits for matters
decided by written circulations.

While many important FTC decisions are made at formal Commission meetings,
most matters before its members are decided as motions circulated in writing. Timely
processing of written circulations has at times troubled the FTC, with action sometimes
being delayed by a dissenting commissioner's failure to vote. To ensure prompt
effectiveness of FTC decisions, the new procedure gives commissioners 14 days to vote
from the time a majority of his or her sitting colleagues has recorded votes on one side
of a motion. A commissioner may wish to circulate a "topping motion" amending or
substituting for the original motion; if he or she does so, and if the new motion obtains
two affirmative votes, the limitation is tolled until the motion is resolved. A similar
process with shOTter time limits governs "walk-around" circulations, which are used in
matters requiring prompt resolution.

Deadlines will also be used to expedite appeals to the Commission from ALJs*
initial decisions. The Commission agreed to set, immediately following oral agreement
of an appeal, a target date for issuance of its decision and to set internal target dates for
preparing an opinion. To expedite appeals handling, the Commission also agreed to make
greater use of its Office of General Counsel and Bureau of Economics in opinion drafting
and to amend its rules of practice to require the parties to file an index of their exhibits
and witnesses. The Secretary is responsible for preparing a weekly list of all

outstanding adjudications that have been circulated by the commissioners.

45/ The FTC's revisions are described in Miller, "Chairman Takes Steps to Improve
Efficiency at FTC," Legal Times, October 31, 1983, 13. The discussion herein is
drawn largely from that article, and from Chairman Miller's October 1983
memorandum to the Council of Independent Regulatory Agencies.

46/ 48 Fed. Reg. (1983) (to be codified at 16. C.F.R. §3.46).

860 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

In addition, the FTC modified its rotational system of assigning new matters to its
members to permit a commissioner with a heavy workload to be passed over for a
reasonable period. It also placed a deadline on commissioners' processing of assignments,
requiring them to circulate all assignments, either with a motion or on an informational
basis, within 30 days after receipt. The Secretary of the Commission is now responsible
for distributing to members a weekly list of all pending assignments.

The commissioners approved delegations of authority in deciding petitions to
quash compulsory process and in closing investigations. Below the Commission level, the
Secretary distributes to the members a monthly report listing target deadlines that the
Commission has established for staff handling of matters. In addition, the commissioners
plan to meet with the FTC's ALJs to discuss ways to expedite the trial of adjudicatory
proceedings.

Conclusion

As the Senate Governmental Affairs Committee recognized, the self -discipline of
agency members in establishing and adhering to deadlines is essential, since it can set an
example for others in the agency. While the FTC's initiatives are too new for their full
impact to be gauged, if adhered to they should serve at least to speed Commission
processing of its business and possibly to strengthen the hands of agency managers
interested in improving the FTC's deliberative process at all levels.

Vni. CONCLUSION

Delay in federal agencies occurs for many reasons, but as this study suggests, a
variety of options are available to agencies wishing to develop time guidelines and case
monitoring systems as one response. Given the nature of bureaucracies, which abide by
rules and standardized working procedures and can become very resistant to structural
changes that require the substitution of new work habits and expectations, the difficulty
in implementing a time limits scheme should not be underestimated. Introducing a time
limit program will require commitment far beyond the mere promulgation of a set of
rules. To have any effectiveness, it demands the commitment and participation of all
those involved, as well as the creation of optimal conditions for such a change.

These techniques cannot be implemented without the realization that a structural
change requires a commitment of time, planning and personnel An agency that
implements time limits should allocate the resources necessary to ensure that such
commitments can be kept It should take pains in developing time limits. Once
guidelines has been issued, then the internal explanation, instruction, monitoring and
feedback must begin.

A cooperative environment must be fostered. Two agencies noted that their time
limit systems had be&\ too harsh at one point during the implementation process to yield
satisfying results. The Chair at HHS' Departmental Grant Appeals Board found that staff
members felt unnecessarily pressured because they were supervised too closely. CAB
workers felt that the initial system was too inflexible as well Some decisional officials
may feel their "independence" threatened. At the extreme, reactions to a system that
polices staff members can range from fear to resentment because it may signal that
supervisors do not trust employees. At both HHS and the CAB, some workers initially

47/ Delay in the Regulatcyy Process 1 40.

AGENCY TIME LIMITS 861

thought that the deadline systems pushed rather than reminded them of time restrictions,
and that they focused on apparent problem areas without considering situational factors
that delayed work items. Adjustments at both agencies proved helpfuL

Agencies can lessen the resistance and promote cooperation by using several
techniques. Employees participating in decisicHimaking will be less resistant if they see
time limits being enforced at all levels in the process. Feedback channels must be
available, since employees frequently can determine fallible planning more quickly than
those who devise it. Moreover, feedback channels indicate that agency officials
welcomes employee suggestions and complaints because s/he trusts his/her judgment.

Additionally, employees wiU^more likely accept changing procedures if they can
participate in their development. Very simply, this means that if the managemoit
announces a change (such as time limits and case monitoring) without first discussing the
problem with or giving any forewarning to affected staff members, then they will
probably encounter greater resistance. A fear of the unfamiliar can thwart change,
particularly when the change involves the introduction of new technology. "... (B)efore
we exchar^e one set of fears for familiarity, the residual fears can lead to immobility."
But, if the staff members are familiarized with the agency's concerns at the start of the
process, then they are unlikely to have as much fear and discomfort. Furthermore, if
employees participate in a goal's establishment then they can understand it more fuUy.
Thus, uncertainty is minimized at the outset of each case proceedings. The participation
also promotes a sense of employee involvement and control that can lead to more
cooperation and satisfaction.

Time limits and monitoring can be implemented for most agency adjudicatory and
rulemaking proceedings. Several agencies have used time frames with success, each one
doing so differently. The important point to note is the results. At each agency that
implemented a system, the benefits from reducing d3lay appeared to outweigh the
system's resource demands, decisional effects, and other drawbacks. These agencies'
experiences can serve as lessons to others, and as the heads of more federal agencies
decide to experiment with time target programs, those that follow can learn even more
from their predecessors' experience.

48/ This point has been recognized by the Administrative Conference in
Recommendation 78-2, which called for consultation with ALJs and other
affected interests to develop standards for expeditious disposition of Social
Security appeals, and Professor Rosenblum in his draft report, which calls for
involvement of ALJs in developing productivity standards, supra note 16.

BACKGROUND REPORT FOR RECOMMENDATION 86-8

ACQUIRING THE SERVICES OF NEUTRALS FOR ALTERNATIVE MEANS OF
DISPUTE RESOLUTION AND NEGOTIATED RULEMAKING

George D. Ruttinger

Crowell & Moring

Washington, DC

Report to the Administrative Conference of the United States
November 19, 1986

864 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

TABLE OF CONTENTS

I . INTRODUCTION
II. ESTABLISHING QUALIFICATIONS

A. Potential Criteria

B. Agency Experience

1. Minitrials

a. Corps of Engineers

b. Department of Justice

c. Department of the Navy

d. Department of Energy

2. Negotiated Rulemakings

a. Department of Interior

b. Council on Environmental Quality

3 . Summary

C. Qualifications Required by Government
Dispute Resolution Agencies

1. Federal Mediation and Conciliation
Services

2. Community Relations Service

D. Rosters Maintained by Private Organizations

1. American Arbitration Association ("AAA")

2. Center for Public Resources ("CPR")

E. Conclusion
III. PROCUREMENT ISSUES

A. The Federal Acquisition System

B. Issues in Contracting for Neutrals' Services

C. Case Studies

1. Corps of Engineers Minitrials

2. Department of Interior
OCS Negotiated Rulemaking

3. CEQ Procurement of Regulatory
Negotiating Services

a. Historical Background

b. The CEQ Procurement

c. The Request for Proposals

4. Use of Government "Neutrals"

D. Evaluation of Techniques

1. Full Competitive Procurement

2. Small Purchases

3. Indefinite Quantity Contracts

4. Other Potential Acquisition Techniques

a. Basic Ordering Agreements

b. Blanket Purchasing Agreements

c. Supply Schedules

d. Hiring Neutrals as Consultants, Experts,
or Special Government Employees

e. Innovations in Procedures

5. Use of Government Neutrals

E. Long-Term Structural Issues
IV. DELEGATION ISSUES

V. CONCLUSION

ADR "NEUTRALS" 865

ACQUIRING THE SERVICES OF NEUTRALS FOR ALTERNATIVE MEANS
OF DISPUTE RESOLUTION AND NEGOTIATED RULEMAKING

GEORGE D. RUTTINGER*

I.
INTRODUCTION

Efficient resolution of disputes involving federal agencies
is often impeded by the formalities of the adjudication or the
litigation process. In recent years, private parties and the fed-
eral government have been searching for ways to streamline the
litigation process by developing alternative means for dispute
resolut ion.^^ To this end, the Administrative Conference of the
United States ("ACUS") has recommended that administrative
agencies, where not inconsistent with statutory authority, adopt
alternatives to litigation such as arbitration, mediation, and
minitrials.-^ The various techniques for resolving disputes
without resort to full litigation or adjudication are referred to
as Alternatives Means of Disputes Resolution, or ADR.

In the sphere of administrative rulemaking, similar trends
have developed. In recent years, several agencies have experi-
mented with a technique referred to as negotiated rulemaking,
which involves convening potentially interested parties to nego-
tiate the details of a proposed rule before it is published for
notice and comment in accordance with the Administrative Procedure
Act.^^ ACUS has been instrumental in promoting such experimen-
tation through its Recommendations 82-4 and 85-5, both of which
are entitled "Procedures for Negotiating Proposed Regulations."^^

* Partner, Crowell & Moring, Washington, D.C.

U See, e.g. , Harter, Points On A Continuum; Dispute Resolu-
tion Procedures and the Administrative Process, Report to
the Administrative Conference of the United States (June 5,
1986).

^ ACUS Recommendation 86-3, "Agencies' Use of Alternative Means
of Dispute Resolution", 1 C.F.R. S 305.86-3.

^ See, Harter, Negotiating Regulations; A Cure for Malaise,
71 Geo. L.J. 1 (1982).

^ 1 C.F.R. 1% 305.82-4 and 85-5. See also, ACUS Recommendation
84-4, "Negotiated Cleanup of Hazardous Waste Sites Under
CERCLA," 1 C.F.R. S 305.84-4.

866 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

A key figure in the effective working of ADR and negotiated
rulemaking is the "neutral" who generally presides at the pro-
ceedings and attempts to assist the parties in reaching a nego-
tiated resolution or, in the case of arbitration, issues a deci-
sion on the matter in dispute. The various types of ADR neutrals
may be summarized as follows:

Minitrial Neutral Advisors. "A minitrial is a structured
settlement process in which each side presents a highly abbre-
viated summary of its case before senior officials of each party
authorized to settle the case."-^ In some (but not all) mini-
trials, a "neutral advisor" participates in the minitrial and
subsequent efforts to settle the dispute. Typically, the neutral
advisor is a private individual who is selected by the parties in
dispute, namely the government agency and the private party or
parties engaged in litigation or adjudication with the government.
The role of the neutral advisor varies, but his duties may include
presiding at the hearing, questioning witnesses, acting as a
mediator during negotiations between the representatives of the
litigants, and rendering an advisory opinion to the parties. In
no event does the neutral advisor render a decision that is
binding on either party to the minitrial.

Mediators. A mediator is simply a neutral third party who
attempts to assist parties in negotiating an agreement. A medi-
ator has no authority to make any decisions that are binding on
either party.

Arbitrators . Arbitration is another form of litigation or
adjudication, without some of the formal trappings. An arbitrator
is a neutral third party who issues a decision on the arbitration
issues after receiving evidence and hearing arguments from the
parties. The arbitrator's decision may or may not be binding.
Arbitration may be voluntary, in which the parties agree to
resolve the issues in dispute through arbitration, or it may be
mandatory, in which a statute or contract specifies arbitration as
the exclusive means for resolving disputes.

Convenors-Facilitators for Negotiated Rulemakings. Negoti-
ated rulemakings generally proceed in two phases. In the first
phase, a "convenor" studies the issues presented by the proposed
regulation, attempts to identify the interested parties, and then
advises the agency regarding the feasibility of convening the
interested parties in an attempt to negotiate a proposed regula-
tion. If the agency decides to go forward with negotiated rule-
making, the facilitator then meets with the interested parties and
attempts to mediate their differences and develop a proposed rule.
Under the concept put forward by the ACUS recommendations, the

-^ ACUS Recommendation 86-3, 1 C.F.R. S 305.86-3.

ADR "NEUTRALS" 867

proposed rule developed through this process is then published for
notice and comment pursuant to Section 553 of the Administrative
Procedure Act. The convenor and facilitator may be, and often is,
the same person or persons. The convenor/facilitator has no
authority to make any decisions that are binding on the interested
parties to the negotiated rulemaking or the agency promulgating
the rule.

One of the by-products of the movement toward ADR and nego-
tiated rulemaking is the need for agencies to develop methods for
identifying qualified neutrals and acquiring their services. This
process involves a number of issues that will be explored in this
report. Among those issues are the following:

1. Qualifications. An agency dispute or rulemaking may
involve technical issues arising under a complex regu-
latory scheme. How can agencies insure that neutrals
that are hired to promote negotiation of settlements
are qualified to assist the parties in sorting through
such issues? Are technical expertise and substantive
knowledge required, or do generic mediation skills
suffice?

2. Procurement procedures. Statutes and regulations
governing procurement of services by federal agencies
require competition and specify a series of procedural
steps for ensuring that competition is maximized. In
some cases, these procedures may be inconsistent with
the agency's need for expedition in acquiring the ser-
vices of an outside neutral. Are there other ways in
which agencies can acquire neutrals' services expedi-
tiously within the competitive system mandated by
statute and regulation?

3. Deleqat ion. Most neutrals lack authority to render a
decision that is binding upon either the agency or
private parties. However, in the case of binding arbi-
tration, questions continue to be raised about whether
decisions delegated to executive agencies by Congress
can be re-delegated to private parties for binding reso-
lution. What are the potential "delegation" issues with
respect to binding forms of ADR, particularly arbitra-
tion?

4. Long-term structural issues. The universe of neutrals
who have specific experience in the experimental forms
of ADR and negotiated rulemaking is presently very
small. If the use of such techniques by agencies
expands, how can agencies broaden the base of indivi-
duals or organizations who are available and are
experienced in the arbitration/mediation/facilitation
process? Should federal agencies develop a centralized
roster of neutrals from which all agencies could draw?
To what extent should the federal government utilize and

868 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

expand the capabilities of government employees in
dispute resolution?

This report will explore these and other issues, drawing
heavily upon the experience of agencies to date.

II.

ESTABLISHING QUALIFICATIONS
A. Potential Criteria

The qualifications required to serve as a neutral vary
depending upon the nature and complexity of the issues, the type
of dispute resolution technique employed, and the size and impor-
tance of the dispute or regulation to be negotiated. In many
cases, seeking an ideal combination of qualifications and experi-
ence would unduly limit the pool of individuals available to serve
as neutrals. For example, only a handful of private parties have
actual experience in convening or facilitating the negotiation of
environmental regulations. Thus, in determining the criteria
applicable to selection of a neutral, agencies will need to
balance their desire for competence and experience against the
need to avoid exclusivity.

There are various levels of training and experience that
could be considered adequate to perform the function of a neutral
in a given case:

1. General dispute resolution experience. Some of
those contacted in connection with this report
expressed the view that "mediation is mediation"
-- that is, a person who has skill and experience
in mediating disputes can perform the role of a
neutral, regardless of the substantive issues
involved. The Federal Mediation and Conciliation
Service ("FMCS") has responsibility for mediating
labor disputes under the Labor-Management Relations
Act of 1947.-^ But FMCS labor mediators have per-
formed a variety of other dispute resolution
functions. Recently, an FMCS mediator successfully
acted as convenor of a negotiated rulemaking for
the Federal Aviation Administration ("FAA") in

^ 29 U.S.C. S 173.

ADR "NEUTRALS" 869

developing proposed regulations concerning flight
and duty time for aircraft crews. ^^

2. Experience in specific ADR techniques. As noted,
agency experience with ADR and negotiated rule-
making has been relatively limited to date. If the
selection of neutrals is confined to persons with
direct experience in these techniques, the fear of
exclusivity will become a reality.

3. Technical expertise. There is no denying that it
would be useful in arbitrating a dispute regarding
licensing of a pesticide under the Federal Insecti-
cide Fungicide and Rodenticide Act to have a degree
or some formal experience in chemical engineering.
Similarly, knowledge or experience in the construc-
tion industry would aid a neutral in mediating the
settlement of a construction dispute. Depending
upon the nature of the issues involved, it may or
may not be necessary to have such technical exper-
tise in order to understand and communicate the
conflicting positions of the disputants in a way
that will promote settlement.

4. Knowledge of the statutory/regulatory scheme.
Particularly in regulatory negotiation, familiarity
with the legal framework in which the regulation is
being developed may be an important criterion in
selecting a neutral. In the arbitration setting,
the Supreme Court upheld mandatory arbitration of
Medicare claims by employees of private insurance
carriers in part on the basis that agency regula-
tions required such arbitrators to possess "a
thorough knowledge of the Medicare program and the
statutory authority and regulations upon which it
is based . . . . "-i^

5. "Absolute Neutrality". Screening out potential
neutrals who have a personal or financial interest
in the proceeding will always be an important step

^ See Harter, Regulatory Negotiation: The Experience So Far,
Resolve, Conservation Foundation 6-7 (Winter 1984 ) ; Perr itt ,
Analysis of Four Negotiated Rulemaking Efforts, 1985 Recom-
mendations and Reports of the Administrative Conference 637,
712-26.

^ Schwieker v. McClure, 456 U.S. 188, 199 (1982) (emphasis
in original) .

870 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

in the selection process. But some agencies have
gone beyond such basic conflict-of-interest con-
siderations by insisting upon neutrals who have
no past or present affiliation with any side of
the controversy. Such insistence upon "absolute
neutrality" could be an extremely limiting quali-
fication, particularly since many of the persons
who are most knowledgeable in a given regulatory
scheme have been affiliated with either government
or private industry, and sometimes both.

B. Agency Experience

1. Minitrials

a. Corps of Engineers

The agency that has had the most experience with minitrials
is the U.S. Army Corps of Engineers.-^ In its Engineer Circular
No. 27-1-3, dated September 23, 1985, the Corps has set forth
detailed guidelines for the use of minitrials, together with a
model "Minitrial Agreement" .^-^y The Engineer Circular specifies
that the minitrial neutral advisor "must be an impartial third
party with experience in government contracting and litiga-
tion."^-J-/ In the two minitrials that the Corps has successfully
completed to date, it has used a retired judge from the United
States Court of Claims and a university professor of government
contracts law as neutral advisors. Corps attorneys who are
responsible for the minitrial program have stated their desire, at
least at the initial stages of the minitrial program, to utilize
neutral advisors who have no present or past affiliation with
either the government or private construction contractors. This
means that in the short term, the pool of persons who have the
requisite neutrality and government contracts expertise to serve
as neutral advisors for Corps of Engineers minitrails will be
limited.

b. Department of Justice

On June 19, 1986, the Commercial Litigation Branch of the
Department of Justice issued a "Policy Concerning the Use of

^ See Ruttinger, Army Corps of Engineers Settles $45 Million
Claim at Minitrial, Alternatives to the High Cost of Liti-
gation, Center for Public Resources, vol. 3, no. 8 (August
1985).

J-^ A copy of the Corps Circular, together with the model agree-
ment, is reproduced as Appendix A to this Report.

^-^ Engineer Circular No. 27-1-3 at 3.

ADR "NEUTRALS" 871

Mini-trials,"-^-^ which encouraged Branch attorneys "to assess
cases assigned to them for the potential for resolution by mini-
trial . . . ."-L±/ The Policy provides that, where appropriate,
the parties may agree upon a neutral advisor to assist the
management officials in resolution of the dispute. With respect
to the qualifications of the neutral advisor, the Policy states as
follows:

The neutral advisor should be a person with
either legal or substantive knowledge in a
relevant field. The neutral advisor should
have no prior involvement in the dispute or
the litigation and must possess no interest in
the result of the mini-tr ial .^-^

c. Department of the Navy

The Department of the Navy has embarked upon the experimental
use of minitrials to resolve disputes arising under Navy con-
tracts. The Navy has expressed a preference for utilizing admin-
istrative judges from the Armed Services Board of Contract Appeals
("ASBCA") to serve as neutral advisors. The ASBCA is one of the
forums designated by the Contract Disputes Act of 1978^-^ to
conduct hearings and render decisions on disputes arising under
government contracts. However, in its first minitrial of a
contract dispute, the Navy utilized the services of the same
university professor of government contracting who had earlier
been employed by the Corps of Engineers as a neutral advisor.

d. Department of Energy

The Energy Department has conducted a minitrial on a contract
claim in which the neutral advisor was a former ASBCA judge who
was practicing government contracts law with a private firm.i-^

Copy of this Policy is reproduced as Appendix B to this
Report.

Commercial Litigation Branch Policy Concerning the Use of
Mini-trials (June 19, 1986) at 1.

Id. at 3.

41 U.S.C. S 601 et seq.

It is also possible to conduct a minitrial without utilizing
a neutral advisor at all. This was done to resolve a con-
tract dispute between the National Aeronautics and Space
Administration and TRW Inc. See "Minitrial Successfully
Resolves NASA-TRW Dispute," The Legal Times (September 6,
1982), p. 19.

872 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

2. Negotiated Rulemakings

Neutrals for "reg neg" procedures have come from several
sources. In some cases, agencies have tapped the private sector
for convenors and facilitators. In other cases, government per-
sonnel, including an FMCS mediator and a staff attorney for the
rulemaking agency, have performed these functions.

a. Department of Interior

In January 1986, the Department of Interior issued a Request
for Proposals for convening and facilitation services for negoti-
ated rulemaking on air quality regulations for the California
Outer Continental Shelf ("OCS"). The evaluation factors for this
award are detailed, and include specific ability and achievement
as a facilitator, knowledge of the Outer Continental Shelf Oil and
Gas Program and the Outer Continental Shelf Lands Act, understand-
ing of the needs of the Department of Interior and other parties
to the rulemaking, general dispute resolution skills, and "prac-
tical knowledge of the convening/facilitating process. "^--^

b. Council on Environmental Quality

In April 1986, the Executive Office of the President, on
behalf of the Council on Environmental Quality ("CEQ"), issued a
Request for Proposals ("RFP") for an indefinite quantity contract
to supply various types of services in connection with negotiated
rulemaking, including convening, facilitating, documenting,
resource support, analytic support, and training. The RFP speci-
fied that the overall purpose of the contract is "to assist EPA,
CEQ, and other participating agencies with joint projects in the
area of regulatory negotiations."^-^ In setting forth evaluation
criteria for award, the solicitation states that technical propo-
sals will be evaluated in part according to "the availability of
an appropriate disciplinary mix of environmental scientists and
technicians to accomplish tasks required under the scope of
work."-^^

One of the successful offerors in the CEQ procurement, the
Conservation Foundation, proposed a team approach in which each
regulatory negotiation would be staffed by a "senior dispute
resolution professional" and appropriate technical personnel

Solicitation No. 3292, January 4, 1986, S M-2. Section M of
the Solicitation, "Evaluation Factors for Award," is repro-
duced as Appendix C to this Report.

Solicitation No. EOPOA-86-05, April 10, 1986, S C.2, p. 13.

Id. S M.l. Section M of the Solicitation, "Evaluation
Factors for Award," is reproduced as Appendix D to this
Report.

ADR "NEUTRALS" 873

selected in consultation with the agency. ^-^ The Foundation's
proposal provided the following rationale for combining mediation
and technical expertise:

It is hard to imagine an environmental media-
tor being effective unless he or she has some
expertise in the substance and the history of
the issues at hand and, therefore, some under-
standing of the implications that various
"process" choices have on the parties, e.g. in
helping the affected interests decide how best
to represent themselves, how to define the
scope of issues to be negotiated, or what
protocols to adopt. The stability both of the
process and of a consensus agreement, if
reached, is increased when the parties make
these decisions in a well informed way.-^-^-^

During negotiations leading up to contract award, the agen-
cies (CEQ and EPA) took the position that inclusion of technical
personnel on the regulatory negotiation team would not be accept-
able. The rationale for the agencies' position was that while
dispute resolution process skills are critical to the success of a
negotiated rulemaking, technical expertise is not only unnecessary
but, in some cases, counterproductive. Officials in charge of
EPA's negotiated rulemaking project believe that if the negoti-
ating group feels that it needs the assistance of a technical
expert, the group itself should select that expert.

3 . Summary

From the foregoing, it appears that during the experimental
stages of ADR and negotiated rulemaking, agencies have sometimes
opted for rather restrictive definitions of the qualifications
required for neutrals. In some of the early regulatory negoti-
ations, agencies have sought neutrals with a combination of skills
that only very few individuals possess, including specific expe-
rience in facilitation of negotiated rulemakings and technical
expertise in the subject matter of the rulemaking proceeding. In
some cases, organizations have been able to respond to these
demanding requirements through a "team approach," in which the
skills of dispute resolution personnel and technical experts are
combined. The agency that has the most experience in regulatory
negotiation, the EPA, has consciously eschewed technical expertise
as a criterion for selection of neutrals and has emphasized
generic dispute resolution skills as the controlling factor.

Conservation Foundation, Technical Proposal EOPOA-86-05 --
Regulatory Negotiation Support Services, May 28, 1986, p. 7.

Id.

874 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

In the case of the Corps of Engineers minitrial program, the
Corps has consciously selected neutral advisors who are both
"truly neutral" and expert in government contracts law applicable
to the disputes. One goal of this approach is to isolate the
minitrial process from political criticism at the early stages of
its development. As the program progresses and the use of mini-
trials becomes more routine, the qualifications may be loosened,
thus broadening the pool of available neutrals.

C. Qualifications Required by Government Dispute
Resolution Agencies

1 . Federal Mediation and Conciliation Service

The basic statutory charter of FMCS is set forth in Section
203 of the Labor-Management Relations Act of 1947:

It shall be the duty of the Service, in order
to prevent or minimize interruptions of the
free flow of commerce growing out of labor
disputes, to assist parties to labor disputes
in industries affecting commerce to settle
such disputes through conciliation and medi-
ation.-^-^

FMCS employs approximately 240 mediators, stationed at 75
separate locations. The basic qualification for employment as an
FMCS mediator is seven years experience in collective bargaining
and/or labor-management relations. FMCS operates an intensive in-
house training program for its mediators.

2 . Community Relations Service

The function of the Community Relations Service ("CRS") is:

To provide assistance to communities and per-
sons therein in resolving disputes, disagree-
ments, or difficulties relating to discrimina-
tory practices based on race, color, or
national origin which impair the rights of
persons in such communities under the Consti-
tution or laws of the United States or which
affect or may affect interstate commerce .^-^^

^^ 29 U.S.C. S 173. Under the Health Care Amendments of 1974,
FMCS is authorized to provide conciliation services to avert
or minimize work stoppages in the health care industry.
29 U.S.C. S 183.

^^ 42 U.S.C. S 2000g-l.

ADR "NEUTRALS" 875

CRS employs a total of 60 to 70 "conciliators" in its ten
regional offices. There are no specified qualifications for
entry-level conciliators, and most of the training is on-the-job.

D. Rosters Maintained By Private Organizations

1. American Arbitration Association ("AAA")

The AAA maintains panels from which arbitrators may be chosen
by parties who have agreed to arbitrate a dispute or disputes.
The AAA has established separate panels of arbitrators for use in
various types of commercial disputes. For example, for disputes
arising under construction contracts, the AAA maintains a Con-
struction Industry Panel. Members of the Construction Industry
Panel are persons recommended by the National Construction
Industry Arbitration Committee as "qualified to serve by virtue of
their experience in the construction field. "^-^

Federal agencies have from time to time used the AAA as a
resource in establishing arbitration programs. For example, under
the terms of the Superfund Statute, disputes arising out of claims
against the fund are resolved by a Board of Arbitrators appointed
by the President .^-^ The Act provides that each member of the
Board "shall be selected through utilization of the procedures of
the American Arbitration Association."-^-^

The Federal Insecticide, Fungicide, and Rodenticide Act
("FIFRA") authorizes the Environmental Protection Agency to use
research data submitted by one manufacturer to register pesticides
submitted by another manufacturer. The Act further provides that
a manufacturer who depends upon data submitted by another firm to
obtain registration must compensate that other firm, and that any
disputes over the amount of compensation will be resolved through
binding arbitration under the auspices of FMCS.-^-^^ The statute
requires that FMCS appoint an arbitrator from a roster of arbi-
trators maintained by the Service, and that the procedures and
rules of the Service shall be applicable. In turn, FMCS regu-
lations have adopted the roster of arbitrators maintained by the
AAA to resolve FIFRA compensation disputes and have designated
that the AAA rules and procedures shall be used.^-^ The Supreme

-^-A/ American Arbitration Association, Construction Industry
Arbitration Rules (January 1, 1986) at 3.

^-^ Comprehensive Environmental Response, Compensation and Lia-
bility Act of 1980, 42 U.S.C. S 9612(4)(A).

i-i/ Id.

i^ FIFRA, S 3(c)(l)(D)(ii), 7 U.S.C. S 136a(C) ( 1) (D) ( i i ) .

^-^ 29 C.F.R. S 1440.1.

876 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Court upheld the FIFRA arbitration provision against consti-
tutional challenge in Thomas v. Union Carbide Agricultural
Products Co.^-^

2. Center for Public Resources ("CPR")

CPR is a private non-profit organization that is devoted to
promoting the use of ADR to resolve commercial disputes, as well
as disputes between private parties and the government. In
furtherance of this purpose, CPR maintains a list of distinguished
persons who are available to serve as mediators, arbitrators, or
neutral advisors in resolving disputes through ADR. The CPR
roster is a blue ribbon group consisting largely of retired
federal judges, former cabinet officers, and other dignitaries.

E. Conclusion

Because the substantive and procedural aspects of ADR vary
significantly from case to case, it would be virtually impossible
to develop a generalized set of qualifications applicable to all
dispute resolution proceedings. Rather, agencies will need to
take a practical approach to the selection of neutrals, balancing
the demands of the specific ADR proceeding against the long-range
need to develop a broader base of experienced neutrals from which
to draw. While the diversity of proceedings makes specific advice
hazardous, certain general guidelines can be gleaned from agency
experience to date:

(1) Generic dispute resolution skills are an important
prerequisite in most cases; insistence upon specific
experience in the ADR process being pursued, however,
many unnecessarily exclude persons whose general
mediation skills are transferable to other contexts.

(2) Familiarity with the applicable statutory and regulatory
scheme is generally desirable, particularly in nego-
tiated rulemaking.

(3) Technical expertise should be required only when the
substantive issues are so complex that the neutral could
not effectively understand and communicate the parties'
positions without in-depth technical knowledge.

(4) Avoiding conflicts of interest is important, but requir-
ing "absolute neutrality" may unduly restrict the field
of potential neutrals to retired judges or university
professors.

U.S. , 105 S.Ct. 3325 (1985)

ADR "NEUTRALS" 877

III.

PROCUREMENT ISSUES

A. The Federal Acquisition System

In some circumstances, it may be possible for agencies to
retain neutrals as experts, consultants, or special employees. ^-^
In most cases, however, neutrals' services must be acquired
through contracting with the private individual or organization.

Federal procurement of goods and services is a highly regu-
lated form of contracting. The principal statutes are the Armed
Services Procurement Act,^-^ which governs military procurements,
and the Federal Property and Administrative Services Act of
1949^X17 vhich governs procurements by civilian agencies. These
statutes have undergone substantial revision in recent years,
principally by the Competition in Contracting Act of 1984
( "CICA" ) .^-^^ CICA mandates that as a general rule, federal agen-
cies conducting a procurement for property or services "shall
obtain full and open competition through the use of competitive
procedures . . . ,"±±y Prior to CICA, the Armed Services
Procurement Act and Federal Property and Administrative Services
Act expressed a preference for formally advertised procurements,
in which competitors submit sealed bids and the lowest "responsive
and responsible" bidder wins the contract. The prior statutes
provided that agencies could negotiate a contract rather than
engage in formal advertising if one of 17 exceptions were present;
one of those exceptions was contracts for "personal or pro-
fessional services. "^-^

See discussion in Section III.D.4., infra .

10 U.S.C. S 2201 et seq (1982), as amended by Pub. L. No.
98-369, Title VII, 98 Stat. 1175.

41 U.S.C. § 251 et seg (1982), as amended by Pub. L. No.
98-369, Title VII, 98 Stat. 1175.

Pub. L. No. 98-369, Title VII, 98 Stat. 1175. Other major
procurement reform statutes of recent vintage include the
Small Business and Federal Procurement Competition Enhance-
ment Act of 1984, Pub. L. No. 98-577, and the Defense
Procurement Reform Act of 1984, Pub. L. No. 98-525.

Id., S 303(a)(1).

Armed Services Procurement Act, 10 U.S.C. S 2304(a)(4)
(1982).

878 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

GIGA mandates full and open competition in any form, whether
it be by formal advertising or negot iat ion.-2-4^ The Act further
provides that agencies may use procedures other than competition
only when one of seven specific exceptions exists. These excep-
tions include situations when "the property or services needed by
the executive agencies are available from only one responsible
source and no other type of property or services will satisfy the
needs of the executive agency . . ."or "the executive agency's
need for the property or services is of such an unusual and
compelling urgency that the government would be seriously injured
unless the executive agency is permitted to limit the number of
sources from which it solicits bids or proposals . . . . "-ljv
Procurements under one of the seven exceptions to competition are
referred to as "sole source." GIGA eliminated the former excep-
tion for procurements of personal and professional services.

Under the Office of Federal Procurement Policy Act,^-^ both
military and civilian agency procurements are governed by a
unified regulatory system, the Federal Acquisition Regulation
(FAR").-i-2^ The FAR sets forth detailed procedures for conducting
federal agency procurements. For procurements over $10,000,
agencies generally must publish a synopsis of the proposed
procurement in the Commerce Business Daily ("GBD") at least 15

J-^ GIGA now refers to formal advertising as "sealed bids."
Under the statute, sealed bids are appropriate in the
following circumstances:

(i) time permits the solicitation, submission, and
evaluation of sealed bids;

(ii) the award will be made on the basis of price and
other factors;

(iii) it is not necessary to conduct discussions with
the responding sources about their bids; and

(iv) there is a reasonable expectation of receiving more
than one sealed bid.

41 U.S.G. S 253(a)(2)(A); 10 U.S.G. S 2304(a)(2)(A). See
also, 48 C.F.R. S 6.401(a) (l)-(4).

J^ Id., S 303(c)(1) & (2).

J-«^ 41 U.S.G. S 405(a).

-J-*^ 48 C.F.R. , Chapter 1, Parts 1-53. Each agency has promul-
gated supplements to the FAR to deal with that agency's
unique acquisition problems. See, e.g. , DOD FAR Supplement,
48 C.F.R. Chapter 2.

ADR "NEUTRALS" 879

days in advance of issuing the sol ici tat ion.-*-^^ After the CBD
synopsis, agencies must allow at least 30 days response time for
receipt of bids or proposal s.-*-i^ The agency's evaluations of bids
or proposals usually takes a minimum of 30 days, although no
minimum time is specified in the regulation. Thus, a competitive
procurement under the procedures specified by FAR can be expected
to take a minimum of two to three months.

The FAR also specifies procedures for sole source procure-
ments -- that is, non-competitive procurements conducted under one
of the seven exceptions established by CICA. In order to conduct
a sole source procurement, the agency's contracting officer must
provide a written justification for negotiating with only one
source and must obtain the approval of his superiors in the pro-
curement chain, at an increasingly nigher level depending upon the
size of the procurement.-^-^ The justification must contain, among
other things, an identification of the statutory authority for
proceeding on a basis other than full and open competition; a
demonstration that "the proposed contractor's unique qualifi-
cations or the nature of the acquisition requires use of the
authority cited;" a description of efforts made to ensure soli-
citation of offers "from as many potential sources as practic-
able;" and a determination that the anticipated cost of the
government will be "fair and reasonable. "^^-^ In addition, the
contracting officer must conduct a "market survey" to determine
whether other qualified sources capable of satisfying the
government's requirement exists. -^-^ The written justification for
a sole source procurement is public information that is available
for inspection by disappointed bidders, among others. ^^^^

The competitive requirements of CICA are enforceable through
a number of different actions available to disappointed bidders or

48 C.F.R. S 5.201(a) and S 5.203(a). The requirement for a
CBD synopsis is imposed by the Small Business Act, 15 U.S.C.
S 637(c) and the Office of Federal Procurement Policy Act,
41 U.S.C. S 416. The Continuing Resolution for Appropria-
tions FY1987 contains an exemption for solicitations between
$10,000 and $25,000 when the agency reasonably expects to
receive at least two offers from responsive and responsible
offerors. Pub. L. No. 99-500, October 18, 1986, Title IX,
Section 9'22.

48 C.F.R. S 5.204(b) .

48 C.F.R. SS 6.303-2, 6.304.

48 C.F.R. S 6.303-2(a) .

48 C.F.R. SS 6.303-2(a)(8), 7.101.

48 C.F.R. S 6.305(1).

880

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

offerors. An interested party who al
curement statute or regulation may fi
troller General.-*-^ When such a prot
suspend award or performance of the c
been decided, unless the head of the
performance is warranted because of
cumstances. "-*-^ For procurements of
equipment, such protests, with simila
be filed with the General Services Bo
In addition, under the Federal Court
disappointed bidders or offerors may
contract allegedly tainted by illegal
U.S. Claims Court. -^-^ Traditionally,
also entertained suits to enjoin the
federal contracts when the agency all
to promote full and open competition.

leges a violation of a pro-
le a protest with the Comp-
est is filed, the agency must
ontract until the protest has
agency finds that award or
urgent and compelling cir-
automatic data processing
r suspension provisions, may
ard of Contract Appeals. -^-^
Improvements Act of 1982,
seek to enjoin award of a
action by filing suit in the
federal district courts have
award or performance of
egedly violated its mandate

B. Issues in Contracting for Neutrals' Services

The overriding requirement of free and open competition,
together with the detailed acquisition procedures prescribed by
the FAR, raise a number of issues when agencies seek to acquire
the services of neutrals. The first and most obvious issue is
time. For any procurement over $10,000, a notice of the solici-
tation must be placed in the CBD, the agency must wait 15 days
before issuing the solicitation, and 30 days must pass before bids
or offers can be received. When the time for evaluating proposals
is added, the process consumes a minimum of two to three months.
Practically speaking, most fully competitive negotiated procure-
ments take several months. In the case of the competitive pro-
curement for convening and facilitating services conducted by the
Department of Interior in connection with the California Outer
Continental Shelf rulemaking, the entire procurement process, from
development of the terms of the solicitation through the award of
the contract, took over a year.

The protracted nature of the standard procurement process is
often inconsistent with the goals of ADR and negotiated

31 U.S.C. S 3552.
31 U.S.C. S 3553.

40 U.S.C. S 759(h) .

28 U.S.C. S 1491(a)(3).

See, Control Data Corporation v. Baldrige, 655 F.2d 283 (D.C,
Cir.), cert, denied, 454 U.S. 881 (1981); Merriam v. Kunzig,
476 F.2d 1233 (3rd Cir.), cert, denied, 414 U.S. 911 (1973);
Scanwell Laboratories, Inc. v. Shaffer, 424 F.2d 859 (D.C.
Cir. 1970).

ADR "NEUTRALS" 881

rulemaking. The very purpose of ADR is to avoid the delays
inherent in the normal litigation process. Introducing several
months of delay while the services of a neutral are procured could
be viewed as self-defeating. Similarly, a lengthy acquisition
process for the convenor or facilitator may be unacceptable when
an agency is seeking to expedite the development of rules affect-
ing the environment or health and safety.

A second problem is that, as discussed above, the requirement
of "full and open competition" may be inconsistent with the
agency's need to acquire the services of a neutral who meets a
number of specific criteria. Particularly at the formative stages
of ADR and negotiated rulemaking, there are only a handful of
individuals and organizations that have the combination of speci-
fic experience in the procedure plus technical expertise in the
substantive issues. To the extent such qualities are important to
successful resolution of the issue, the field of available
neutrals may be very limited, until further experience results a
development of a broader base. In the case of neutral advisors
for minitrials, the fact that the neutral is generally selected by
agreement between the private party and the government may mean
that there is only one "qualified source." Yet the market sur-
veys, sole source determinations, and gamut of agency approvals
required by Parts 6 and 7 of the FAR may make it difficult for an
agency to proceed on a sole source basis in a timely fashion. -^-^

A third issue arises with respect to the consideration of
price in the evaluation of proposals. CICA mandates that the con-
tract will be awarded to the "responsible source whose proposal
was most advantageous to the United States, considering only price
and the other factors included in the solicitation."-^-^ One of
the principal purposes of full and open competition is to obtain
the lowest available price for the federal government .-^-^ The
requirement of some form of price competition may be inconsistent
with the need to obtain the services of neutrals who have the
requisite experience and reputation, as well as the neutrality, to
gain the confidence of the parties and bring delicate negotiations

-5^-/ In addition, the Comptroller General has stated that sole

source procurements under CICA will be closely scrutinized.
Daniel H. Wagner Associates, Inc., B-220633, 86-1 CPD II 166
(Feb. 18, 1986); WSI Corp., B-220025, 85-2 CPD II 626 (Dec. 4,
1985).

-5^ Pub. L. No. 98-369, S 2711(d)(4), 41 U.S.C. S 253 (b) (d) (4 ) .

-5^^ See Control Data Corporation v. Baldrige, supra note 50,
655 F.2d at 295.

882 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

to a satisfactory conclusion. -5-^ The FAR is at least of some help
in this regard because it recognizes that price competition may
not be appropriate in certain circumstances, including
acquisitions of "professional services":

While the lowest price or lowest total
cost to the Government is properly the decid-
ing factor in many source selections, in cer-
tain acquisitions the Government may select
the source whose proposal offers the greatest
value to the Government in terms of perform-
ance and other factors. This may be the case,
for example, in the acquisition of research
and development or professional services, or
when cost-reimbursement contracting is anti-
cipated .-^-^

Finally, some of those contacted in connection with this
study expressed concern that the services of neutrals could be
considered "personal services." As a general rule, the government
must secure personal services through employment rather than
contract. Agencies are not permitted to award personal services
contracts in the absence of specific statutory author izat ion .-^-^
These restrictions do not appear to be a significant concern under
the regulatory definition of "non-personal services contract":

[A] contract in which the personnel rendering
services are not subject, either by the con-
tract's terms or by the manner of its admini-
stration, to the supervision and control
usually prevailing in relationships between
the Government and its employees. -^^^

-^-^ Acquisition of the services of neutrals is at least roughly

parallel to procurement of architect/engineer services, which
is governed by the Brooks Act. 40 U.S.C. SS 541-44. The
Brooks Act provides that "the agency head shall negotiate a'
contract with the highest quali f ied firm for architectural
and engineering services at compensation which the agency
head determines is fair and reasonable to the Government."
40 U.S.C. S 544(a) (emphasis added).

-5-^ 48 C.F.R. S 15.605(c) .

-5-^ 48 C.F.R. S 37.104(a), (b) .

-5-^ 48 C.F.R. S 37.101.

ADR "NEUTRALS" 883

Since neutrals by definition act independently and are subject to
no one's supervision, their services can generally be regarded as
"non-personal . "-5-§v

C. Case Studies

1. Corps of Engineers Minitrials

The minitrial has several distinctive features that dictate
the procurement procedures to be followed. First, a minitrial is
by definition an extremely abbreviated hearing before senior
executives of the two parties and the neutral advisor, if one is
employed. Under the Corps' model minitrial agreement, the pro-
ceeding is scheduled to last two days, with a limited period for
negotiating a settlement thereafter. -^-^ Second, the government
and the private party to the dispute generally share the cost of
the neutral advisor's services. -^-^ Third, the agency and the
private party must agree on the selection of the neutral.

Given the first two factors (the abbreviated nature of the
minitrial and equal sharing of costs by the private parties),
acquisition of the services of the neutral advisor should seldom
if ever cost the government more than $10,000, at least at current
prices. This means that some of the formalities of the procure-
ment process can be dispensed with. Procurements under $10,000
need not be advertised in the CBD.-^-^ In addition, the low-dollar
amount of neutral advisor acquisitions means that agencies can
avail themselves of the small purchase procedures (under $25,000)
of FAR Part 13.1. These procedures allow the agencies to procure
on a more informal basis, such as soliciting quotations orally
rather than through a formal request for proposals. The Corps
used the small purchase procedures, without a CBD announcement, in

-^-^ See 61 Comp. Gen. 69, 72-74 (1981) (agency authorized to
contract for legal services because law firm acted as an
independent contractor and was not subject to agency super-
vision) .

-§-^ Engineer Circular No. 27-1-3 at A-8. The first Corps mini-
trial required two days of hearings while the second lasted
approximately three days. See Army Engineers Succeed in
First Minitrial, Alternatives to the High Cost of Litigation,
Center for Public Resources, vol. 3, no. 3 at 1 (March 1985);
Ruttinger, Army Corps of Engineers Settles $45 Million Claim
at Minitrial, Alternatives to the High Cost of Litigation,
Center for Public Resources, vol. 3, no. 8 at 1 (August
1985).

^^ Engineer Circular No. 27-1-3 at A-4, II 6.

-6^ 48 C.F.R. S 5.201(a).

884 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

acquiring the services of neutral advisors for both of its prior
minitrials. The Department of the Navy used the same procedure in
retaining a neutral advisor for its minitrial of a cost allow-
ability dispute.

2. Department of Interior PCS Negotiated Rulemaking

As noted above, the Department of Interior used full competi-
tive procedures to acquire convening/facilitating services for
regulatory negotiation of environmental rules applicable to the
California OCS development. This involved the development and
issuance of a 62-page request for proposals, which detailed the
nature and scope of the services to be provided as well as the
evaluation factors for award. An announcement of the solicitation
was published in advance in the CBD. Seven firms submitted offers
on the solicitation, followed by detailed evaluation and negotia-
tions. Ultimately, a cost-reimbursement type contract was awarded
to the Mediation Institute of Seattle, Washington.

The evaluation factors for award in the solicitation focused
upon the experience and technical expertise of the offerors.
Points were assigned to each of the five separate categories,
comprising experience (30 points), understanding of the problem
(25 points), dispute resolution skills (25 points), technical
approach ( 10 points) , and personnel staffing (10 points). No
numerical weight was assigned to the cost proposal. The solici-
tation stated as follows:

In evaluating proposals for a cost reimburse-
ment type contract, estimated costs of con-
tract performance and proposed fees will not
be considered as controlling factors, since in
this type of contract advance estimates of
costs may not provide valid indicators of
final actual costs. There is no requirement
that cost reimbursement type contracts be
awarded on the basis of either (a) the lowest
proposed cost, (b) the lowest proposed fee, or
(c) the lowest total estimated cost plus
proposed fee.-^-^

The solicitation went on to state that the cost proposal was
required to reflect a "realistic and reasonable approach" to the
contract .

Solicitation No. 3292, S M-3, pp. 66-62. See 48 C.F.R.
S 15.605(d).

ADR "NEUTRALS" 885

3, CEQ Procurement of Regulatory Negotiating Services

a. Historical Background

EPA has been one of the most active agencies in promoting
regulatory negotiation. EPA has several "reg negs" in process and
has used the procedure to complete two sets of regulations: non-
conformance penalties under Section 206(g) of the Clean Air Act
and pesticide exemptions under Section 18 of the FIFRA.-^-^^ In the
case of the nonconformance penalties rulemaking, EPA employed the
services of ERM-McGlennon Associates as the convenor/facili-
tator.-^-^ In the second rulemaking, regarding pesticide exemp-
tions, ERM-McGlennon Associates was used as the convenor, but the
facilitator was an employee of EPA's Office of General Counsel.
In acquiring the services of the outside convenor/facilitator, EPA
utilized a basic ordering agreement, which is a form of
contracting described in FAR Subpart 16.7.

b. The CEQ Procurement

In April 1986, CEQ undertook to acquire convening, facilitat-
ing and related services for use by EPA in its ongoing regulatory
negotiation project, and by other agencies interested in launching
similar projects. CEQ did so pursuant to its statutory role as a
clearinghouse for hiring experts and consultants in furtherance of
environment policy.-^-^ The procurement was conducted by a
contracting officer for the Executive Office of the President
("EOP"). The EOP synopsized the solicitation in the CBD, and
received some 200 requests for the RFP. Ultimately, however, only
four organizations submitted offers.

The RFP solicited proposals on seven different categories of
convening, facilitating, and related services .-^-^ The RFP contem-
plated the award of one or more indefinite quantity contracts for
a one-year period, plus two option years. Under the terms of the
RFP, the agency could have awarded separate contracts for each of
the seven different types of services. In fact, one contract was
awarded for six categories of services to the Conservation Foun-
dation, a nonprofit environmental research organization, and a
separate contract for the seventh category was awarded to the

See Perritt, Analysis of Four Negotiated Rulemaking Efforts,
1985 Recommendations and Reports of the Administrative Con-
ference 637, 726-745.

Mr. McGlennon was an experienced environmental mediator and
former administrator of EPA Region 1.

42 U.S.C. S 4343.

These services included convening, facilitating, documenting,
resource support, analytic support, and training.

886 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

National Institute for Dispute Resolution ("NIDR"). While the RFP
described the regulatory negotiation project as arising out of the
program initiated by EPA, the terms of the RFP made clear that the
services being procured were for the purpose of assisting EPA, the
Office of Environmental Quality ("OEQ") and "other participating
agencies" with joint projects in regulatory negotiations.

c. The Request for Proposals

Under the terms of the RFP, offerors were to propose a roster
of professionals who would be available to perform the various
services called for under the contract. These categories included
"professional," defined as convenors, facilitators, analysts, and
trainers, and "administrative personnel," defined as documentors,
direct support staff, resource support staff, and management/
clerical positions. For each category and subcategory of person-
nel, the offeror was to propose a base period hourly rate, and
rates for the first and second options under the contract. The
offerors were also required to propose percentage ceiling rates
for such items as fringe benefits, overhead, general and admini-
strative expense, and profit/fee. As required by the regulations
governing indefinite quantity contract s,-^-^ the RFP specified a
minimum order quantity of $5,000 and maximum of $175,000.

The evaluation section of the RFP made it clear that each of
the seven discrete categories of services (i.e., convening, facil-
itating, document support, etc.) would be evaluated separately.
The EOP reserved the right to award separate contracts for each
category or more than one contract for a given category. The
evaluation factors were stated as follows:

The Technical proposals will be evaluated
according to the offeror's understanding of
the requirements of the Solicitation and the
availability of an appropriate disciplinary
mix of environmental scientists and techni-
cians to accomplish tasks required under the
scope of work .... The Technical Proposal
will also be rated as to the approach, metho-
dology, and accuracy of Work Plan for the
Benchmark Task Order.

The Cost Proposal will be evaluated according
to the relative costs set forth in the tables
prepared in accordance with Section B of the

-i^ 48 C.F.R. S16. 504(a)(1).

■fiJ^ Solicitation No. EOPOA-86-05, S M.l, p. 85.

ADR "NEUTRALS" 887

The RFP contained a "benchmark task order" describing a hypo-
thetical EPA negotiated rulemaking-^-^ Each offeror was required
to submit a work plan outlining the offeror's proposed approach,
staffing, management plan, and schedule for this hypothetical task
order.

Under the terms of the indefinite quantity contract, work is
commissioned on particular regulatory negotiations through the
issuance of task orders. The task order defines the scope of the
work required, the estimated period of performance, and the esti-
mated level of effort. -^-^ Within the time period specified in
each task order (expected to be a week or two), the contractor is
required to submit a proposed work plan outlining the contractor's
objectives, approach, statement of work, deliverables, staffing
arrangements, management plan, schedule, and cost/price assump-
tions.-^-^^ The contractor is also required to submit a separate
cost analysis providing a breakdown of costs and specifying the
type of contract desired, i.e., firm fixed-price, cost plus fixed-
fee, or labor hour. It is contemplated that the agency can
negotiate with the contractor regarding each aspect of the work
plan, including the personnel who are proposed. The RFP
specifically states that the government reserves the right "to
award the task orders in any order, or not to award."" '

7 2

In the eyes of the EOP, CEQ, and EPA, the principal advantage
to this indefinite quantity contract is its flexibility. Rather
than having to go through a fully competitive process for each and
every regulatory negotiation, the EOP conducted a competitive
procurement for the initial indefinite quantity contract. Under
the terms of the contract, task orders can be issued and nego-
tiated with the contractor for each separate rulemaking within a
matter of weeks, thus shortening the period required to engage the
services of a convenor or facilitator. By engaging groups like
the Conservation Federation and National Institute for Dispute
Resolution, CEQ, EPA, and other agencies have ready access to the
rosters of experienced professionals that those groups have
retained as employees or subcontractors.

6 9,

7 I.

The Benchmark Task Order is reproduced as Appendix E to this
Report.

Solicitation No. EOPOA-86-05, S H.9, p. 27.

The Benchmark Task Order in the RFP states that a firm fixed-
price order is anticipated.

Solicitation No. EOPOA-86-05, S H.9, p. 28. ^•;.

888

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Use of Government "Neutrals"

Another possibility for obtaining
utilize government personnel. This has
cases: the FAA negotiated rulemaking r
time for aircraft crews and the EPA's r
regarding pesticide exemptions. In the
from FMCS was employed as the convenor/
case, an employee from the EPA's Office
used. In addition, OSHA is now underta
rulemaking with the intent of using an

D. Evaluation of Techniques

1 . Full Competitive Procurement

services of neutrals is to
been done in at least two

egarding flight and duty

egulatory negotiation
former case, a mediator

facilitator; in the latter
of General Counsel was

king its second negotiated

FMCS mediator.^^-i^

The most
of a neutral
the Californi
petition for
posals. The
selected by s
making these
of the propos
an evaluated
ent in select
of cost rathe

straightforward approach to acquiring the services
is that utilized by the Department of Interior for
a OCS rulemaking. The agency conducted an open com-
the contract in which seven offerors submitted pro-
agency also ensured that a qualified source would be
pecifying detailed technical evaluation factors, and
technical factors the exclusive basis for evaluation
als. By obtaining cost proposals but not making cost
factor, the agency avoided potential problems inher-
ing a provider of professional services on the basis
r than professional experience or expertise.

However, the principal disadvantage of a fully competitive
procurement is the time and effort required, which in most cases
make full competition impractical for an individual dispute reso-
lution or regulatory negotiation. From start to finish, the
Interior Department procurement of convening and facilitating
services took over a year. The successful offeror submitted a
detailed, two-volume proposal that took months to prepare and was
estimated to cost several thousand dollars. Thus, while fully
competitive procurements are the most desirable and compliant with
statutory requirements, they may be impractical when time is of
the essence.

Small Purchases

Use of the small purchase procedures provided for in FAR
Subpart 13.1 should work for most procurements of neutral advisor
services, and possibly in the case of small arbitrations and regu-
latory negotiations. As noted, in virtually all cases, contracts
with minitrial neutral advisors should involve expenditure of

lAJ

In the past, agencies that have used FMCS mediators have

paid a pro rata share of the mediator's salary through an

inter-agency transfer of funds pursuant to the Economy Act,
31 U.S.C. S 1535.

ADR "NEUTRALS" 889

under $10,000 by the government. Thus, no announcement in the CBD
is required, and the streamlined procedures for small purchases
can be utilized. In its two successful minitrials, the Corps of
Engineers has contracted with the neutral advisor through a pur-
chase order issued based upon an oral quotation. In each case,
the purchase order was accompanied by a tripartite agreement among
the neutral advisor, the government, and the private party to the
dispute. -^-^

Even for small purchases, however, agencies are required to
obtain competition "to the maximum extent practicable."^-^ Soli-
citations may be limited to one source only "if the contracting
officer determines that only one source is reasonably avail-
able."-^-^ However, unlike the procedures specified in Parts 6 and
7 of the FAR for larger procurements, sole source purchases under
the small purchase procedures do not require a written deter-
mination by the contracting officer or approvals by senior pro-
curement officials. In the case of minitrial neutral advisors,
sole source procurements should be justified on the basis of the
need for prompt action to effect a settlement, the limitations on
the number of qualified sources, and the fact that the selection
of the neutral advisor must be approved in advance by the private
party to the dispute.

Similar factors may control the hiring of arbitrators and
mediators — i.e., joint selection and sharing of fees by the
agency and private party to the dispute. In arbitrations or
mediations of smaller disputes that take a few days to resolve,
the small purchase procedures should be available for acquisition
of the neutral's services.

3. Indefinite Quantity Contracts

As noted above, the indefinite quantity contract used by the
CEQ to procure convening and facilitating services for the EPA and
other agencies is a flexible procedure. Under the regulations,
this type of cor.tracting may be used when "the Government cannot
predetermine . . . the precise quantities of supplies and services
that will be required during the contract period . . . ,"J-L/ --

A redacte.d copy of the Agreement for Services of Neutral
Advisor utilized in one of the minitrials is reproduced in
Appendix F hereto.

48 C.F.R. S 13.106(b) (1).

Id.

48 C.F.R. S 16.504(b)(1). See generally Virden, Indefinite
Delivery Contracts, Government Contractor Briefing Papers
No. 78-2, Federal Publications (April 1978).

890 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

precisely the situation that may exist when an agency embarks upon
a regulatory negotiation project. Full and open competition, as
required by CICA and the procurement regulations, takes place in
response to the RFP for the indefinite quantity contract. Once
the contract has been awarded, acquisition of services for each
separate regulatory negotiation is done through the task order/
work plan procedure described above. The contractor can respond
to each task order much more quickly than if full competitive
procedures were required for each separate rulemaking.

Use of the indefinite quantity contract for this purpose
raises several issues. First, the regulations specify that such
contracts should be used only for "commercial or commercial-type
products. "^-5^ "Commercial product" is defined as something that
is "sold or traded to the general public in the course of normal
business operations at prices based on established catalog or
market prices . . . ^'^J-U a "commercial-type product" is a
commercial product that has been modified to meet some peculiar
requirement of the government. A case could presumably be made
that the mediation-type services provided by convenors and facil-
itators are also sold or traded in the commerical market. It is
less clear whether such services are sold "to the general public"
at "established catalog or market prices". Since the "commercial
product" restriction is not mandatory, however, it should not pose
an insuperable barrier to the use of indefinite quantity contracts
for ADR-related services.

Second, the regulations require that an indefinite quantity
contract specify a "minimum quantity" of the item to be procured,
and further that such minimum quantity must be more than a
"nominal" amount. -§-^ This is necessary to avoid an illusory
contract under which the government has no obligation to do
anything in return for the contractor's agreement to fill
orders. -^^^ In the regulatory negotiation and ADR context, it is
obviously difficult to specify a minimum quant i ty of services to
be procured. In a somewhat parallel context, the Court of Claims
upheld an indefinite quantity contract for various categories of

48 C.F.R. S 16.504(b).

48 C.F.R. S 11.001.

48 C.F.R. S 16.504(a)(2) .

See Mason v. United States, 615 F.2d 1343, 1346 n.5 (Ct. CI.
1980) , citing, Willard Sutherland & Co. v. United States, 262
U.S. 489, 493 (1923).

ADR "NEUTRALS" 891

construction work where the "minimum quantity" specified in the
contract was a payment of $5,000.-8^^

Third, the task order procedure specified in the RFP allows
the agency and the contractor to negotiate the terms of each
individual task order, including the personnel who will be
assigned to a particular project and, presumably, the cost of
those services. In the typical indefinite quantity contract for a
commercial product sold at a catalog price, the agency issues an
order for a given quantity and the contractor fills the order at
the price specified in the contract. That price was, of course,
established through competition for the initial contract. In the
case of the EOP/CEQ procurement of convening and facilitating
services, the mix of services, the personnel supplied to provide
the services, and even the cost of the services (within the ceil-
ings specified in the contract) are subject to negotiation for
each individual task order. Both the government and the con-
tractor have the right not to go forward with the particular task
order if the detailed terms of the order and work plan cannot be
agreed upon. This leaves the arrangement open to the criticism
that each task order is in fact a separate procurement that should
be conducted on a competitive basis, rather than through a de
facto "sole source" process under the indefinite quantity con-
tract.

A further problem in this regard may be that the service
providers in each case are subcontractors to the organization that
is performing the indefinite quantity contract. By allowing the
agency and the contractor to negotiate the identity of the "sub-
contractor" for each separate task order, the indefinite quantity
contract may in effect allow the agency to select a sole source
for each separate regulatory negotiation without complying with
the sole source justification procedures of the regulations.

These potential problems may be ameliorated by the fact that
the material terms of each work plan — including ceilings on cost
and rates, identity of the service providers, and general approach
and methodology — were defined in the proposals submitted in
response to the competitive RFP. So long as the parties adhere to
those terms in negotiating individual task orders, sole source
issues should be avoided.

In summary, the EOP/CEQ' s use of indefinite quantity con-
tracts is an imaginative application of an existing procurement

-S-2^ Mason V. United States, supra note 81. See also, Hemet

Valley Flying Service Co. v. United States, 7 CI. Ct. 512
(1985) (indefinite quantity contracts for flying services
upheld, although contract required no minimum purchase of
services, because contractor was paid a dollar amount to
maintain the availability of his aircraft for government
use) .

892

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

techique to the peculiar needs of the regulatory negotiation
setting.

4 . Other Potential Acquisition Techniques

a. Basic Ordering Agreements

Prior to the CEQ indefinite quantity contract, t
cured convening and facilitating services for its reg
negotiation project through basic ordering agreements
Subpart 16.7. A basic ordering agreement is not itse
tract, but rather an agreement specifying a product o
be procured, the contract clauses that will apply to
tracts, and other terms and conditions as negotiated
government and the contractor. The agreement contemp
orders can be issued during the term of the agreement
each such order will become a separate contract upon
the contractor. The basic ordering agreement is also
specify a method for pricing future orders.

he EPA pro-
ulatory

under FAR
If a con-
r service to
future con-
between the
lates that

and that
acceptance by

required to

The basic ordering agreement theoretically elimi
the formal steps required in competitively procuring
convenor/facilitator for each negotiated rulemaking,
into such an agreement with a mediation/facilitation
able to issue orders for services as each new regulat
tion arose. However, use of basic ordering agreement
attractive when recent revisions to the FAR required
issuing an order under a basic ordering agreement, a
agency must obtain competition in accordance with Par
FAR.-^^ This means that each order under a basic ord
agreement is, in effect, a separate competitive procu
subject to the same procedures and requirements as wo
a new contract. Thus, some of the gains in efficienc
achieved by using basic ordering agreements have been

b. Blanket Purchasing Agreements

Blanket purchasing agreements, which are not contracts, are
the equivalent of government charge accounts with qualified
sources of supply. -^-^ These are used for simplifying purchasing
when a wide variety of items in a broad class of goods is
generally purchased, but the exact items, quantities and delivery
requirements are not known in advance and can be expected to vary
widely, or where an agreement may avoid the necessity of writing a
large number of purchase orders. -^-^ Blanket purchasing agreements

nates some of
services of a

By entering
firm, EPA was
ory negotia-
s became less
that, before
federal
t 6 of the
er ing
rement

uld apply to
y previously

diminished.

^^ 48 C.F.R. S 16.703(d)(1).
A^ 48 C.F.R. S 13.201(a) .
^-^ 48 C.F.R. S 13.203-1.

ADR "NEUTRALS" 893

are small purchase procedures and cannot cumulatively exceed the
dollar limitations for small purchases ($25,000). Use of a
blanket purchase agreement does not justify sole source
purchases .-§-iy

Such agreements do not appear to be especially useful as
procedures for contracting with ADR neutrals. The dollar limi-
tations are too low for regulatory negotiation (but could pay for
individual arbitrators or minitrial neutrals), the services would
not be the sort of standard, frequently purchased item contem-
plated by the regulations, and such an agreement is not a contract
and could not be used to bind anyone to performance. Nor does the
existence of a blanket purchase order remove the requirements for
obtaining compet i t ion.-§-^

c. Supply Schedules

The federal supply schedule program-^-^^ provides agencies with
a simplified process for acquiring commonly used supplies and
services. Under a supply schedule, contractors agree to fill
relatively small individual orders from agencies at price dis-
counts normally available only with commercial volume purchases,
in return for a promise by the government that certain agencies
will obtain all of their requirements for the contract items by
purchasing from the schedule. While one of the main purposes of
the supply schedule program is to obtain this price advantage for
the government, a second purpose is to provide a mechanism by
which agencies can obtain goods and services for which there is a
recurrent need without struggling' through the rigors of the normal
procurement process. The supply schedule mechanism, or the
variant thereof, presents obvious possibilities for the acquisi-
tion of the services of mediators, facilitators, arbitrators, and
perhaps other ADR professionals.

A supply schedule is maintained by an administering agency.
Most existing schedules are managed by the General Services
Administration, but other agencies can be authorized to administer

^-^ 48 C.F.R. S 13.204.

^^ See 48 C.F.R. S 16.703(d).

-§-^ FAR Subpart 38.1 specifies the salient legal characteristics
of the contract device, and FAR Subpart 8.4 contains instruc-
tions for use by federal agencies in making purchases from a
supply schedule. 48 C.F.R. Parts 8.4, 38.1.

894 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

schedules. -fi-^ A supply schedule is often a multiple award-^-^^
contract in which all offerors who meet the criteria for inclusion
are placed on the schedule. Full competition is used to select
qualified suppliers through an ordinary contracting process that
may be by sealed bids or by proposals and negot iation,-2-L>' as
appropriate.

One or more "mandatory" agencies are designated by the
schedule administrator as being required to purchase all of their
requirements for the included goods or services from schedule
suppl iers.-2-^ The designated agencies need not engage in
competitive considerations, -2-^^ but may obtain their needs by
direct order from any schedule supplier. Exceptions to the
mandatory purchase requirements are available, but do not provide
much latitude to purchase non-schedule items. Urgent needs that
cannot be filled by allowing a schedule contractor to accelerate
the agreed-upon delivery terms can be obtained of f-schedule.-^-^
If a mandatory agency finds a schedule item available from a non-
schedule supplier at a lower price, then the agency can purchase
off-schedule -- but only after obtaining full compet it ion.-2-^

Non-mandatory agencies, while not required to purchase from
the schedule, have the option to do so at the specified schedule
prices. -5-^ A schedule contractor is not required to fill orders
from the non-mandatory agencies, but he is encouraged to do so.-^-^

-§-^ 48 C.F.R. S 38.101(e). The GSA must authorize another agency
to award a schedule contract.

-2-2V A single award schedule is also possible (48 C.F.R.

S 38.102-1), and, in fact, is the preferred mechanism
(48 C.F.R. S 8.403-1) .

-2-J^ Multiple award schedules are always negotiated. 48 C.F.R.
S 38.102-2(a).

-i^ 48 C.F.R. S 38.101(b) .

^-^ In fact, competitive procedures, such as soliciting bids from
schedule suppliers, is prohibited. 48 C.F.R. S 8.404(b).

-2-^ 48 C.F.R. S 8.404-l(a).

^^ 48 C.F.R. S 8.404-l(e).

^-^ 48 C.F.R. S 38.101(c) .

-2-ZV 48 C.F.R. S 8.404-2(b).

ADR "NEUTRALS" 895

If the contractor accepts an order from an optional agency, he
must comply with the pricing and delivery terms of the sched-
ule.^-^

Where more than one supplier qualifies under a multiple
award, then no supplier is entitled to make any sales under the
schedule, although the mandatory agencies are still bound to
obtain their requirements from schedule suppliers. This entitles
a schedule supplier to some relief in the event a mandatory agency
illegally purchases "off-schedule" (which may include acquiring
the schedule items from another government agency-2-^ ) .

In the context of ADR services, one salient feature of ordi-
nary supply schedules may require modification. Under current
rules, a qualifying offeror must agree to deliver services on the
same terms (in particular, volume pricing discount schedules) as
the offeror makes available to its best commercial customers.
This appears to have little meaning in the ADR services situation,
although a requirement that offerors quote rates equivalent to
their commercial rates, if any, may be appropriate. This par-
ticular feature reportedly has caused many desirable firms to
avoid supply schedule contracts, because of the possibility that
they would be required to sell at high-volume prices, whereas they
might have the opportunity to fill only low-volume orders. -L^-s^

d. Hiring Neutrals as Consultants, Experts,
or "Special" Government Employees

Several statutes authorize federal agencies to obtain the
services of consultants or experts, either by hiring them as
federal employees on a short-term or interim basis, or by con-
tracting for their services.^-^-^-^ The most important

-2-i^ Id.

-2-^ For example, the Department of Defense was held to have

breached a requirements contract by ordering items covered by

the contract from GSA. Inland Container v. United States,
206 Ct. CI. 478, 512 F.2d 1073 (1975).

±-3-3J See W. Goodrich & C. Mann, Avoid Disaster in Federal Supply
Schedule Contracts, 15 Pub. Cont. L.J. 1 (1984) for a review
of pitfalls facing supply schedule contractors.

J-9-!^ Examples: 5 U.S.C. § 575 (Administrative Conference); 7

U.S.C. S 1642 (Department of Agriculture, rate not to exceed
$50 per day); 21 U.S.C. S 1116 (Food and Drug Administration,
six persons may be so employed with no time limitations); 22
U.S.C. S 290(F) (Inter-American Foundation); 29 U.S.C. § 656
(Department of Labor, contracts may be renewed annually); 33
U.S.C. S 569A (Corps of Engineers); 40 U.S.C. S 758 (General
Services Administration); 49 U.S.C. S 1657(B) (Department of
Transportation, pay not to exceed $100 per day).

896 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

of these laws is 5 U.S.C. S 3109, which provides, in pertinent
part :

When authorized by an appropriation or other
statute, the head of an agency may procure by
contract the temporary (not in excess of one
year) or intermittent services of experts or
consultants or an organization thereof,
including stenographic reporting services.
Services procured under this section are with-
out regard to:

(1) the provisions of this title governing
appointment in the competitive service;

(2) chapter 51 [civil service classifications]
and subchapter iii of chapter 53 [pay] of this title;
and

(3) section 5 of title 41 [requirements for
advertising of contracts] ....

Section 3109 confers on those agencies that have the appro-
priate authorization in an organic or appropriation statute^-^-^^
the ability to employ consultants or experts without regard to
civil service competitive hiring restrictions. In the context of
ADR neutrals, experts are of most interest here as a consultant
serves primarily "as an advisor to an officer" but "neither per-
forms nor supervises performance of operating functions. "^-^-^^

Agencies can retain experts and consultants on a full-time
basis for only one year, although many of the authorizing statutes
allow for annual renewals. Experts and consultants can be hired
on an intermittent basis -- that is, from time to time, working up
to 130 days in a year -- for an indefinite period. ^-2-^ The pay is
set by the employing agency, and may be up to the rate of pay for
level V of the Executive Service. ^ ° ^^ No retirement benefits are
accorded, and, unless required by other statutes, no holidays or
overtime are provided for. Employees in this category are "per
diem" employees, even if their tour of duty is for one year.

-Lojy The Department of Defense Authorization, for example, have
been contained in the yearly DOD appropriations acts.

-^^-^ 23 Comp. Gen. 497 (1944); Federal Personnel Manual ("FPM")
304-1-2(1) .

-L^^ FPM 304-1-2(5) , (6) .

^-^-^ 5 U.S.C. S 3109. Other limitations may apply under statutes
that provide specific authorization. See note 101, supra.

ADR "NEUTRALS" 897

The employment of experts and consultants could be used by an
agency with an irregular need for ADR services. Professionals
could be brought on board in a short time, without the need for
either a full-blown procurement or a competitive civil service
placement. If a requirement for many services can be foreseen,
but their timing is liable to be sporadic, then the employees
could be hired on an intermittent basis, providing services from
time to time as necessary. ^-^-^

There are several potential impediments to hiring ADR neu-
trals as special government employees. These impediments may be
summarized as follows:

Conflicts of Interest. Employees hired under 5 U.S.C. S 3109
are subject to all statutory prohibitions on conflicts of inter-
est, including ethical standards, financial disclosure, and post-
employment restrictions on employment .^--^-^^ To the extent that an
expert or consultant becomes subject to conflict-of-interest
restrictions, his professional options after serving as a neutral
could be constrained. For example, a consultant employed by EPA
on an intermittent basis was excluded from bidding on an EPA
contract relating to her area of expertise because, at the time of
the contract bidding, she was still technically an employee of
EPA. This result was reached even though the consultant had not
actually accepted any work for the agency for a period of time
prior to bidding .^-^-^-^ In a recent case, the government was
enjoined from proceeding with a contract awarded to a bidder who
had been an employee of the government when he bid, but who
resigned prior to the award. ^ ° ^/

1-3-^ It is possible for a professional to maintain two or more
intermittent positions with different agencies. See 5
U.S.C. S 5703. The Federal Personnel Manual states that,
under an exception to the general restriction against being
paid for more than one position for more than 40 hours per
week, "an individual is entitled to pay for services on an
intermittent basis from more than one consultant or expert
position, provided the pay is not received for the same hours
of the same day." FPM 304-6-1.

^^-&^y FPM 304-1--9. Temporary or interim employees who serve

less than 130 days per year may qualify for treatment as
a "special government employee", and thereby will not be
subject to all of the prohibitions that apply to regular
employees. See FPM Chapter 735.

-^^-^ Matter of Enarco, Inc., B-218106, 85-1 CPD K 592 (May 23,
1985).

J-S-^ Speakman Co. v. Weinberger, (unpublished, D.D.C.), CCH

Government Contracts Reports H 74,539 (October 2, 1986).

898 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Pay Limitations. Compensation for experts and consultants
who are hired under Section 3109 is limited to the rate of pay for
level V of the Executive Service. The daily rate may therefore be
considerably less than a highly qualified neutral could command in
the commercial market. Moreover, specific authorizing statutes
for some agencies limit the compensation for temporary experts and
consultants to very low levels; for example, the rate of compen-
sation for Department of Agriculture experts is limited to $50 per
day.J-^-sy Thus, some qualified potential ADR neutrals may be
unwilling to offer their services to government agencies if their
compensation is limited to an arbitrarily low level.

Requirement to Follow Procurement Procedures. As noted
above, hiring a neutral through Section 3109 obviates competitive
civil service requirements. Section 3109 also exempts such
hirings from the requirements of 41 U.S.C. S 5, which requires
that all procurements of contracts for supplies or services in
excess of $10,000 be publically advertised. However, the
Comptroller General has held that this exemption

does not relieve an agency from the necessity
of satisfying all of the other applicable
requirements imposed by the Federal Property
and Administrative Services Act of 1949 . . .
and the Federal Procurement Regulations . . .
on Government contracts for goods or nonper-
sonal services. ^ ^ ^^

Thus, it is not at all clear that hiring ADR neutrals as special
government employees is any more efficient than utilizing procure-
ment techniques discussed above.

e. Innovations in Procedures

Contracting for services for multiple proceedings (especially
in the case of indefinite quantity contracts) can encounter pro-
cedural requirements in the Federal Acquisition Regulation that
simply do not conform to the needs of the agencies. Subpart 1.4

J^^*-ay 7 U.S.C. S 1642.

^^^-^-^ 61 Comp. Gen. 69, 78 (1981) (citations omitted).

ADR "NEUTRALS" 899

of FAR contains the kernel that may provide the solution to this
situat ion:^-i^^

Unless precluded by law, executive order,
or regulation, deviations from the FAR may be
granted as specified in this subpart when
necessary to meet the specified needs and
requirements of each agency. The development
and testing of new techiques and methods of
acquisition should not be stifled simply
because such action would require a FAR devi-
ation. The fact that deviation authority is
required should not, of itself, deter agencies
in their development and testing of new tech-
niques and acquisition methods . . . .^-^-^^

While statutory requirements cannot be waived, the FAR itself
points the way toward its own adjustment. Many specifications for
contract devices, such as supply schedules and indefinite quantity
contracts, were not established by statute, but rather developed

1 1. 2/

48 C.F.R. S 1.402.

-U-JV Revisions to the Federal Acquisition Regulations are prepared
and issued through the coordinated action of the Civilian
Agency Acquisition Council (composed of representatives of
the civilian executive departments and EPA, the Small Busi-
ness Administration, and the Veterans Administration) and the
Defense Acquisition Regulatory Council (representatives of
military departments, the Defense Logistics Agency, and
NASA). 48 C.F.R. S 1.201-1. Notice and comment rulemaking
is used when the revision is "significant". 48 C.F.R.
S 1.501.2.

Deviations from the FAR are permitted "when necessary to
meet the specific needs and requirements" of an agency, and
require authorization by specified agency officials. 48
C.F.R. S 1.402. Deviations for a single contracting action
require the agency head or a delegee to authorize the devia-
tion and- to furnish the FAR Secretariat with a copy of the
authorization. 48 C.F.R. S 1.403. Deviations for a class of
civilian contracting actions require that the appropriate
agency official first consult with the Civilian Agency Acqui-
sition Council. 48 C.F.R. S 1.404(a)(1). When an agency
perceives the need for a class deviation on a permanent
basis, the agency must submit a proposed FAR revision to the
FAR Secretariat for consideration by the pertinent FAR Coun-
cil(s). 48 C.F.R. S 1.404(a)(2). Deviations for defense
agencies and NASA are subject to slightly different require-
ments.

900

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

over the years largely through experience and adjudication; it is
these structural devices that are susceptible of modification.

Use of Government Neutrals

Using employees of the federal government as neutrals has
several advantages. First, assuming the immediate availability of
a qualified government neutral, the delays inherent in the pro-
curement process described above may be avoided. Second, using
government employees presumably spares the government the addi-
tional expense of paying outside neutrals .-*-^-*^ Third, to the
extent that the use of private parties as "neutrals" creates
constitutional issues under the "delegation doctrine" (See S IV
infra) , those issues are presumably avoided, or at least
substantially reduced, when government employees perform the
neutral function. Finally, there may be a long-term advantage to
the extent that as government employees become expert in acting as
neutral advisors, arbitrators, or convenors/facilitators, the
process of institutionalizing ADR and regulatory negotiation
within the government will be enhanced.

Potential limitations on the use of government employees as
neutrals are: f irst , private parties to disputes may not view
government employees as truly neutral; and second, the most
logical providers of neutral services, such as FMCS and CRS, may
be inhibited by their statutory charter^-*-^ and/or manpower
limitations from providing such services on a regular basis.

E. Long-Term Structural Issues

As discussed above, use of state-of-the-art ADR techniques
and regulatory negotiation by federal agencies is still in an

±±Ay However, an agency may be required to compensate the FMCS,

for example, for the services of one of its mediators through
an inter-agency transfer of funds. See 31 U.S.C. § 1535.
Some have argued that if one considers the fully allocated
cost of a government employee's time, including salary and
overhead, use of a government neutral may be more costly than
contracting with an outsider.

-!-i-^ FMCS is authorized to co
S 173) , while the CRS is
disputes relating to dis
color, or national origi
could in effect loan an
limited period to assist
See discussion in Sectio
statutory charters would
lishing an ongoing ADR n
agencies without specifi

nciliate labor disputes (29 U.S.C.

charged with mediating community
crimination on the basis of race,
n. As in the past, FMCS or CRS
employee to another agency for a

in an ADR or reg neg proceeding,
n III.C.4 above. But the agencies

probably prevent them from estab-
eutrals services for other federal
c congressional authorization.

ADR "NEUTRALS" 901

experimental or formative stage. The experience of agencies is
limited, and many agencies are sensitive to potential political
criticism of their use of newly developed negotiation techniques.

The dilemma created by these factors is that the growth of
these ADR techniques and regulatory negotiation may be limited by
the shortage of experienced neutrals in the private sector; if
agencies do not expand their use of such techniques, however, the
pool of experienced neutrals cannot expand.

Thus, agencies must respond to the long-term need to develop
a broader base of expertise upon which to draw for neutral ser-
vices. Expansion of the talent pool could occur through several
processes:

Less stringent criteria for selection. The Corps of Engi-
neers has conceded that it is more sensitive about the selection
of neutral advisors for its minitrials during the developmental
stage, when the process is potentially subject to greater scrutiny
by higher officials in the agency and/or Congress. As the program
gains acceptance over time and becomes more part of the Corps'
routine procedures, its visibility will be reduced. At that
point, the Corps believes it may loosen its criteria for selection
to broaden the base of available neutrals.

Training mechanisms. The proposal submitted by NIDR on the
EOP/CEQ regulatory negotiation procurement provided that each
negotiation would be staffed by at least two convening/facilitat-
ing professionals. One purpose of this staffing was to allow the
senior professional to train his colleague in the process, thus
giving the junior professional the experience needed to perform
convening or facilitating services for future regulatory negoti-
ations. While such a "team" approach may involve some short-term
costs, it may be beneficial in the long run in developing a
broader cadre of trained professionals available to the agencies.

Government neutrals. Both the FMCS and CRS were created in
response to a specific need for mediation services within the
government. By expanding the authority of FMCS, CRS, or other
agencies, or creating a new "neutrals" service organization within
the government, agencies' ability to expand their use of ADR and
regulatory negotiation techniques would be enhanced. ^-^-^

Government Roster of Neutrals. Another device for expanding
the availability of qualified neutrals would be to assign a single

-Li-^ The National Institute for Dispute Resolution has a program

for providing moderate grants to educational institutions and
state governments to establish dispute resolution programs.
Such "seed money" may be available to federal agencies that
are interested in establishing pilot programs or policy
guidelines for the use of ADR or regulatory negotiation.

902 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

agency, such as ACUS, to maintain a roster of qualified neutrals
from which other agencies could draw. Private individuals and
organizations who wished to be listed on the roster would submit
applications specifying educational background, experience, and
techical expertise, if any. The central agency could also collect
feedback on those neutrals who were actually employeed by agencies
for ADR or regulatory negotiation. The establishment and main-
tenance of such a roster could be patterned after the Roster of
Arbitrators maintained by FMCS for use in voluntary arbitrations
of disputes arising under labor collective bargaining
agreements .^^'' ^

IV. y^

DELEGATION ISSUES

A recurring issue with respect to federal government use of
ADR techniques is whether the functions performed by private
neutrals are unconstitutional under the "delegation" doctrine. ^ ^ ^/
"Delegation" actually encompasses a number of different consti-
tutional concepts, including violations of due process, delegation
of legislative power, and violation of the Appointments
Clause. -L-L^

i-L^ 29 C.F.R. Part 1404.

^ ^ ^/ See Memorandum for Stephen J. Markman, Assistant Attorney

General, Office of Legal Policy, "Administrative Conference
Recommendation on Federal Agencies' Use of Alternative
Dispute Resolution Techniques" (May 24, 1986).

^ ^ ^/ In addition, 0MB Circular A-76, Performance of Commercial

Act ivi t ies, August 16, 1983, prohibits award of any contract
"for the performance of an inherently governmental function."
The Circular defines "governmental function" as follows:

(1) The act of governing; i.e., the discre-
tionary exercise of Government authority. Examples
include criminal investigations, prosecutions and
other judicial functions; management of Government
programs requiring value judgments, as in direction
of the national defense; management and direction
of the Armed Services; activities performed exclu-
sively by military personnel who are subject to
deployment in a combat, combat support or combat
service support role; conduct of foreign relations;
selection of program priorities; direction of Fed-
eral employees; regulation of the use of space,
oceans, navigable rivers and other natural
resources; direction of intelligence and counter-
( Footnote continued)

ADR "NEUTRALS" 903

Due Process. In a line of cases dating back to the Depres-
sion era, the Supreme Court struck down legislative delegations of
public decisionmaking authority to private entities on the ground
that such delegations violated due process. ^-^-^ In each of these
cases, the principal due process objection was that the power to
regulate a group of private parties was delegated to a subgroup of
such parties who had an interest in the result of the regulation.
For example, in Carter v. Carter Coal Company-^--^-^^ the Court was
reviewing the Bituminous Coal Conservation Act of 1935. The Act
established a national bituminous coal commission and divided the
country into districts. Within each district, the majority of
producers and miners were authorized to fix maximum hours of labor
and minimum wages that were binding upon all producers and miners
within the district. The Supreme Court held that this was an
unconstitutional violation of due process, stating as follows:

The power conferred upon the majority is,
in effect, the power to regulate the affairs
of an unwilling minority. This is legislative
delegation in its most obnoxious form; for it
is not even delegation to an official or an
official body, presumptively disinterested,
but to private persons whose interests may be
and often are adverse to the interests of
others in the same business. ^ ^ ^^

Other infirmities in the private delegations found unconsti-
tutional by the due process line of cases are the lack of any
specified standards for decision by the private parties, and the
lack of any review by a government agency or court.

Delegation of legislative power. The principal case in this
line of authority is A.L.A. Schecter Poultry Corp. v. United
States. ^-^-^ Schecter struck down portions of the National
Recovery Act as unconstitutional delegations of legislative power.
In particular, Section 3 of the Act delegated to private parties
and the President the power to enact codes of fair competition

±-L-iy (continued)

intelligence operations; and regulation of industry
and commerce, including food and drugs.

^!-^-^ Carter v. Carter Coal Company, 298 U.S. 238 (1938); Seattle
Title Trust Co. v. Roberge, 226 U.S. 1 (1928); Eubank v.
City of Richmond, 226 U.S. 137 (1912).

-i^-^ 298 U.S. 238 (1935).

-^^^ id., 298 U.S. at 311.

i^^ 295 U.S. 495, 537 (1935).

904 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

that were enforceable by injunction and punishable as crimes. The
Court held that this "unfettered" delegation of legislative power
was an unconstitutional violation of the separation of powers
doctrine .

Appointments Clause. In this line of cases, the Court has
nullified delegations of decisionmaking authority to private
parties on the basis that official government functions cannot be
performed by persons who were not appointed by the President with
the advice and consent of the Senate pursuant to Article II, sec-
tion 2, clause 2 of the Constitution. In Buckley v. Valeo^-^-^ the
Court held certain provisions of the Federal Election Campaign Act
of 1971 to be unconstitutional on the basis that the majority of
the voting members of the Federal Election Commission were
appointed by the President pro tempore of the Senate and the
Speaker of the House. The Commission had authority to make rules
for carrying out the Act, to enforce the Act by bringing civil
actions against violators, and to temporarily disqualify federal
candidates for failing to file required reports. The Court held
that the delegation of such regulatory and enforcement functions
to persons not appointed by the President with the advice and
consent of the Senate violated the Appointments Clause.

Under these various lines of delegation cases, ^-^-^ consti-
tutional issues should not arise with respect to the various forms
of ADR that are totally nonbinding, such as minitrials and
mediation. In a minitrial, for example, the neutral advisor at
most presides at the hearing and acts as a mediator between the
principal negotiators. In no event does he render any kind of
decision that is binding on either the private party or the
government. The lack of any binding decisionmaking authority thus
insolates nonbinding ADR from constitutional criticism.

Similarly, there should be no constitutional issues with
respect to regulatory negotiation, as structured under the ACUS
recommendations. First, the convenor/facilitator is not a deci-
sionmaker, but rather a person who identifies the issues and the
interested parties, and attempts to mediate a negotiated reso-
lution among the parties. Second, under the ACUS recommendations,
the product of the regulatory negotiation is a proposed rule that
is not in any way binding upon the agency. ^-^-^ At the completion
of the regulatory negotiation, the proposed regulation must be

^^-^^ 424 U.S. 1 (1976) .

^-^-^ See (generally Liebmann, Delegation to Private Parties in
American Constitutional Law, 50 Ind. L.J. 650 ( 1975) .

-^^-^ See R. H. Johnson & Co. v. SEC, 198 F.2d 690 (2d Cir.),

cert, denied, 344 U.S. 855 (1952); United Black Fund, Inc.
v. Hampton, 352 F.Supp. 898 (D.D.C. 1972).

ADR "NEUTRALS" 905

published in the Federal Register and subjected to the notice-and-
comment rulemaking procedures of the Administrative Procedure
Act.J^^

The constitutional delegation issues arise principally with
respect to neutrals who have authority to issue decisions that are
binding upon the parties to a dispute. This is most likely to be
an issue in the case of arbitration. Again, however, if agencies
follow the details of the ACUS recommendation regarding ADR, con-
stitutional issues should be avoided, ^-^-^ Under the ACUS
recommendation, resort to arbitration is a voluntary decision of
the parties, unless mandated by a statute. Thus all parties
consent to the arbitration proceeding. In addition, the parties
have a role in the selection of the arbitrators, thus insuring
that they will be neutral and disinterested. The decision of the
arbitrator is subject to judicial review under the standards of
the U.S. Arbitration Act.^-^-^ Finally, the ACUS recommendation
provides that arbitration is appropriate only when the norms for
decision have been established by statute, precedent, or rule.-^-^-^

Thus, the potential due process objections to delegations of
decisionmaking authority to private parties should not apply to
voluntary arbitration, as structured by the ACUS recommendation.
The fact that the interested parties consent to the procedure as a
practical matter eliminates the potential for due process chal-
lenge. Moreover, the traditional due process objections (self-
interest of the decisionmaker, lack of decisional norms, and lack
of judicial review) are specifically addressed and resolved by the
ACUS recommendation.

Finally, any doubts regarding whether binding arbitration
complies with the due process clause are probably eliminated by
the Supreme Court's decision in Schweiker v. McClure.^-^-^ That
case involved review of provisions of the Social Security Act
establishing the Medicare program. The Act provided that any
disputes regarding Medicare claims would be subject to mandatory
arbitration by employees of private insurance carriers who had
been retained to administer the program. Implementing regulations
promulgated by the Department of Health and Human Services
required that these private "hearing officers" be attorneys or
other qualified individuals who (1) had the ability to conduct
formal hearings; (2) generally understood of medical matters and

i^-^ ACUS Recommendation 82-4, 1 C.F.R. S 305.82-4, 1111 13-14.

^^^-^ ACUS Recommendation 86-3, 1 C.F.R. S 305.86-3, II 4.

^^-^-^ 9 U.S.C. S 10.

i^-^ ACUS Recommendation 86-3, 1 C.F.R. S 305.86-3, II 5(a)(2).

-i-2^ 456 U.S. 188 (1982).

906 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

terminology; and (3) possessed a thorough knowledge of the
Medicare program, including the statute and regulations on which
it is based. J-J-^/

The Supreme Court held that this scheme complies with due
process. The Court stated that there was a presumption that the
hearing officers who decided Medicare claims were unbiased. Since
claims were ultimately paid by the federal government, and not
their private employers, the hearing officers had no personal or
financial interest in the outcome of the proceedings. In
addition, the requirement that hearing officers have pertinent
experience and familiarity with the Medicare program minimized the
risk of an erroneous decision and the probable value of additional
procedural safeguards. ^ ^ ^^ Under Schweiker , therefore, mandatory
arbitration schemes are constitutional under the Due Process
Clause, so long as the arbitrator are disinterested and possess
adequate qual i f icat ions .^-^-^

Nor should binding arbitration, as defined in the ACUS
recommendation, involve unconstitutional delegation of legislative
power or violation of the Appointments Clause. Recommendation
86-3 makes it clear that binding arbitration is inappropriate
where the norms for decision are not established by statute,
regulation, or precedent .^-^-^ Thus, arbitrators will in no event
be making policy decisions, but rather will be applying existing
decisional standards to the facts of a particular dispute.
Certainly, an arbitrator's award cannot be fairly analogized to
the codes of fair competition that were struck down in the
Schecter Poultry case; in that case, the codes established norms
for behavior by private parties that were enforceable through
injunctions or criminal actions. An arbitrator's award simply
resolves a fact-specific dispute between a private party and the
government, or among private parties.

J-^^ Id. , 456 U.S. at 199.

-tJ^^ Id,, 456 U.S. at 198-99. See also Thomas v. Union Carbide

Agricultural Products Co., U.S. , 105 S. Ct. 3325

(1985) (Upholding binding arbitration provisions of the
FIFRA) .

-LA±y A specific statutory mandate does not appear necessary for

the delegation of decisionmaking authority by an agency. See
Tabor v. Joint Board for the Enrollment of Actuaries,
566 F.2d 705, 708 (D.C. Cir. 1977).

-L-2^^ ACUS Recommendation 86-3, 1 C.F.R. S 305.86-3, 1 5(a)(2).

ADR "NEUTRALS" 907

Finally, arbitrators do not have the authority to promulgate
or enforce regulations, as did the Federal Electoral Commission in
Buckley v. Valeo.^--^-^ Thus, the Appointments Clause should not
stand in the way of agencies' employing arbitration under the ACUS
recommendat ion .

V.
CONCLUSIONS

The challenges facing federal agencies in expanding the use
of ADR and regulatory negotiations include developing and refining
procurement procedures that will streamline the process of hiring
outside neutrals, and developing a broader base from which to draw
in acquiring the services of private or government neutrals.
Meeting this challenge will require that agencies be flexible in
defining the qualifications required of outside neutrals, avoiding
rigid requirements of technical expertise or specific ADR expe-
rience unless such qualities are essential to the success of the
proceedings. Agencies would also benefit from efforts to pool
information about their experience with ADR neutrals, ideally with
the advice and assistance of agencies like ACUS and FMCS. Advan-
tage should be taken of opportunities to train government
personnel in ADR skills, and to utilize the expertise of existing
dispute resolution services within the government. Finally,
agencies should use existing procurement techniques in imaginative
ways, and seek to develop new techniques, so that the services of
qualified ADR neutrals can be acquired without the delays and
procedural hurdles inherent in the normal competitive procurement
process.

J-3-^ In the specific context of government contracts disputes, an
issue has been raised as to whether binding arbitration would
violate the requirements of the Contract Disputes Act of
1978, 41 U.S.C. S 601 et seg. (1982). That Act expressly
authorizes agency boards of contract appeals or the U.S.
Claims Court to hear and decide appeals arising out of dis-
putes between government contractors and federal agencies.
Arguably, the Contracts Disputes Act would pose a barrier to
the use of arbitration in government contracts disputes
unless the Act were specifically amended to permit
arbitration.

908

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Appendix A

DAEN-CCZ

Engineer Circular
No. 27-1-3

DEPARTMENT Oe THE ARMY
US Army Corps of Engineers
Washington, D.C. 20 314-lUOO

EC 27-1-3

23 September 1935

EXPIRES 30 SEPT^;MBER 1986
Legal Services
ALTERNATE DISPUTE RESOLUTION:

MINI-TRIALS

1. Purpose , This circular sets forth guidance for the use
of a mini-trial as an alternate dispute resolution procedure
in contract appeals. The mini-trial is an alternative to
litigation before the Engineer Board of Contract Appeals ( ENG
rfCA) and the Armed Services Board of Contract Appeals
(ASBCA). Guidance pertains to case selection and procedures.

2. Applicability. This circular applies to all HQUSACE/OCE
elements and all EOA processing contract appeals pending
before the ENG BCA or ASBCA.

3. Reference. EFARS Appendix N, "Contract Requests,
Contract Dispute Claims and Appeals."

4 . General .

a. Definition. A mini-trial is a voluntary, expedited,
and nonjudicial procedure whereby top management officials
for each party meet to resolve disputes.

b. Background. The mini-trial was developed as an
alternative to litigation because of the costs, delays and
disruptions associated with litigation. Although the term
mini-trial has been coined, it is not really a trial. It
is a technique used to bring top management officials
together voluntarily to resolve disputes in a short period of
time rather than relying upon a third party such as a judge
to decide the matter. The mini-trial consists of a blend of
selected characteristics from the adjudicative process with
arbitration, mediation and negotiation. This blend can be
structured to meet the particular needs of the parties.

ADR "NEUTRALS" 909

App. A

b;C 27-i-3
23 SEP 85

c. Characteristics.

(1) Top Management Involvement. Top management
officials for both parties are directly involved as
principals in making the decision to resolve the dispute.

(2) Time Period Limited. The time period for the
process is short. In most cases it should be completed

iwithin two to three months.

(3) Informal Hearing t-ormat. The hearing is informal
and in most instances should last only one to two days. Each
party has a representative make a presentation to the
principals .

(4) Discussions Non-bindmg. At the conclusion of the
hearing, the principals meet by themselves to discuss the
dispute. These discussions are non-binding and are kept
strictly confidential.

(5) Neutral Advisor Input. A neutral advisor may be
retained by the parties to assist in the mini-trial.

5, Case Selection.

a. Initial Ueterminat ion. Tne Division Engineer has the
authority to select a pending contract appeal for the
mini-trial process. This decision may be based upon the
requ-est of the appellant.

b. Procedures. Upon receipt of the contract appeal file
by the Division Engineer, it will be reviewed by appropriate
staff members, including the Division Counsel. v»hen a
mini-trial is recommended, the Division Counsel will prepare
a report to the Division Engineer setting forth the reasons
for the recommendation.

c. Time of Case Selection. The selection of a pending
appeal should be made after Division review has been
completed so that the facts and issues have been sufficiently
developed.

d. Types of Disputes. While most contract appeals are
suitable for mini-trials, appeals involving clear legal
precedent or having significant precedential value are not
appropriate.

910 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

App. A

EC 27-1-3
23 SKP 85

6. Initiation of Process.

a. Offer to Appellant. Once the decision has been made
that an appeal is appropriate for a mini-trial, the Division
Engineer will offer appellant the opportunity to participate
in the process. At that time, th» Division Counsel should
notify the government trial attorney and the Chief Trial
Attorney/ (DAEN-CCF) that a mini-trial is being offered to
appellant. Appellant will be advised that the procedure is
voluntary and will not prejudice its appeal before the
board. Ihe Division Engineer will explain the nature of the
mini-trial and set forth its basic characteristics and
participants. Appellant will also be advised that the
parties will have to enter into a written agreement governing
the mini-trial procedures.

b. Participants.

( 1 ) Principals .

(a) The Government's principal participant will be the
Division Engineer. However, in appropriate circumstances in
the discretion of the Division Engineer, the principal
participant may be the Deputy Division Engineer. The
authority of the Division Engineer to resolve the contract
claim shall be set forth in a warrant as the contracting
officer for purpose of the mini-trial. The request for a
warrant shall be submitted to HQUSACE (DAEN-PR) WASH DC
20314-1000.

(b) The contractor's principal should be a senior
management official who has authority to settle the appeal.
Further, if possible, the contractor's principal should not
have been previously involved with the preparation of the
claim or presentation of the appeal.

(2) Representatives. Each party will designate a
representative who will act as point of contact and make the
mini-trial presentation. The government trial attorney
should be the Government representative.

(3) Neutral Advisor. At the option of the parties, a
neutral advisor may be used to assist in the mini-trial. The
neutral advisor must be an impartial third party with
experience in government contracting and litigation.

ADR "NEUTRALS" 911

App. A

EC 27-1-3
23 SEP 85

The Chief Trial Attorney (DAEN-CCF) will maintain a list of
neutral advisors. The name of anyone not on the list may be
submitted by the Division Counsel for addition to the list.

(c). Mini-Trial Agreement. The Division Counsel, in
coordination with the Government trial attorney should
negotiate the mini-trial agreement with appellant. The
agreement will contain the procedures to be tollowed during
the course of the mini-trial. The agreement must contain
specific time limitations to assure that the mini-trial is
handled in an expeditious manner. The agreement should be
executed by the principals and representatives for both
parties. A sample agreement is at Appendix A. However, each
mini-trial agreement should be structured to meet the needs
of each situation.

(d) Contracting With the Neutral Advisor. The services
provided by the neutral advisor are non-personal in nature
and therefore the engagement of a neutral advisor may be
handled by entering into a non-personal services tripartite
contract in compliance with FAR, Part 37, Subpart 37,1. The
parties to this tripartite contract will be the Government,
the contractor, and the neutral advisor. The contract
should, at a minimum, cover the services to be furnished by
the neutral advisor; the time for performance of such
services (which shall include a "not to exceed" time for the
performance of such services); the total price for the
services of the neutral advisor with a breakdown of the price
to indicate the amount to be paid by the Government and the
amount to be paid by the contractor.

(e) Suspension of Board Proceedings. Upon the execution
of the mini-trial agreement, the government trial attorney
should file 'a motion to suspend proceedings before the Board
of Contract Appeals. Appellant shall be requested to make
this a joint motion. The motion should advise the Boar^l that
the suspension is for the purpose of conducting a mini-trial
and should state the time limitation for completing the
mini-trial .

7, Procedures .

a. General. The mini-trial process is flexible and as
such the procedures should reflect the needs of the parties
considering the time and costs involved.

912 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

App. A

EC 27-1-3
23 JEP 85

b. Time Considerations. Since the mini-trial must be
conducted in an expeditious manner the schedule set forth in
the mini-trial agreement must be strictly adhered to. The
agreement must expressly state the time limitations for
discovery, the mini-trial presentation and the
post-presentation discussions.

c. Discovery. All mini-trial discovery should be on the
record. The scope of discovery should be limited by the
parties in the agreement. This may include limiting the
number and length of both depositions and interrogatories.
Discovery should conclude at least two weeks prior to tne
mini-trial.

d. Pre .lini-Trial Concerence.

(1) Timing. At the conclusion of discovery the
representatives should confer with the neutral advisor, if
any, and arrange for the timely exchange of written
submi ttals .

(2) Written Submittals. The parties may use any type of
written submittal which will further the progress of the
mini-trial. A position paper, the format and length of which
should be specified in the mini-trial agreement, is
recommended. The parties should also agree to exchange
exhibits and witness lists. Appellant should submit a
quantum analysis which identifies the costs associatea with
issues that will arise during the mini-trial.

e. Mini-Trial.

(1) Location. The site for conducting a mini-trial
should be specified in the mini-trial agreement. The cost of
the site, if any, should be shared equally by both parties.

(2) Manner of Presentation. The allocation of time
during the mini-trial is at the discretion of the
parties. The hearing should not exceed two days. The
mini-trial agreement should specify the exact time for each
presentation and the type of presentation, whether direct or
rebuttal. The time limitations should be strictly adhered
to. Each representative shall have the discretion to
structure its presentation as desired. This may include the
examination of witnesses including expert witnesses, audio

ADR "NEUTRALS'

App

913

EC
23

27-1-3
SEP 85

visuaisr demonstrative evidence and oral argument. Any
testim.ony given snail be unsworn. t'urthermore , the recording
or verbatim transcription of testimony will not be
acceptable. The mini-trial agreement should indicate whether
the neutral advisor and opposing representatives or
pr inc ipals . wi 11 be permitted to examine witnesses. If
agreed, a time for such examination should be specified in
the agreement. Also, closing statements should be made since
post-hearing briefs are not submitted.

(3) Role of the Neutral Advisor. The neutral advisor
shall be present at the hearing and provide such services as
are specified in the mini-trial agreement, such as the
amplication of the agreement and providing an oral or written
opinion on the merits of the claim. The agreement shall
provide that the neutral advisor may not be called as a
witness in any subsequent litigation concerning the claim.
The cost of the neutral advisor shall be shared equally by
both parties.

f. Settlement Discussions. The principals should meet
immediately following the mini-trial to discuss resolution of
the claim. The meeting should be conducted privately, but.
the mini-trial agreement may provide for the principals to
consult with the neutral advisor. Also a principal may
consult with staff members. Any additional examination of
witnesses or argument by representatives shall be conducted
in the presence of both principals and, if applicable, the
neutral advisor.

g. Confidentiality. The advice of the neutral advisor,
if any, and the discussions between the principals shall not
be used in any subsequent litigation as an indication or
admission of liability or to indicate what either party was
willing to agree to as a part of the settlement discussions.

h. Termination. Since the mini-trial is a voluntary
process, either principal may terminate the mini-trial
agreement at any time.

914

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

App. A

EC
23

27-1-3
Sb:P 85

8. Notification. When a mini-trial is initiated the Chief
Trial AtLorney (DAlN-CCF) must be notified in writing. Such
notification should include a copy of the Division Counsel's
report to the Division Engineer and a copy of the mini-trial
agreement .

FOR THE COMMANDER:

LESTER EDELNiAN
Chief Counsel

1 Appendix:
App A - Sample
Mini-Trial Agreement

ADR "NEUTRALS" 915

EC 27-1-3

23 September 1985

APPENDIX A

MIiMi-TRlAL AGRtlbMtNT
brlWEEM THE
UNITED STATES ARMY CORPS OF ENGIMEERS

Ai\D
APPELLANT

This mini-trial agreement dated this day of ,

19 IS executed by , Division

Engineer, United States Army Corps of Engineers on behalf of

the Corps, and oy , on Dehalf of

hereinaf ter

referred to as

V;HEREAS: On the day of , 19 , the

parties hereto entered into Contract No.

for the

WHEREAS, under the Disputes Clause (General Provision No. 4)

of that contract. Appellant on , 19

filed a claim with the contracting officer alleging

WHEREAS, Appellant certified its claim m accordance with rhe
requirements of the Contract Disputes Act of 1978;

916 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

App. A

EC 27-1-3
23 StlP 85

WHEREAS, in a letter dated , 19 the

contracting officer issued a final decision denying

appellant's claim;

WHEREAS, on , 19 Appellant appealed the

contracting officer's final decision to the

rioard of Contract Appeals where the appeal has been docketed
as (AbtiCA) ( EIiNG t^CA) mo. ;

WHEREAS, the Corps nas instituted an Alternative Contract
Disputes Resolution Procedure known as a "Mini-Trial", which
procedure provides the parties with a voluntary means of
attempting to resolve disputes without the necessity of a
lengthy and costly proceeding before a board of Contract
Appeals nor prejudicing such proceeding; and

WHEREAS, the Corps and Appellant have agreed to submit
(ASBCA) (ENG bCA ) No. to a "Mini-Trial".

NOvv THEREFORE, subject to the terms and conditions of this
"Mini-Trial" agreement, the parties mutually agree as
follows :

ADR "NEUTRALS" 917

App . A

tiC 27-1-3
23 SEP 85

1. The Corps and Appellant will voluntarily engage in a
non-binding mini-trial on the issue of

The mini-trial will be held on , 19

2. The purpose ot this mini-trial is to inform the principal
participants of the position of each party on the claim and
the underlying bases of such. It is agreed that each party
will have the opportunity and responsibility to present its
"best case" on entitlement and quantum.

3. The principal participants for the purpose of this

mini-trial will be for the

Corps, and for appellant. The

principal participants have the authority to settle the
dispute. Each party will present its position to the

918 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

App. A

EC 27-1-3
23 SEP 85

principal participants through a trial attorney(s). In

addition, will attend as a mutually

selected "neutral advisor".

4. The role of the neutral advisor is that of an advisor.
The neutral advisor will not be actively involved in the
conduct of the mini-trial proceedings. The neutral advisor
may ask questions of witnesses only if mutually agreed to by
the principal participants. Upon request by either principal
the neutral advisor will provide comments as to the relative
strengths and weaknesses on that party's position.

5. The Government trial attorney will provide the neutral
advisor with copies of this agreement and the Rule 4 appeal
assembly. Other source materials, statements, exhibits and
depositions may be provided to the neutral advisor by the
trial attorneys, but only after providing the same materials
to the other trial attorney. t^ieither trial attorney shall
conduct ex parte communications with the neutral advisor.

6. The fees and expenses of the neutral advisor shall be
borne equally by both parties. Except for the costs of the
neutral advisor, all costs incurred by either party in
connection with the mini-trial proceedings shall be borne by
that party, and shall not be treated as legal costs for
apportionment in the event that the dispute is not resolved,
and proceeds to a Court or Board determination.

ADR "NEUTRALS" 919

App. A

EC 27-1-3
23 SEP 85

7. Unless completed prior to the execution of this
agreement, the parties will enter into a stipulation setting
forth a schedule for discovery to be taken and

completed weeks prior to the mini-trial. Discovery

taken during the period prior to the mini-trial shall be
admissible for all purposed in this litigation, including any
subsequent hearing before any Board or competent authority in
the event this mini-trial does not result in a resolution of
this appeal. It is agreed that the pursuit of discovery
during the period prior to the mini-trial shall not restrict
either party's ability to take additional discovery at a
later date. In particular, it is understood and agreed that
partial depositions may be necessary to prepare for the
mini-trial. If this matter is not resolved informally as a
result of this procedure, more complete depositions of the
same individuals may be necessary. In such case the partial
depositions taken during this interim period shall in no way
foreclose additional depositions of the same individual into
the same or additional subject matter for a later hearing
date before a Court or Board.

8. No later than weeks prior to commencement of the

mini-trial, snail submit to

the Corps a quantum analysis which identifies the costs
associated with the issuos that will arise during the
mini-trial .

920 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

App. A

EC 27-1-3
23 SEP 85

9. The presentations at the mLni-trui will be intormal.
The rules of evidence will not apply, and witnesses may
provide testimony in the narrative. The principal
participants may ask any question ot the witnesses that they
deem appropriate. However, any such questioning by the
principals shall be within the time period allowed for that
parties' presentation of its case as hereinafter delineated
in paragraph 10.

10. At the mini-trial proceeding, the trial attorneys have
the discretion to structure its presentation as desired. The
form of presentation may be through expert witnesses, audio
visual aids, demonstrative evidence, depositions and oral
argument. The parties agree that stipulations will be
utilized co the maximum extent possible. Any complete or
partial depositions taken in connection with the litigation
in general, or in contemplation of the mini-trial
proceedings, may be introduced at the mini-trial as
information to assist the principal participants
understanding of the various aspects of the parties'
respective positions. The parties may use any type of
written material which will further the progress of the
mini-trial. The parties may, if desired, no later

than weeks prior to commencement of the

mini-trial, submit to the representatives for the opposing
side, as well as the neutral advisor, a position paper of

ADR "NEUTRALS" 921

App. A

tic 27-1-3
23 StP 85

no more than 25 - 8-1/2 X 11 double spaced pages. No later

than week(s) prior to commencement of the proceedings,

the parties will exchange copies of all documentary evidence

proposed for utilization at the mini-trial, inclusive of a

listing of all witnesses.

11. The mini-trial proceedings shall take day(s).

The morning's proceedings shall begin at a.m. and shall

continue until ?i.r\. The afternoon's proceedings shall

begin at p.m. and continue until p.m. (A sample

two day schedule follows:)

922

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

^PP- ^

EC 27-1-3
23 SEP 85

SCHEDULE

Day 1
3:30 a.m. - 12:00 .Moon

12:00 Noon -

1 : 00 p . m . -

2: 30 p.m. -

4:00 p.m. -

1 : OU p.m.
2: 30 p.m,
4:00 p.m,
5:00 o.m

Appellant's position & case

presentat ion .
Lunch *

Corps' cross-examination,
^xppellant's re-examinat ion .
Open question & answer period.

Day 2
8:30 a.m. - 12:00 Noon

12:00 iNloon
1 :00 p.m.
2: 30 p.m.
3:00 p.m.
4: 30 p.m.
4:45 p.m.

1 :00 p.m.
2: 30 p.m.
3:00 p.m,
4 : 30 p.m,
4:45 p.m,
5:00 p.m

Corps' position s< case

presentation .
Lunch*

Appellant 's cross-examination.
Corps' re-examination,
open question and answer period
Appellant's closing argument.
Corps' closing argument.

•Flexible time period for lunch of a stated duration.

ADR "NEUTRALS" ^^3

App. A

EC 27-1-3
23 S£P 8 5

11, vVithin day(s) following the termination of the

mini-trial proceedings, the principal participants should
meet, or confer, as often as they shall mutually agree might
be productive for resolution of the dispute. If the parties

are unable to resolve the dispute within days following

completion of the mini-trial, the mini-trial process shall be
deemed terminated and the litigation will continue,

12, No transcript or recording shall be made of the
mini-trial proceedings, Except for discovery undertaken in
connection with this appeal, all aspects of the mini-trial
including, without limitation, all written material prepared
specifically for utilization at the mini-trial, or oral
presentations made, between or among the parties and/or the
advisor at the mini-trial are confidential to all persons,
and are inadmissible as evidence, whether or not for purposes
of impeachment, in any pending or future Court or Board
action which directly or indirectly involves the parties and
this matter in dispute. However, if settlement is reached as
a result of the mini-trial, any and all information prepared
for, and presented at the proceedings may be used to justify
and document the subsequent settlement modification.
Furthermore, evidence that is otherwise admissible shall not
be rendered inadmissible as a result of its use at the
mini-trial.

924

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

EC 27-1-3
23 SEP 85

13. The neutral advisor will be instructed to treat the
subject natter of this proceeding as confidential, and
refrain from disclosing any of the information exchanged to
third parties. The neutral advisor is disqualified as a
witness, consultant or expert for either party in this and
any other dispute between the parties arising out of
performance of Contract ^'o. .

14. Each party has the right to terminate the mini-trial at
any time for any reason whatsoever.

15. Upon execution of this mini-trial agreement, if mutually
deemed advisaole by the parties, the Corps and Appellant
shall file a joint motion to suspend proceedings of this

appeal before the Board of Contract Appeals.

The motion shall advise the Board that the suspension is for
the purpose of conducting a mini-trial. The Board will be
advised as to the time schedule established for completing
the mini-trial proceedings.

DATED
BY:

Principal participant for Corps

DATED
BY:

Principal participant for

Attorney for the Corps

Attorney for Appellant

NOTE: This agreement reflects a mini-trial which involves a
neutral advisor. In the event a neutral advisor is not used,
you should eliminate all references to the neutral advisor.

ADR "NEUTRALS" 925

V.b. Uepartment ot Justice

Appendix B

Washington. DC. 20530

MEMORANDUM

JUN I 9 1986

TO: Commercial Litigation Branch
Attorneys

FROM: Stuart E. Schiffer

Deputy Assistant Attorney General
Civil Division

SUBJECT Alternative Dispute Resolution --
Mini-Trials

Mini-trials, a form of alternative dispute resolution, can
be a less expensive, less time-consuming means of resolving
disputes between the Government and private parties. It is our
policy to encourage alternative means of resolving disputes when
these goals can be achieved.

Attached is a statement of policy regarding the use of mini-
trials. If you are responsible for a case that you believe is
amenable to resolution by mini-trial, please consult with your
reviewer.

Attachment

926 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

App. B

JUN I 9 1986

COMMERCIAL LITIGATION BRANCH POLICY CONCERNING
THE USE OF MINI-TRIALS

STATEMENT OF POLICY

It is the policy of the Commercial Litigation Branch of the
Department of Justice to consider carefully and, where appro-
priate, implement methods for resolving disputes that are
alternatives to judicial proceedings. In furtherance of that
policy, the Branch will participate in mini-trials as a form of
alternate dispute resolution. Branch attorneys are encouraged
to assess cases assigned to them for the potential for resolu-
tion by mini-trial and are requested to forward requests for
mini-trials from opposing counsel to obtain a decision by- an
appropriate Department of Justice official. Branch attorneys
should make it clear to opposing counsel, however, that the
Branch will not participate in a mini-trial unless appropriate
Departmental officials, in the exercise of their discretion,
determine that participation is appropriate and in the best
interests of the Government.

II.

GENERAL

1. Definition. A mini-trial is a voluntary, expedited,
nonjudicial procedure through which management officials for
each party meet to resolve disputes.

2. Purpose. A mini-trial is intended to reduce the cost,
disruption and delay associated with litigation.

3. Description. A mini-trial is not actually a trial;
rather, it is a process designed to facilitate settlement toy
educating the parties' principals regarding the strengths and
weaknesses of the positions of both parties. The process
combines the salutary aspects of negotiation and litigation,
using flexible procedures designed to meet the needs of each
individual case.

4. Attributes. The following are characteristic of all
mini-trials in which the Department will participate:

a. Involvement of Principals: Management officials with
settlement authority (or with the authority to make a final

ADR "NEUTRALS" 927

App. B

recommendation as to settlement) for both parties
participate directly.

b. Expedited Time Period: The time period allowed for
a mini-trial is brief and deadlines are expedited.

c. Non-binding Discussions By Principals: At the close
of the presentation, the principals meet by themselves to
attempt to resolve the dispute. These discussions are not
binding and may not be used by either party in any sub-
sequent proceedings.

d. Informality: All proceedings are informal.

In addition, where appropriate, the parties may select a
neutral advisor to provide advice to the management officials
involved in the mini-trial.

III.

CRITERIA FOR SELECTING CASES

Cases likely to be governed by clear legal precedent are not
good candidates for resolution by mini-trial. Cases which
involve factual disputes, which do not depend upon the
credibility of the witnesses, are preferred. Cases which are
expected to establish important legal precedent and those which
are clearly without merit do not lend themselves to resolution
by mini-trial.

IV.

INITIATION OF PROCESS

The suggestion that a mini-trial be conducted may emanate
from either party. If the non-governmental party requests a
mini-trial, the Department's trial attorney is requested to
submit that request, along with his or her recommendations and
those of the interested agency, to his or her supervisor. If
the Department's attorney, in the absence of a request by the
non- governmental party, concludes that a mini-trial would be
advantageous, he or she shall obtain the recommendations of the
interested agency, obtain approval from appropriate supervisors
and then propose this procedure to the opposing party. The
opposing party will be supplied with a copy of this memorandum
and will be advised that a written agreement between the parties,
is a prerequisite to initiating the procedure. The decision to
participate in a mini- trial requires the approval of the Deputy
Assistant Attorney General in charge of the Branch and is solely
within the discretion of the Department.

928 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

App. B
V.

PARTICIPANTS

The Government's principal participant will be the Depart-
ment of Justice offi-cial with settlement authority or, where
that is not feasible, the official with the authority finally to
recommend acceptance of a settlement. Usually, the official or
officials within the interested agency or agencies with
authority to make recommendations which are binding upon the
agency or agencies will participate as a secondary principal for
the Government.

The non-governmental party' s principal participant must be a
senior level management official who possesses authority to
settle the dispute in the absence of litigation. Where
possible, the official should be an individual who has not
participated in preparing the case for litigation.

Each party will designate one representative who will be
responsible for conducting the mini-trial and ensuring that
procedures are followed. The Department's attorney of record
will be the Government's representative.

Where appropriate, the parties may agree upon a neutral
advisor to advise the management officials who participate in
the mini-trial. The neutral advisor should be a person with
either legal or substantive knowledge in a relevant field. The
neutral advisor should have no prior involvement in the dispute
or the litigation and must possess no interest in the result of
the mini-trial. The neutral advisor and the parties must agree
in advance that the neutral advisor will have no further
involvement in the litigation should the mini-trial fail to
result in a settlement.

VI.

THE MINI -TRIAL AGREEMENT

The mini-trial agreement is a written document, signed by
the principals and the representatives, in which the parties
agree to the procedures to be used. While each mini-trial
agreement should be structured so as to meet the needs of each
individual case, every agreement must contain specific expedited
time limitations for each aspect of the procedure, a statement
regarding the non-binding nature of the procedure, and an
agreement that the parties will seek a suspension of proceedings
in the pending litigation while the mini-trial process is con-
tinuing. The mini- trial agreement will be negotiated by the
representatives, with the approval of the principals. A seunple
mini- trial agreement is Appendix A to this memorandum.

ADR "NEUTRALS" 929

App. B

VII.

PROCEDURES

While the procedures to be used are subject to negotiation
and should be designed to meet the needs of each individual
ca-se, 'the following procedures are generally considered to be
appropriate:

a. Time Limits: Time limitations are to be explicit,
brief and strictly observed.

b. Discovery: Discovery procedures should be expedited
and should be the subject of a specific provision contained
in the mini-trial agreement. The parties should consider
including in the agreement a limitation upon the scope of
discovery as well as the number and length of depositions
and interrogatories. Discovery conducted prior to the
initiation of mini-trial procedures shall not be duplicated
during the mini-trial process. A nongovernmental party may
not conduct discovery under the mini-trial agreement if it
has pending a request or requests for disclosure of informa-
tion under the Freedom of Information Act. The mini- trial
agreement should normally provide that discovery shall be
completed at least two weeks prior to the mini-trial.

c. Written Submittals: The parties should normally
provide for an exchange of written submittals prior to the
mini-trial. The mini-trial agreement should set forth the
timing, format and length of the submittals. The written
submittal of the nongovernmental party must include an
analysis of its quantum claim which includes information
regarding the source of the figures. At the time the
written submittals are exchanged, the parties should also
exchange exhibit lists and, if applicable, witness lists.

d. Location of the Mini-Trial: The location of the
mini-trial shall be specified in the mini-trial agreement.
Government facilities may be used; the Government will not
agree to pay any part of a fee charged for the use of
nongoverximental facilities.

e. Manner of Presentation at the Mini-Trial: The
allocation of the time agreed upon for presentation of the
case to the principals shall be set forth in the mini-trial
agreement. The presentation should exceed one day only in
exceptional circumstances. The time allotted to each
representative may be used as that representative desires,
including examination of or presentations by witnesses,
demonstrative evidence and oral argument. Recording or
verbatim transcription of the testimony shall not be
allowed. The mini-trial agreement may provide for an
opportunity for the principals to examine any witnesses.

930 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

App. B

f. Neutral Advisor: The parties may agree that a
neutral advisor shall be present during the mini-trial in
order to provide an opinion, upon request, to the principals
on any issue upon which the parties agree in advance. The
neutral advisor should be selected by agreement of the
parties. The advisor should be a person with legal and/or
relevant substantive knowledge and should be a person who
has had no prior involvement in the dispute or the
litigation. The parties shall agree in advance upon the
amount of compensation to be paid to the neutral advisor and
the manner in which this compensation shall be paid. The
neutral advisor shall agree in advance that he or she will
have no further involvement in the case should the mini-
trial fail to dispose of the litigation.

g. Settlement Discussions: The principals shall meet
immediately following presentation of the mini-trial to
discuss the possibility of settling the claim. This meeting
shall be private, although the mini-trial agreement may
provide that each principal may designate an individual to
act as his or her technical advisor. This individual may
not be the party's representative. A principal may consult
with his or her attorneys, although they may not take part
in the discussions regarding settlement.

h. Confidentiality: The discussion which takes place
between the principals shall not be used for any purpose in
any subsequent litigation.

i. Termination: Any party may terminate mini-trial
proceedings at any time.

ADR "NEUTRALS"

APPENDIX A

MINI -TRIAL AGREEMENT
BETWEEN THE
UNITED STATES
AND

931

App. B

This mini-trial agreement dated this
19 , is executed by f name ]

day of
[title]

name

on
on

behalf of the United States and by

behalf of [name of plaintiff] , hereinafter referred to

as plaintiff.

WHEREAS: On the

day of

, 19 , plaintiff and

the United States entered into Contract No
for the

WHEREAS, under the Contract Disputes Act of, 1978, plaintiff on

, 19 , filed a suit in the United States

Claims Court alleging

932 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

APP- B

WHEREAS, the United States and plaintiff have agreed to submit
fname of case] No. [docket no. 1 to a "Mini-Trial";

NOW THEREFORE, subject to the terms and conditions of this "Mini-
Trial" agreement, the parties mutually agree as follows:

1. The United States and plaintiff will voluntarily engage in a
non-binding mini-trial on the issue of

The mini-trial will be held on , 19 , at

[time of day] at [ location] .

2. The purpose of this mini-trial is to inform the principal
participants of the position of each party on the claim and the
underlying bases of the parties' positions. It is agreed that
each party will have the opportunity and responsibility to
present its "best case" on entitlement and quantum.

3. The principal participants for the purpose of this mini-
trial will be for the United

States and for plaintiff. The

principal participants have the authority to settle the dispute
or to make a final recommendation concerning settlement. Each

ADR "NEUTRALS" 933

App. B'

party will present its position to the principal participants
through that party's designated representative, ,

for the United States, and , for plaintiff.

4. The parties have agreed that shall

seirve as a neutral advisor to the principals. The neutral
advisor shall be compensated as set forth in a separate
agreement with the advisor. The advisor has warranted that he
or she has had no prior involvement with this dispute or
litigation and has agreed that he or she will not participate in
the litigation should the mini-trial fail to resolve the dispute.

The neutral advisor shall participate in the mini-trial
proceedings and shall render an opinion, upon request, on the
following issues:

. NOTE : Thi s

clause is to be used only if the parties have agreed that the
participation of a neutral advisor would be useful.

5. All discovery will be completed in the twenty working days
following the execution of this agreement. Neither party shall
propound more than 25 interrogatories or requests for admis-
sions, including subparts; nor shall either party take more than
five depositions and no deposition shall last more than three
hours. Discovery taken during the period prior to the mini-
trial shall be admissible for all purposes in this litigation.

934 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

App. B

including any subsequent hearing before any board or competent
authority in the event this mini-trial does not result in a
resolution of this appeal. It is agreed that the pursuit of
discovery during the period prior to the mini-trial shall not
restrict either party's ability to take additional discovery at
a later date. In particular, it is understood and agreed that
partial depositions may be necessary to prepare for the mini-
trial. If this matter is not resolved informally as a result of
this procedure, more complete depositions of the same indivi-
duals may be necessary. In that event, the partial depositions
taken during this interim period shall in no way foreclose
additional depositions of the same individual into the same or
additional subject matter for a later hearing.

6. No later than weeks prior to commencement of the mini-
trial, the plaintiff shall submit to the United States a quantum
analysis which identifies the costs associated with the issues
that will arise during the mini-trial and which identifies the
source of all data.

7. The presentations at the mini-trial will be informal. The
rules of evidence will not apply, and witnesses may provide
testimony in narrative form. The principal participants may ask
any questions of the witnesses. However, any questioning by the
principals, other than that occurring during the period set

ADR "NEUTRALS" 935

App. B-

aside for questions, shall be charged to the time period allowed
for that party's presentation of its case as delineated in
paragraph 9.

8. At the mini-trial proceeding, the representatives have the
discretion to structure their presentations as desired. The
presentation may include the testimony of expert witnesses, the
use of audio visual aids, demonstrative evidence, depositions,
and oral argument. The parties agree that stipulations will be
utilized to the maximum extent possible. Any complete or
partial depositions taken in connection with the litigation in
general, or in contemplation of the mini-trial proceedings, may
be introduced at the mini-trial as information to assist the
principal participants to understand the various aspects of the
parties' respective positions. The parties may use any type of
written material which will further the progress of the mini-
trial. The parties may, if desired, no later than weeks

prior to commencement of the mini-trial, submit to the
representatives for the opposing side a position paper of no
more than 25-8 1/2" X 11" double spaced pages. No later

than week(s) prior to commencement of the proceedings, the

parties will exchange copies of all documentary evidence
proposed for use at the mini-trial and a list of all witnesses.

936

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

App. B

9. The mini-trial proceedings shall take one day. The morn-
ing's proceedings shall begin at a.m. and shall continue

until a.m. The afternoon's proceedings shall begin at

p.m. and continue until .__ p.m. (A sample schedule follows.)

SCHEDULE

9:00 a.m. - 10:00 a.m.

10:00 a.m.

11:00 a.m.

11:30 a.m.

12:00 noon

1:00 p.m.

2:00 p.m.

3:00 p.m.

3 :30 p.m.

4:00 p.m.

4:30 p.m.

- 11:00 a.m.

- 11:30 a.m.

- 12:00 noon

- 1:00 p.m.

- 2:00 p.m.

- 3 :00 p.m.

- 3 : 30 p.m.

- 4:00 p.m.

- 4:30 p.m.

- 5:00 p.m.

Plaintiff's position and case
presentation.

United States' cross-examination.

Plaintiff :r rebuttal.

Open question and answer period.

Lunch

United States' position and case
presentation.

Plaintiff's cross-examination.

United States' rebuttal.

Open question and answer period.

Plaintiff's closing argument.

United States' closing argument.

10. Within

day(s) following the termination of the mini-

trial proceedings, the principal participants should meet, or
confer, as often as they shall mutually agree might be pro-
ductive for resolution of the dispute. If the parties are
unable to resolve the dispute within days following

ADR "NEUTRALS" 937

App. B

completion of the mini-trial, the mini-trial process shall be
deemed terminated and the litigation will continue.

11. No transcript or recording shall be made of the mini-trial
proceedings. Except for discovery undertaken in connection with
this mini-trial, all written material prepared specifically for
utilization at the mini-trial, all oral presentations made, and
all discussions between or among the parties and/or the advisor
at the mini-trial are confidential to all persons, and are
inadmissible as evidence, whether or not for purposes of impeach-
ment, in any pending or future court or board action which
directly or indirectly involves the parties and the matter in
dispute. However, if settlement is reached as a result of the
mini-trial, any and all information prepared for, and presented
at the proceedings may be used to justify and document the sub-
sequent settlement. Furthermore, evidence that is otherwise
admissible shall not be rendered inadmissible as a result of its
use at the mini-trial.

12. Each party has the right to terminate the mini-trial at any
time for any reason whatsoever.

13. Upon execution of this mini-trial agreement, if mutually
deemed advisable by the parties, the United States and the
plaintiff shall file a joint motion to suspend proceedings in
the Claims Court in this case. The motion shall advise the

938

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

App. B

court that the suspension is for the purpose of conducting a
mini-trial. The court will be advised as to the time schedule
eatciblished for completing the mini-trial proceedings.

DATED
BY:

Principal participant for
the United States

DATED
BY:

Principal participant for

Attorney for the United States Attorney for

ADR "NEUTRALS" 939

Appendix C

Solicitation No. 3292
Page 60

SECTION M

EVALUATION FACTORS FOR AWARD

M-1. COMPETITIVE PROPOSAL EVALUATION

Every timely proposal received in response to this solicitation will be
evaluated according to all of the criteria stated below. Numerical scores
will be assigned each proposal according to the criteria stated in Article
M-2 only.

M-2. NUMERICALLY RATED CRITERIA; Maximum Possible Score: One-hundred points
(100 Points)

Subfactors in each category are generally listed in descending order of
importance.

A. Experience 30 points

1. Ability and achievement as a facilitator in analysis of existing or
Incipient disputes and ability to assess conflicts and make cogent
recommendations and professional .ludgements on the prospects for conflict
resolution through a facilitated negotiation or similar process. Ability
to gain acceptance and bring disputing parties into negotiations, and
ability to communicate essential information trlthout violating
confidentiality.

2. Work experience and demonstrated achievement as a facilitator to work
as a neutral third party with disputing parties in group problem solving
and formal negotiations.

3. Skill, as demonstrated by experience, in effectively resolving
scientifically and technically complex natural resource and environmental
protection issues in dispute among many polarized parties.

4. Experience in advising disputing parties on techniques of coalition
building, in-team bargaining, and negotiation while maintaining neutrality
and credibility.

5. Experience in effectively managing negotiations related to regulations
or other rulemakings, and knowledge of the Federal regulatory process as
evidenced by research, publication, or experience.

6. Demonstrated ability and willingness to develop and use innovative
dispute resolution techniques as evidenced by experience, research, and
publication.

7. Ability to provide interactive graphic recording of meetings.

940

ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Solicitation No. 3292
Page 61

SECTION M-continued

8. Knowledge or general familiarity with the outer continental shelf oil
and gas program and the Outer Continental Shelf Lands Act.

B. Understanding of the Problem 25 points

1. How well the proposal discusses a clear rationale for the approaches,
strategies, and procedures to be employed, and shows Insight and under-
standing in developing a process likely to promote resolution of
differences .

2. Clear understanding of the needs of the Department of the Interior
and other parties to the California air quality rulemaking negotiation,
and how well the proposal satisfies those needs.

3. How well the proposal discusses the use of innovative dispute resolution
techniques and their applicability to this rulemaking.

C. Dispute Resolution Skills 25 points

Perceived ability to devise and effectively manage dispute resolution
process, including the perceived ability to deal successfully with groups
and individuals possessing different viewpoints on the issues which are
the subject of the proposed rulemaking.

D. Technical Approach 10 points

1. How well the proposed methods, techniques, and procedures are likely
to fulfill the stated project requirements and demonstrate a practical
knowledge of the convening/facilitation process.

2. How well the proposal provides for full coordination of logistical
and communications needs associated with scheduled meetings during the
course of convening and negotiations.

3. How well the proposal provides for interactive graphic recording of
meetings and timely delivery of all required reports and meeting summaries.

E. Personnel Staffing 10 points

1. Ability/flexibility to provide a staff /team having the proper mix of
professional expertise and support skills necessary to manage not more
than two simultaneous, multiple group problem solving sessions.

2. Availability of key personnel to fulfill requirements of the contract.

3. COST PROPOSAL CRITERIA (No Numerical Weight Assigned)

A. In evaluating proposals for a cost reimbursement type contract, estimated
costs of contract performance and proposed fees will not be considered as

ADR "NEUTRALS" 941

Solicitation No. 3292
Page 62

SECTION M-continued

controlling factors, since in this type of contract advance estimates of
costs may not provide valid indicators of final actual costs. There is no
requirement that cost reimbursement type contracts be awarded on the basis of
either (a) the lowest proposed cost, (b) the lowest proposed fee, or (c) the
lowest total estimated cost plus proposed fee. Cost estimates will be evalu-
ated to determine the prospective Contractor's understanding of the project
and ability to organize and perform the contract. The agreed fee must be
within the limits prescribed by law and agency procedures and appropriate to
the work to be performed. It is the Department of the Interior's policy to
use a structured approach for determining the fee objective in contracts such
as this that require cost analysis (see DIAR Subpart 1415.9 and FAR Subpart
15.9).

B. The cost and business proposal must be clear, accurate, complete, and
reflect a realistic and reasonable approach to the contract.

M-4. OTHER CRITERIA

The Contracting Officer shall consider several factors in the selection
process which are important, but have not been assigned specific point values,
such as :

(1) Proposals must respond to all the requirements of the RFP, and must
include all Information specifically required in all sections of the
RFP.

(2) Award of a contract may not be made unless an agreement can be secured
for all general and special contract provisions.

(3) Award of a contract shall not be made to any Offeror whose proposed
period of performance is not within a period of time acceptable to the
)flS.

(4) Award of a contract shall only be made to an Offeror determined to be a
responsible Contractor by the Contracting Officer in accordance with the
provisions of the Federal Acquisition Regulation 9.1.

M-5. CONTRACT AWARD

Contract award shall be made to the responsible Offeror whose offer, conforming
to this RFP, is most advantageous to the Government, technical evaluation
factors, cost, and other factors considered. The Government's objective is
to obtain the highest technical quality considered necessary to achieve the
project objectives with a realistic and reasonable cost. Technical evaluation
factors as a whole are more important than cost; however, between proposals
that are evaluated as substantially equal in technical quality, the estimated .
probable cost to the Government will be a major selection factor.

942 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

SECTION M - EVALUATION FACTORS FOR AWARD Appendix D

M.l EVALUATION CRITERIA/ INSTRUCTIONS

a. An evaluation of all offers will be made in accordance
with the criteria of this Section M.

b. This is a Solicitation for contract work in seven
separate and distinct categories as identified in
C.3 (i. e. items i through vii).

c. Offerors may submit one proposal identifying separate
categories of interest as indicated in section L.IO.
Offerors may compete for only one category, several
categories, or all seven categories.

d. The government will rate all proposals received for
each of the categories against each other, and select
the most responsive proposal(s). The government may
award more than one contract in each of the- above
categories. When an offeror submits multiple
proposals, the government may award a contract for one
(or more), and reject the proposal(s) for other
categories in favor of one from another offeror that is
more responsive.

e. The Council on Environmental Quality shall assemble a
technical evaluation panel composed of professional
regulatory staff from the Council and other federal
environmental agencies.

f . The Technical Proposals will be evaluated according to
the offeror's understanding of the requirements of the
Solicitation and the availability of an appropriate
disciplinary mix of environmental scientists and
technicians to accomplish tasks required under the
scope of work (Section C). The Technical Proposal will
also be rated as to the approach, methodology, and
accuracy of the Work Plan for the Benchmark Task Order

( Appendix J . 2 ) .

g. The Cost Proposal will be evaluated according to the
relative costs set forth in the tables prepared in
accordance with Section B of the RFP.

h. Proposals will also be compared by cost categories set
forth in the cost Analysis for the Benchmark Task
Order. (Refer to Sections B.7.b., H.9.C., L.ll and
Appendices J.l. and J. 2.)

M.2. RESPONSIBILITY

An offeror must be determined responsible according to the
standards in FAR, Part 9, to be eligible for contract award. ^

M.3. CONTRACT AWARD

(a) The Government will award a contract from this

solicitation to the responsible offeror whose offer
conforming to the solicitation will be most

ADR "NEUTRALS" 943

advantageous to the Government, cost or price and other
factors, specified elsewhere in this Solicitation,
considered.

(b) The Government may (1) reject all offers, (2) accept
other than the lowest offer, and (3) waive
informalities and minor irregularities in offers
received.

(c) The Government may award a contract on the basis of
initial offers received, without discussions.
Therefore, each initial offer should contain the
offerors best terms from a cost or price and technical
standpoint .

(d) A written award or acceptance of offer mailed or
otherwise furnished to the successful offeror within
the time for acceptance specified in the offer shall
result in a binding contract without further action by
either party. Before the offer's specified expiration
time, the Government may accept an offer, whether or
not there are negotiations after its receipt, unless a
written notice of withdrawal is received before award.
Negotiations conducted after receipt of an offer do not
constitute a rejection or counter offer by the
Government .

(e) Neither financial data submitted with an offer, nor
representations concerning facilities or financing,
will form a part of the resulting contract. However,
if the resulting contract contains a clause providing
for price reduction for defective cost or pricing data,
the contract price will be subject to reduction if cost
or pricing data furnished is incomplete, inaccurate, or
not current.

M.4. TOTAL EVALUATED TECHNICAL SCORE

In weighted evaluations, the following formula will be used
to arrive at the total evaluated technical score:

Each Vendor's
Total Number of

Technical Points X 75% = TOTAL EVALUATED TECHNICAL

SCORE

M.S. TOTAL EVALUATED PRICE SCORE

For weighted evaluations, each proposal will be given a
total evaluated price score based on the following formula:

Lowest Offered Price

Each Vendor's Offered

Price X 25% = TOTAL EVALUATED PRICE SCORE

M.S. TOTAL EVALUATED SCORE ^'

The total score in this weighted evaluation section is
determined by combining the total evaluated technical score
and the total evaluated price score.

944 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Appendix E

BENCHMAiUC TASK ORDER

INTRODUCTION

This is a sample Task Order in abbreviated format modeled after an actual
negotiation conducted under the EPA project. It is indicative of the type
of work to be expected under the Indefinite Quantity Contract.

As part of the response requirements for this Solicitation, each offeror must
prepare a Work Plan (see Section L.IO) and a Cost Analysis (see Section L.ll)
to illustrate its typical approach and methodology, assignment of personnel
by labor category, and costs of the work broken down by accounting category
and project subtask.

This Task Order consists of seven individual tasks, which are described in
detail in sections C.2 and C.3 of this Request for Proposal. Although the
tasks are interrelated, each represents a function of the negotiation process
that is severable and could be performed by one contractor alone. In pre-
paring your proposal, you may select any one (or more) of these tasks to
compete for. However, both the Work Plan and Cost Analysis must clearly
segregate the material for each task into clearly labeled Sections so that
it can be evaluated separate and apart from other tasks. The Section in the
Work Plan for any given task may not exceed 10 pages in length.

Your Work Plan should concentrate on the procedural., logistical', and admin-
istracive considerations of the task. Emphasize your approach, methodology,'
and assumptions. You may include a brief description of your qualifications
to understand the technical environmental factors. (Such qualifications
are helpful, but secondary to the procedural aspects.) Indicate staff
requirements by labor category. Prepare your sample Work Plan and Cost
Analysis according to the format set forth in Appendix J.l.

To perform its mission, the Council engages in joint projects with other
federal environmental agencies concerned with the particular topic Involved.
This sample Task Order is written as if the project will be cosponsored
by the Environmental Protection Agency (EPA).

I . BACKGROUND

On April 2, 1986, the Assistant Administrator for the Office of Pesticides and
Toxic Substances has recommended that the Environmental Protection Agency use
a negotiated rulemaking to develop the substance of a proposed rule for regu-
lating the application of pesticides in areas where migrant farmworkers would
be subject to exposure. A negotiated rulemaking is a relatively new procedure
under which representatives of an agency and interested parties are convened
to reach a consensus that forms the basis of the proposed rule published by
the agency. By involving the interested parties in the formulation of the
proposed rule with the assistance of a trained facilitator, the resulting rule
should be more acceptable to the competing interests and less likely tobe the
subject of litigation.

ADR "NEUTRALS" 945

App. E

EPA has prepared and submitted a charter for a federal advisory committee.
In the event negotiations proceed, the representatives of various parties
will conduct bargaining sessions through this vehicle. The Charter for this
Committee is attached hereto.

EPA has adopted the "Procedures for Negotiating Proposed Regulations" promulgated
by the Administrative Conference of the United States for use in its bargaining
sessions. (Copy attached.) In addition, the parties themselves will adopt their
own protocols for the process under the guidance of a facilitator as the first
part of the negotiation.

Additional descriptive material is attached to this Task Order and should be
reviewed as background information relevant to this negotiation. The material
includes the following items: EPA Regulatory Negotiation Overview, Regulatory
Negotiation Overview - FORUM, Interview with Lee Thomas, and Breaking Down the
Walls: Negotiated Rulemaking at EPA.

The project is expected to take a total of 9 months to complete and will be
divided into two distinct phasls: convening phase and facilitation phase.

PHASE I CONVENING THE NEGOTIATIONS

Objective: To determine whether a regulatory negotiation concerning the Rule
on Farmworker Protection Standards is likely to be successful, and if so, to
determine the interests that must be represented in the negotiation, the
members of the actual negotiating group, and the Issues that must be addressed.

Schedule: Complete all work within three months of award.

Tasks for the first phase Include Convening Support, Documenting Support,
Analytic Support, Resource Support, and Training Support. Refer to the
applicable provisions in sections C.2 and C.3 for the substantive require-
ments of the above tasks. Use this information to prepare your proposal.
Anticipate difficulties that may be encountered and list available options.

At the conclusion of the convening phase, the convener submits a report
containing his/her professional opinion on the prospect of resolving the issues
through negotiation given the mix of parties and the desire of the parties
to negotiate in good faith. Assume that the convenor recommends proceeding with
the negotiation.

PHASE II THE BARGAINING SESSIONS

Objective: To develop, through negotiations, a consensus proposal for the
Rule on Farmworker Protection Standards.

Schedule: Complete all work within six months of end of Phase I.

Tasks for Phase II include: Facilitating Support, Documenting Support,
Analytic Support, Resource Support, and Direct Support. Refer to the ap-
plicable provisions in Sections C.2 and C.3 for the substantive requirements
of the above tasks. Use this information to prepare your proposal. Anticipate
difficulties that may be encountered and list available options.

946 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

App. E

RESOURCE AND TIKE REQUIREMENTS

Estimated Labor Intensicy* by Task for Phases I and II:

Convening Support: 2.5 work months

Facilitating Support: 2.5 work months

Documenting Support: 2.0 work months

Analytic Support: 2.0 work months

Resource Support: 2.0 work month

Training Support: I.O work months

Direct Support: 0.5 work months

*The term "Labor Intensity" refers to cumulative staff time for the entire
Task Order.

TRAVEL

There will be 5 monthly bargaining sessions of the federal Advisory Committee
In Washington, D. C. Each session will last 2 days.

DELIVERABLES

Monthly progress reports

Final Report for each task indicating progress of negotiation, problems solved,
and recommendations for future negotiations.

TYPE OF CONTRACT ANTICIPATED

It is anticipated that this Task Order will result in a firm fixed-price contract

ADR "NEUTRALS" 947

Appendix F
AGREEMENT FOR SERVICES
OF NEUTRAL ADVISOR

This agreement , dated this day of executed by

the U. S. Army Engineer District, , on behalf of the Corps of

Engineers (hereinafter referred to as "Corps") ,

and

WHEREAS, on the day of the Corps, on behalf of

the United States of America, and entered into Contract No.

(hereinafter referred to as "Contract") for the construction of

and

WHEREAS, has filed a claim with the Corps in accordance with

the Contract Disputes Act of 1978 alleging that

and

WHEREAS, in a letter dated the Corps' contracting

officer issued a final decision denying claim; and

WHEREAS, on appealed the Corps' final

decision to the Corps of Engineers Board of Contract Appeals, where the
appeal has been docketed as Ehg BCA No. and

WHEREAS, the Corps has instituted an Alternative Contract Disputes
Resolution Procedure known as a "Mini-Trial", v^ich procedure provides the
parties with a voluntary means of attempting to resolve disputes without the
necessity of a lengthy and costly proceeding before a Board of Contract
Appeals but without prejudicing such proceeding; and

WHEREAS, and the Corps have agree to submit Eng BCA No. 5128
to a "Mini-Trial" and have requested to serve as neutral advisor for
the "Mini-Trial" :

948 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

NOW, THEREFORE, the parties hereto mutually agree as follows:

1 . agrees to serve as neutral advisor for the "Mini -Trial"
to be held in on and to undertake those
services set forth in the "Mini-Trial Agreement Between the United States
Army Corps of Engineers and dated

which agreonent is attached hereto and incorporated herein by reference.

shall be compensated for services rendered In the lunp sum amount of

, v^tch sum shall include all fees and expenses incurred by by

virtue of this agreement, including all travel and lodging exp>enses as well

as time spent in preparation for the "Mini-Trial."

2, and the Corps agree to share equally the fees and expenses
incurred by in connection with his services as neutral advisor, as set
forth in paragraph 1, above. Payment to for services rendered will be
made separately by and the Corps upon suhmission of an invoice to each
of thera in the amount of

3. further agrees to treat any information conveyed to him in
connection with the "Mini-Trial" as confidential and agrees to refrain from
disclosing to third parties any of the information exchanged at the Mini-
Trial" or in preparation Iherefor.

4. The parties agree that will be disqualified as a trial
witness, consultant, or expert for any party and that his advisory response
will be inadmissible for any purpose in this or any other dispute under the
contract".

CORPS OF ENGINEERS

By: By;

INDEXED
BIBLIOGRAPHY

ADMINISTRATIVE CONFERENCE

OF THE UNITED STATES:

A BIBUOGRAPHY

1968-1986

Sue Judith Boley*

The Administrative Conference of the United States was established by public law in
1964 as a permanent, independent federal agency to study the efficiency and fairness of the
administrative processes in the federal government, and to recommend improvements to the
President, the Congress, the agencies concerned, and the Judicial Conference. Since the
appointment of its first chairman in 1968, the Administrative Conference has addressed a
wide variety of topics ranging, for example, from a congressionally mandated study of the
rulemaking procedures of the Federal Trade Commission to a number of projects exploring
various provisions of the Freedom of Information Act. Major themes currently under study
include informal adjudication and alternative dispute resolution, efficient approaches to
regulation and deregulation, governmental torts, and regulation of financial services.

Topics of inquiry may be chosen by the Chairman of the Conference, the Council, the
committees, and the Assembly^. In most cases a research contractor is hired to perform in-
depth research in the area of concern. The consultant and staff of the Office of the
Chairman work closely with conference committees in drafting recommendations to be
considered for adoption by the Assembly. The Assembly may approve, amend, remand, or
reject recommendations presented by committees. Adopted recommendations may result in
new congresssional legislation or direct action on the part of the affected agencies.

The product of the Conference takes two principal forms: staff or consultant reports,
and Conference recommendations and statements. Recommendations and statements adopted
by the Assembly are published in the Federal Register (Fed. Reg.), and in most cases
(depending on continuing general interest) in the Code of Federal Regulations
(recommendations . at 1 C.F.R. § 305, statements at 1 C.F.R. § 310). Staff and consultant

*Librarian and Information Officer, Administrative Conference of the U. S. Earlier
bibliographies appeared at 30 Ad. L. Rev. 303 (1978), and 33 Ad L. Rev. 235 (1981), and 36
Ad. L. Rev. 307 (1984).

+For further information about the organization of the Administrative Conference see:
[1985] ACUS Ann. Rep., Washington, D. C, U. S. Government Printing Office
(Superintendent of Documents No. Y 3.Ad 6:1/985). See also 1 C.F.R. §§ 301.1 to 310.11.

951

952 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

reports are often published as periodical articles or monographs, or serve as the basis for
such publications.

Texts of all recommendations and statements and the reports that led to them, are
published in a four-volume series entitled Recommendations and Reports of the
Administrative Conference of the United States and its successor series. Administrative
Conference of the United States: Recommendations and Reports (both hereinafter cited as
ACUS). Full texts of adopted recommendations and statements also appear in the
corresponding annual report of the Administrative Conference. Miscellaneous staff and
consultant reports not leading to formal recommendations and not published in journals or
monographic form are made available for distribution by the Conference.

This bibliography covers the major work of the Conference from its first Plenary Session
in May 1968 through the thirty-third Plenary Session in December 1986. During this period
117 recommendations were adopted along with 11 formal statements, all of which were based
on reports prepared by consultants, staff, or committees. Included herein are 217 reports of
research contractors and staff (committee reports excluded): 107 of these resulted in
recommendations and 10 led to Conference statements.

Each entry includes the author, title, and article citation(s). In those cases where the
report was published in a journal as well as in a volume of ACUS, the title is shown as it
appears in the journal. Early volumes of Recommendations and Reports of the Administrative

Conference of the United States are cited as 1 ACUS , 2 ACUS , etc.

References to reports that are included in continuing volumes of ACUS (published in yearly

compilations beginning with 1978) are cited as 1978 ACUS , 1979 ACUS

, etc.

Entries resulting in Conference recommendations include the recommendation number,
title and a C.F.R. or Fed. Reg. citation. The texts of recommendations and statements of
continuing general interest are codified in the C.F.R. For other recommendations and
statements, C.F.R. lists the title and, for those adopted after 1972, also a citation to the
Federal Register where the text was published. The texts of all recommendations adopted
prior to 1973 are located in volumes 1 and 2 of ACUS as well as in annual reports of the
Administrative Conference. These annual reports are cited by period covered and page, e.g.,
[1970-71] ACUS Ann. Rep. 84, for those early recommendations and statements not codified
in C.F.R.

The first 35 recommendations of the Administrative Conference were sequentially
numbered 1 through 35 and were so designated in most publications until 1972. Thereafter
the current official numbering system for Conference recommendations was adopted whereby
recommendations are numbered sequentially in the order adopted for the year of adoption,
e.g., 72-1 refers to the first recommendation adopted in 1972; 72-2, the second in 1972; 76-
1, the first in 1976; etc.

The purposes of this bibliography are to acquaint the researcher with the work of the
Administrative Conference and to assist in locating reports by supplying the appropriate
bibliographic information. Reports should be obtained directly from their published source
in lieu of requesting them from the Administrative Conference. The four-volume series.
Recommendations and Reports of the Administrative Conference of the United States
(Superintendent of Documents classification number Y 3. Ad 6:9), and its successor series.
Administrative Conference of the United States: Recommendations and Reports (also Y 3. Ad
6:9), can be found in most government depository libraries.

An index is included at the end of the bibliography to assist in finding reports on topics
of special interest. The number in the index refers to the entry number of the report in the
bibliography.

ACUS BffiLIOGRAPHY 953

1. Ablard, Charles D., Some Comparisons between the Council on Tribunals and the
Administrative Conference of the U. S., 24 Am. J. Comp. L. 73 (1976).

2. Adams, Arvil V. and Jose R. Figueroa, Expediting Settlement of Employee
Grievances in the Federal Sector: An Evaluation of the MSPB's Appeals Arbitration
Procedure, Washington, D.C., U. S. Government Printing Office (1985).

3. Administrative Conference of the U. S. (Office of the Chairman), Colloquium
ON Regulatory Design in Theory and Practice, Vols. I-III, Washington, D.C., U.
S. Government Printing Office (1983-85).

4. Administrative Conference of the U. S. (Office of the Chairman), Directory
OF Administrative Hearing Facilities, Washington, D.C., U. S. Government
Printing Office (1981).

5. Administrative Conference of the U. S. (Office of the Chairman), Directory
OF Administrative Hearing Facilities, Washington, D.C., U. S. Government
Printing Office (2d ed. 1984).

6. Administrative Conference of the U. S. (Office of the Chairman), Federal
Administrative Law Judge Hearings — Statistical Report for 1975,
Washington, D.C., U. S. Government Printing Office (1977).

7. Administrative Conference of the U. S. (Office of the Chairman), Federal
Administrative Law Judge Hearings — Statistical Report for 1976-1978,
Washington, D.C., U. S. Government Printing Office (1980).

8. Administrative Conference of the U. S. (Office of the Chairman), Federal
Administrative Procedure Sourcebook: Statutes and Related Materials,
Washington, D.C., U. S. Government Printing Office (1985).

9. Administrative Conference of the U. S. (Office of the Chairman), A Guide to
Federal Agency Rulemaking, Washington, D.C., U. S. Government Printing
Office (1983).

954 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

10. Administrative Conference of the U. S. (Office of the Chairman), Legislative
Veto of Agency Rules After INS v. Chadha: Twenty-Seventh Plenary Session
Discussion on December 15, 1983, Washington, D.C., U. S. Government Printing
Office (1984).

11. Aman, Alfred C, Jr. Institutionalizing the Energy Crisis: Some Structural and
Procedural Lessons, 65 Cornell L. Rev. 491 (1980); 1980 ACUS 205.

Recommendation 80-2: "Enforcement of Petroleum Price Regulations," 45 Fed.
Reg. 46,774 (1980).

12. American Bar Assocl^tion, Symposium on Federal Disability Benefit Programs:
Report and recommendations, Washington, D.C., American Bar Association
(1985); see also infra Entry 121.

13. Anderson, Frederick R., Negotiation and Informal Agency Action: The Case of
Super fund, 1985 Duke L. J. 261; 1984 ACUS 263.

Recommendation 84-4: "Negotiated Cleanup of Hazardous Waste Sites Under
CERCLA," 1 C.F.R. § 305.84-4.

14. Anthony, Robert A. and James E. Byrne, International Trade Commission Release
of Confidential Information under Protective Orders in Antidumping and
Countervailing Duty Proceedings, 1984 ACUS 573.

Recommendation 84-6: "Disclosure of Confidential Information under Protective
Order in International Trade Commission Proceedings," 1 C.F.R. § 305.84-6.

15. Anthony, Robert A., Towards Simplicity and Rationality in Comparative Broadcast
Licensing Proceedings, 24 Stan. L. Rev. 1 (1971).

16. Aronowitz, Dennis S., Practices and Procedures under the Renegotiation Act of 1951,
1 ACUS 663 (1971).

Recommendation 70-5: "Practices and Procedures under the Renegotiation Act of
1951," 1 ACUS 43 (1971); [1970-71] ACUS Ann. Rep. 49.

17. AsiMow, Michael, Advice to the Public from Federal Administrative
Agencies, New York, Matthew Bender & Co. (1973).

ACUS BffiLIOGRAPHY 955

18. Asimow, Michael, Civil Penalties for Inaccurate and Delinquent Tax Returns, 23
UCLA L. Rev. 637 (1976), Administrative Procedures of the Internal Revenue
Service, S. Doc. No. 266, 94th Cong., 2d Sess. 619 (1975).

Recommendation 75-7: "Internal Revenue Service Procedures: Civil Penalties," 41

Fed. Reg. 3,984 (1976).

19. Asimow, Michael, Public Participation in the Adoption of Interpretive Rules and
Policy Statements, 75 Mich. L. Rev. 521 (1977); 4 ACUS 615 (1979).

Recommendation 76-5: "Interpretive Rules of General Applicability and
Statements of General Policy," 1 C.F.R. § 305.76-5.

20. Asimow, Michael, When the Curtain Falls: Separation of Functions in Federal
Administrative Agencies, 81 Colum. L. Rev. 759 (1981); 1981 ACUS 141.

21. Baram, Michael S., Regulation of Health, Safety and Environmental Quality and the
Use of Cost-Benefit Analysis, 8 Ecology L. Q. 473 (1980); 1979 ACUS 377.

Recommendation 79-4: "Public Disclosure Concerning the Use of Cost-Benefit
and Similar Analyses in Regulation," 1 C.F.R. § 305.79-4.

22. Bennett, Robert W., Broadcast Coverage of Administrative Proceedings, 67 Nw. U.
L. Rev. 528 (1972); 2 ACUS 625 (1973).

Recommendation 72-1: "Broadcast of Agency Proceedings," 1 C.F.R. § 305.72-1.

23. Berg, Richard K., Insulation of Decision-Making At the Department of
Transportation, U. S. Department of Transportation, CAB Sunset Seminar:
Future Administration of the International Avl/^tion Functions of the CAB
111, Vol. II (1983).

24. Berg, Richard K., Re-Examining Policy Procedures: The Choice Between
Rulemaking and Adjudication, 38 Ad. L. Rev. 149 (1986).

25. Berg, Richard K., Subpoena Powers in Formal Agency Proceedings, 3 ACUS 408
(1975).

Recommendation 74-1: "Subpoena Powers in Formal Agency Proceedings,"
1 C.F.R. § 305.74-1.

26. Berg, Richard K. and Stephen H. Klitzman, An Interpretive Guide to the
Government in the Sunshine Act, Washington, D.C., U. S. Government Printing
Office (1978).

956 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

27. Bermann, George A., Administrative Handling of Monetary Claims: Tort Claims at
the Agency Level, 1984 ACUS 639; revision, Federal Tort Claims at the Agency
Level: The FTCA Administrative Process, 35 Case H'. Res. 509 (1984-85).

Recommendation 84-7: "Administrative Settlement of Tort and Other Monetary

Claims Against the Government," 1 C.F.R. $ 305.84-7.

28. Beytagh, Francis X., Judicial Review in Selective Service Cases — Lessons from
Vietnam, 48 Notre Dame Lawyer 1164 (1973); 2 ACUS 965 (1973).

Recommendation 72-7: "Preinduction Review of Selective Service Classification
Orders and Related Procedural Matters," 2 ACUS 70 (1973); [1972-73] ACUS
Ann. Rep. 36.

29. Bonfield, Arthur E., "Military and Foreign Affairs Function" Rulemaking under the
APA, 71 Mich. L. Rev. 221 (1972); 3 ACUS 226 (1975).

Recommendation 73-5: "Elimination of the 'Military or Foreign Affairs
Function' Exemption from APA Rulemaking Requirements," 1 C.F.R. $ 305.73-5.

30. Bonfield, Arthur E., Public Participation in Federal Rulemaking Relating to Public
Property, Loans, Grants, Benefits, or Contracts, 118 U. Pa. L. Rev. 540 (1970); 1
ACUS 306 (1971).

Recommendation 69-8: "Elimination of Certain Exemptions from the APA

Rulemaking Requirements," 1 C.F.R. § 305.69-8.

31. Bonfield, Arthur E., Representation for the Poor in Federal Rulemaking, 67 Mich.
L. Rev. 511 (1969); 1 ACUS 79 (1971).

Recommendation 68-5: "Representation of the Poor in Agency Rulemaking of
Direct Consequence to Them," 1 C.F.R. § 305.68-5.

32. Bonfield, Arthur E., Some Tentative Thoughts on Public Participation in the Making
of Interpretive Rules and General Statements of Policy under the A.P.A., 23 Ad. L.
Rev. 101 (1971).

33. Bonine, John E., Public-Interest Fee Waivers Under the Freedom of Information Act^
1981 Duke L. J. 213; 1981 ACUS 17.

Recommendation 81-1: "Procedures for Assessing and Collecting Freedom of
Information Act Fees," 1 C.F.R. § 305.81-1.

34. Botein, Michael, Primary Jurisdiction: The Need for Better Court/Agency
Interaction, 29 Rutgers L. Rev. 867 (1976).

ACUS BIBLIOGRAPHY 957

35. Bowers, Michael W., A Review of the Development of Law on Informal Rulemaking
Procedure, unpublished report, 1982.

Statement 7: "Proposals Pending in Congress to Amend the Informal Rulemaking
Provisions of the Administrative Procedure Act," 1 C.F.R. § 310.7.

36. Boyer, Barry B., Alternatives to Administrative Trial-Type Hearings for Resolving
Complex Scientific, Economic, and Social Issues, 71 Mich. L. Rev. Ill (1972).

37. Boyer, Barry B., Funding Public Participants in Administrative Rulemaking: The
Federal Trade Commission Experience, 70 Geo. L. J. 51 (1981), 1979 ACUS 437.
Recommendation 79-5: "Hybrid Rulemaking Procedures of the Federal Trade
Commission — Administration of the Program to Reimburse Participants'
Expenses," 1 C.F.R. § 305.79-5.

38. Boyer, Barry B., Report on the Trade Regulation Rulemaking Procedures of the
Federal Trade Commission (Phase II), 1980 ACUS 33 and Compensating Public
Participants in Administrative Rulemaking: The Federal Trade Commission
Experience (Part 2), 70 Geo. L. J. 51 (1981), 1980 ACUS 165.

Recommendation 80-1: "Trade Regulation Rulemaking Under the Magnuson-
Moss Warranty — Federal Trade Commission Improvement Act," 1 C.F.R.
§ 305.80-1.

39. Boyer, Barry B., A Report to the Administrative Conference of the United States by
the Special Project for the Study of Rulemaking Procedures under the Magnuson-
Moss Warranty — Federal Trade Commission Act, May 1979. Executive Summary of
unpublished report, 1979 ACUS 41.

Recommendation 79-1: "Hybrid Rulemaking Procedures of the Federal Trade
Commission," 1 C.F.R. § 305.79-1.

40. Boyer, Barry B. and Bliss C. Cartwright, Mobilizing Friends and Foes in
Administrative Proceedings, 6 Law & Policy 451 (1984).

Recommendation 79-1: "Hybrid Rulemaking Procedures of the Federal Trade
Commission," 1 C.F.R. § 305.79-1.

41. Boyer, Barry B. and Errol Meidinger, Privatizing Regulatory Enforcement: A
Preliminary Assessment of Citizen Suits Under Federal Environmental Laws, 34
Buffalo L. Rev. 833 (1986); 1985 ACUS 365.

Recommendation 85-3: "Coordination of Public and Private Enforcement of

Environmental Laws," 1 C.F.R. § 305.85-3.

958 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

42. Breger, Marshall J., The Administrative Procedure Act after Forty Years, 33 Federal
Bar News & J. 297 (1986).

43. Breger, Marshall J., The APA: An Administrative Conference Perspective, 72 Va. L.
Rev. 337 (1986).

44. Bruff, Harold H., Presidential Exemption from Mandatory Retirement of Members
of the Independent Regulatory Commissions, 1976 Duke L. J. 249; 4 ACUS 395
(1979).

Recommendation 76-1: "Exception from Mandatory Retirement for Certain
Presidential Appointees," 41 Fed. Reg. 29,653 (1976).

45. Cappalli, Richard B., Model for Case Management: The Grant Appeals Board, 1986
ACUS 663.

Recommendation 86-7: "Case Management as a Tool for Improving Agency
Adjudication," 1 C.F.R. { 305.86-7.

46. Cardozo, Michael H., Federal Advisory Committee Act in Operation, 33 Ad. L. Rev.
1 (1981); 1980 ACUS 313.

Recommendation 80-3: "Interpretation and Implementation of the Federal
Advisory Committee Act," 1 C.F.R. $ 305.80-3.

47. Carrow, Milton M. and J. D. Nyhart, editors. Law and Science in
Collaboration, Lexington, Mass., D. C. Heath and Co. (1983).

48. Cass, Ronald A., "" Agency Review of Administrative Law Judges' Decisions, 1983
ACUS 115.

Recommendation 83-3: "Agency Structures for Review of Decisions of Presiding
Officers Under the Administrative Procedure Act," 1 C.F.R. § 305.83-3.

49. Chambers, Reid P., Conflicts of Interest in the Administration of Federal Trust
Responsibility, 2 ACUS 659 (1973).

Recommendation 72-2: "Conflict-of-interest Problems in Dealing with Natural
Resources of Indian Tribes," 2 ACUS 57 (1973); [1971-72] ACUS Ann. Rep. 79

50. Chambers, Reid P. and Monroe E. Price, Regulating Sovereignty: Secretarial
Discretion and the Leasing of Indian Lands, 26 Stan. L. Rev. 1061 (1974).

ACUS BffiLIOGRAPHY 959

51. Clagett, Brice McAdoo, Informal Action — Adjudication — Rule Making: Some
Recent Developments in Federal Administrative Law, 1971 DukeL. J. 51.

Recommendation 71-3: "Articulation of Agency Policies," 1 C.F.R. § 305.71-3.

52. Cox, Michael P., Regulation of Attorneys Practicing before Federal Agencies. 34
CaseW. Res. L. Rev. 173 (1984); 1982 ACUS 491 (Vol. II).

Statement 8: "Statement of the Administrative Conference on Discipline of
Attorneys Practicing Before Federal Agencies," 1 C.F.R. § 310.8.

53. Cramton, Roger C, Causes and Cures of Administrative Delay, 58 A.B.A. J. 937
(1972).

54. Cramton, Roger C, A Comment on Trial-Type Hearings in Nuclear Power Plant
Siting, 58 Va. L. Rev. 585 (1972).

55. Cramton, Roger C, A Federal Ombudsman, 1972 DukeL. J. 1.

56. Cramton, Roger C, Nonstatutory Reform of Sovereign Immunity, Subject Matter
Jurisdiction, and Parties Defendant, 68 Mich. L. Rev. 387 (1970); 1 ACUS 170, 191,
417 (1971).

Recommendation 68-7: "Elimination of Jurisdictional Amount Requirement in

Judicial Review," 1 ACUS 22 (1971); [1969] ACUS Ann. Rep. 39.

Recommendation 69-1: "Statutory Reform of the Sovereign Immunity Doctrine,"

1 ACUS 23 (1971); [1969] ACUS Ann. Rep. 40.

Recommendation 70-1: "Parties Defendant," 1 ACUS 32 (1971); [1970-71] ACUS

Ann. Rep. 39.

57. Cramton, Roger C, A Title Change for Federal Hearing Examiners? "A Rose by Any
Other Name..", 40 Geo. Wash. L. Rev. 918 (1972).

58. Cram ton,. Roger C, The Why, Where, and How of Broadened Public Participation in
the Administrative Process, 60 Geo. L. J. 525 (1972); 2 ACUS 422 (1973).

Recommendation 71-6: "Public Participation in Administrative Hearings,"
1 C.F.R. 5 305.71-6.

59. Cramton, Roger C. and Richard K. Berg, On Leading a Horse to Water: NEPA and
the Federal Bureaucracy, 71 Mich. L. Rev. 511 (1973).

960 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

60. Cramton, Roger C. and Barry B. Boyer, Citizens Suits in the Environmental Field
Peril or Promise?, 25 Ad. L. Rev. 147 (1972); 2 Ecology L. Q. 407 (1972).

61. Currie, David P., Judicial Review Under Federal Pollution Laws, 62 Iowa L. Rev.
1221 (1977); 4 ACUS 555 (1979).

Recommendation 76-4: "Judicial Review Under the Clean Air Act and Federal
Water Pollution Control Act," 1 C.F.R. § 305.76-4.

62. Currie, David P. and Frank I. Goodman, Judicial Review of Federal Administrative
Action: Quest for the Optimum Forum, 75 Colum. L. Rev. 1 (1975); 4 ACUS 197
(1979).

Recommendation 75-3: "The Choice of Forum for Judicial Review of

Administrative Action," 1 C.F.R. § 305.75-3.

63. Davenport, Charles, Administrative Procedures of the Internal Revenue
Service, S. Doc. No. 94-266, 94th Cong., 2d Sess. (1975); Staff Summary, IRS
Taxpayer Service Program: Hearings Before the Subcomm. on Oversight of the
House Comm. on Ways and Means, 95th Cong., 1st Sess. 272 (1978); 4 ACUS 317
(1979)

Recommendation 75-5: "The Audit and Settlement Processes," 41 Fed. Reg. 3,982

(1976).

Recommendation 75-6: "Collection of Delinquent Taxes," 41 Fed. Reg. 3,982

(1976).

Recommendation 75-7: "Civil Penalties," 41 Fed. Reg. 3,984 (1976).

Recommendation 75-8: "Tax Return Confidentiality," 41 Fed. Reg. 3,985 (1976),

as amended at 41 Fed. Reg. 29,655 (1976).

Recommendation 75-9: "Taxpayer Services and Complaints," 41 Fed. Reg. 3,986

(1976).

Recommendation 75-10: "The IRS Summons Power," 41 Fed. Reg. 3,987 (1976).

64. Davis, Frederick, Judicial Review of Benefits Decisions of the Veterans
Administration, unpublished report, 1978.

65. Davis, Frederick, Judicial Review of Rulemaking: New Patterns and New Problems,
1981 DukeL. J. 279.

66. DeLong, James V., Benzene Exposes Workers to Unresolved Issues, Legal Times of
Washington, Sept. 8, 1980, at 40.

67. DeLong, James V., Informal Rulemaking and the Integration of Law and Policy, 65
Va. L. Rev. 257 (1979).

ACUS BroUOGRAPHY 961

68. DeLong, James V., Book Review, 80 Mich. L. Rev. 885 (1982).

69. DeLong, James V., The Role, If Any, of Economic Analysis in Antitrust Litigation,
12 Sw. U. L. Rev. 298 (1981).

70. Diver, Colin S., Agency Articulation of Policy, 1983 ACUS 387.

Statement 9: "Guidelines for Choosing the Appropriate Level of Agency Policy
Articulation," 1 C.F.R. § 310.9.

71. Diver, Colin S., The Assessment and Mitigation of Civil Money Penalties by Federal
Administrative Agencies, 79 Colum. L. Rev. 1435 (1979); 1979 ACUS 203.

Recommendation 79-3: "Agency Assessment and Mitigation of Civil Money
Penalties," 1 C.F.R. § 305.79-3.

72. Diver, Colin S., The Optimal Precision of Administrative Rules, 93 Yale L. J. 65
(1983).

73. Dixon, Robert G., Jr., Social Security Disability and Mass Justice: A
Problem IN Welfare Adjudication, New York, Praeger Publishers (1973).

74. Dixon, Robert G., Jr., The Welfare State and Mass Justice: A Warning from the
Social Security Disability Program, 1972 Duke L. J. 681.

75. Ellis, Emory N., Jr., Report in Support of Discretionary Review of Decisions of
Presiding Officers, 1 ACUS 155 (1971).

Recommendation 68-6: "Delegation of Final Decisional Authority Subject to
Discretionary Review by the Agency," 1 C.F.R. § 305.68-6.

76. Freedman, James O., Report of the Committee on Agency Organization and
Procedure in Support of Intermediate Appellate Boards, 1 ACUS 125 (1971).

Recommendation 68-6: "Delegation of Final Decisional Authority Subject to
Discretionary Review by the Agency," 1 C.F.R. § 305.68-6.

77. Freedman, James O., Summary Action by Administrative Agencies, 40 U. Chi. L.
Rev. 1 (1972).

962 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

78. Funk, William F., The Paperwork Reduction Act: Paperwork Reduction Meets
Administrative Law, 24 Harv. J. of Legis. (1987).

79. Gellhorn, Ernest, Adverse Publicity by Administrative Agencies, 86 Harv. L. Rev.
1380 (1973); 3 ACUS 67 (1975).

Recommendation 73-1: "Adverse Agency Publicity," 1 C.F.R. $ 305.73-1.

80. Gellhorn, Ernest, Public Participation in Administrative Proceedings, 81 Yale L. J.
359 (1972); 2 ACUS 376 (1973).

Recommendation 71-6: "Public Participation in Administrative Hearings,"
1 C.F.R. 5 305.71-6.

81. Gellhorn, Ernest and Harold H. Bruff, Congressional Control of Administrative
Regulation: A Study of Legislative Vetoes. 90 Harv. L. Rev. 1369 (1977); 4 ACUS
679 (1979).

Recommendation 77-1: "Legislative Veto of Administrative Regulations," 1 C.F.R.

§ 305.77-1.

82. Gellhorn, Ernest and Paul B. Larsen, Interlocutory Appeal Procedures in
Administrative Hearings, 70 Mich. L. Rev. 109 (1971); 2 ACUS 81 (1973).

Recommendation 71-1: "Interlocutory Appeal Procedures," 1 C.F.R. § 305.71-1.

83, Gellhorn, Ernest and William F. Robinson, Jr., Summary Judgment in Administrative
Adjudication, 84 Harv. L. Rev. 612 (1971); 1 ACUS 545 (1971).

Recommendation 70-3: "Summary Decision in Agency Adjudication," 1 C.F.R.
§ 305.70-3.

84. Gerhart, Peter M., Judicial Review of Customs Service Actions, 9 Law & Pol. Int'l,
Bus. 1101 (1978); 4 ACUS 751 (1979).

Recommendation 77-2: "Judicial Review of Customs Service Actions," 42 Fed.
Reg. 54,251 (1977).

85. Giannella, Donald A., Agency Procedures Implementing the Freedom of Information
Act: A Proposal for Uniform Regulations, 23 Ad. L. Rev. 217 (1971); 2 ACUS 119
(1973).

Recommendation 71-2: "Principles and Guidelines for Implementaion of the
Freedom of Information Act," 2 ACUS 18 (1973); [1971-72] ACUS Ann. Rep. 51.

86. Gifford, Daniel J., Remission and Mitigation of Forfeitures in the Justice
Department, 1 ACUS 697 (1971).

ACUS BffiLIOGRAPHY 963

87. Gilhooley, Margaret, Standards and Procedures for the Discretionary Distribution of
Federal Assistance, 3 ACUS 422 (1975).

Recommendation 74-2: "Procedures for Discretionary Distribution of Federal
Assistance," 1 C.F.R. § 305.74-2.

88. Goldschmid, Harvey J., An Evaluation of the Present and Potential Use of Civil
Money Penalties as a Sanction by Federal Administrative Agencies, 2 ACUS 896
(1973).

Recommendation 72-6: "Civil Money Penalties as a Sanction," 1 C.F.R. § 305.72-

89. Grunschlag, Dov M., Administering Federal Programs of Production Adjustment, 49
Agricultural History 131 (1975).

90. Hamilton, Robert W., Procedures for the Adoption of Rules of General Applicability:
The Need for Procedural Innovation in Administrative Rulemaking, 60 Calif. L.
Rev. 1276 (1972); 2 ACUS 834 (1973).

Recommendation 72-5: "Procedures for the Adoption of Rules of General

Applicability," 1 C.F.R. § 305.72-5.

91. Hamilton, Robert W., Role of Nongovernmental Standards in the Development of
Mandatory Federal Standards Affecting Safety or Health, 56 Tex. L. Rev. 1329
(1978); 1978 ACUS 247.

Recommendation 78-4: "Federal Agency Interaction with Private Standard-Setting
Organizations in Health and Safety Regulation," 1 C.F.R. § 305.78-4.

92. Hamilton, Robert W., Rulemaking on a Record by the Food and Drug
Administration, 50 Tex. L. Rev. 1132 (1972); 2 ACUS 448 (1973).

Recommendation 71-7: "Rulemaking on a Record by the Food and Drug
Administration," 2 ACUS 42 (1973); [1971-72] ACUS Ann. Rep 66.

93. Harter, Philip J., Negotiating Regulations: A Cure for Malaise, 1982 ACUS 301
(Vol. I); 71 Geo. L. J. 1 (1982).

Recommendation 82-4: "Procedures for Negotiating Proposed Regulations,"
1 C.F.R. § 305.82-4.

94. Harter, Philip J., Points on a Continuum: Dispute Resolution Procedures and the
Administrative Process, 1986 ACUS 165.

Recommendation 86-3: "Agencies Use of Alternate Means of Dispute Resolution,"
1 C.F.R. § 305.86-3.

964 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

95. Harter, Philip J. and George C. Eads, Policy Instruments, Institutions, and
Objectives: An Analytical Framework for Assessing "Alternatives" to Regulation, 37
AD. L. Rev. 221 (1985).

96. Hosteller, Zona P., Nonlawyer Assistance to Individuals in Federal Mass Justice
Agencies: The Need for Improved Guidelines, 1986 ACUS 47.

Recommendation 86-1: "Nonlawyer Assistance and Representation," 1 C.F.R.
§ 305.86-1.

97. Johnson, George R., Jr., The Split-Enforcement Model: Some Conclusions from the
OS HA and MSHA Experiences, 1986 ACUS 293.

Recommendation 86-4: "The Split-Enforcement Model for Agency Adjudication,"
1 C.F.R. § 305.86-4.

98. Johnson, Phillip £., Federal Parole Procedures, 25 Ad. L. Rev. 459 (1973); 2 ACUS
706 (1973).

Recommendation 72-3: "Procedures of the U. S. Board of Parole," 2 ACUS 58
(1973); [1971-72] ACUS Ann. Rep. 80.

99. Jordan, Ellen R., The Administrative Procedure Act's "Good Cause" Exemption, 36
Ad. L. Rev. 113 (1984), 1983 ACUS 49.

Recommendation 83-2: "The 'Good Cause' Exemption from APA Rulemaking
Requirements," 1 C.F.R. § 305.83-2.

100. Kinney, Eleanor D., The Medicare Appeals System for Coverage and Payment
Disputes, 1986 ACUS 339.

Recommendation 86-5: "Medicare Appeals," 1 C.F.R. § 305.86-5.

101. Kartalia, David E., Elimination of Duplicative Hearings in FAA Safety
Decertification Cases, 1 ACUS 274 (1971).

Recommendation 69-5: "Elimination of Duplicative Hearings in FAA Safety
Decertification Cases," 1 ACUS 25 (1971); [1969] ACUS Ann. Rep. 42.

102. Kurzman, Stephen, Uniform Minimum Procedures for Agencies Administering Grant
Programs. 2 ACUS 181 (1973).

Recommendation 71-4: "Minimum Procedures for Agencies Administering
Discretionary Grant Programs," 1 C.F.R. § 305.71-4.

ACUS BIBLIOGRAPHY 965

103. Legomsky, Stephen H., Forum Choices for the Review of Agency Adjudication: A
Study of the Immigration Process, 71 Iowa L. Rev. 1297 (1986), 1985 ACUS 505.
Recommendation 85-4: "Administrative Review in Immigration Proceedings,"
1 C.F.R. § 305.85-4.

104. Leibowitz, Arnold H., Comparative Analysis of Immigration in Key Developed
Countries in Relation to Immigration Reform and Control Legislation in the United
States, 7 Human Rights L. J. 1 (1986).

105. Leifer, Jacqueline C, Implementation of the Federal Debt Collection Act of 1982,
1984 ACUS 899.

106. Lesnick, Howard, Grievance Procedures in Federal Prisons: Practices and Proposals,
123 U. Pa. L. Rev. 1 (1974).

107. Levin, Ronald M., Judicial Review and the Bumpers Amendment, Current Issues in
Regulatory Reform 264, Washington, D.C., Federal Bar Association (M. L,
Rosenberg and B. B. McGovern ed. 1980); 1979 ACUS 565.

Recommendation 79-6: "Elimination of the Presumption of Validity of Agency

Rules and Regulations in Judicial Review, as Exemplified by the Bumpers

Amendment," 45 Fed. Reg. 2,308 (1980).

Recommendation 81-2: "Current Versions of the Bumpers Amendment," 1 C.F.R.

§ 305.81-2.

108. Levinson, L. Harold, Congressional Oversight of Agency Rulemaking: Options
Available After Chadha, Legislative Veto of Agency Rules After INS v. Chadha
app. B (1984), supra Entry 10.

109. Levinson, L, Harold, Legislative and Executive Veto of Administrative Agencies:
Models and Alternatives, 24 Wm. & Mary L. Rev. 79 (1982).

110. Lockhart, William J., The Origin and Use of "Guidelines for the Study of Informal
Action in Federal Agencies," 24 Ad. L. Rev. 167 (1972).

111. Lockhart, William J., Report on Study of No- Action Letters and Related Advisory
Processes Administered by the Division of Corporation Finance, Securities and
Exchange Commission, 1 ACUS 440 (1971).

Recommendation 70-2: "S.E.C. No-Action Letters Under Section 4 of the
Securities Act of 1933," 1 ACUS 34 (1971); [1971-72] ACUS Ann Rep. 40.

966 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

112. Lubbers, Jeffrey S., Book Review, 32 Fed. Bar News & J. 347 (1985).

113. Lubbers, Jeffrey S., Federal Administrative Law Judges: A Focus on Our Invisible
Judiciary, 33 Ad. L. Rev. 109 (1981).

114. Lubbers, Jeffrey S., Federal Agency Adjudications: Trying to See the Forest and
the Trees, 31 Fed. Bar News & J. 388 (1984).

115. Lubbers, Jeffrey S., Improving Government Regulations: Guide on Agency Reports
Under Executive Order 12044, 43 Fed. Reg. 36,411 (1978).

116. Lubbers, Jeffrey S., A Unified Corps of ALJs: A Proposal to Test the Idea at the
Federal Level, 65 Judicature 266 (1981).

117. Luneburg, William V., Petitions for Rulemaking: Federal Agency Practice and
Recommendations for Improvement, 1986 ACUS 493.

Recommendation 86-6: "Petitions for Rulemaking," 1 C.F.R. § 305.86-6.

118. Madden, Thomas J., Certification Requirements under the Contract Disputes Act,
1983 ACUS 23.

Recommendation 83-1: "The Certification Requirement in the Contract Disputes
Act," 1 C.F.R. § 305.83-1.

119. Madden, Thomas J. and Nicholas W. Allard, Advice on Official Liability and
Immunity, 1982 ACUS 210 (Vol. II). Chapter 4 revised as Bedtime for Bivens:
Substituting the United States as Defendant in Constitutional Tort Suits, 20 Harv. J.
onLegis. 469 (1983).

Recommendation 82-6: "Federal Officials' Liability for Constitutional Violations,"
1 C.F.R. § 305.82-6.

120. Martin, Peter W., Procedures Used in Forming and Carrying Out Federal-State
Agreements under the Supplemental Security Income Program, 1979 ACUS 71.

Recommendation 79-2: "Disputes Respecting Federal-State Agreements for
Administration of the Supplemental Security Income Program," 44 Fed. Reg.
38,823 (1979).

ACUS BffiLIOGRAPHY 967

121. Mashaw, Jerry L., Briefing Memorandum: ABA- ACUS Symposium on Federal
Disability Benefit Programs, Washington, D.C., American Bar Association (1985);
see also supra Entry 12.

122. Mashaw, Jerry L., The Management Side of Due Process: Some Theoretical and
Litigation Notes on the Assurance of Accuracy, Fairness, and Timeliness in the
Adjudication of Social Welfare Claims, 59 Cornell L. Rev. 772 (1974).

123. Mashaw, Jerry L., Private Enforcement of Public Regulatory Provisions: The
"Citizen Suit", 4 Class Action Rep. 29 (1975).

124. Mashaw, Jerry L., Quality Assurance Systems in the Adjudication of Claims of
Entitlement to Benefits or Compensation, 3 ACUS 160 (1975).

Recommendation 73-3: "Quality Assurance Systems in the Adjudication of Claims
of Entitlement to Benefits or Compensation," 1 C.F.R. § 305.73-3.

125. Mashaw, Jerry L., Report to the Grants and Benefits Committee, Administrative
Conference of the United States, on the Social Security Hearings and Appeals
Process, 1978 ACUS 81. Drawn from Mashaw, Jerry L., et al. Social Security
Hearings AND Appeals, Lexington, Mass., D. C. Heath & Co. (1978).

Recommendation 78-2: "Procedures for Determining Social Security Disability

Claims," 1 C.F.R. § 305.78-2.

126. Mason, Malcolm S., Why Can't Grants Statutes Be Drafted Better? 3 Assistance
Management J. 3 (1986).

127. McGarity, Thomas O., Multi-Party Forum Shopping for Appellate Review of
Administrative Action, 129 U. Pa. L. Rev. 302 (1980); 1980 ACUS 437.

Recommendation 80-5: "Eliminating or Simplifying the 'Race to the Courthouse'
in Appeals from Agency Action," 1 C.F.R. § 305.80-5.

128. McGarity, Thomas O., The Role of Regulatory Analysis in Regulatory
Decisionmaking, 1985 ACUS 107.

Recommendation 85-2: "Agency Procedures for Performing Regulatory Analysis
of Rules," 1 C.F.R. § 305.85-2.

968 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

129. McGregor, John, House Subcommittee on Oversight of the Committee on Ways
AND Means, 94th Cong., 2d Sess., Collection of Delinquent Taxes 27 (Comm.
Print 1976); Administrative Procedures of the Internal Revenue Service, S.
Doc. No. 266, 94th Cong., 2d Sess. 203 (1975).

Recommendation 75-6: "Internal Revenue Service Procedures: Collection of

Delinquent Taxes," 41 Fed. Reg. 3,982 (1976).

130. Merrill, Richard A., CPSC Regulation of Cancer Risks in Consumer Products:
1972-1981, 67 Va. L. Rev. 1261 (1981).

Recommendation 82-5: "Federal Regulation of Cancer-Causing Chemicals,"
1 C.F.R. § 305.82-5.

131. Merrill, Richard A., Federal Regulation of Cancer-Causing Chemicals, 1982 ACUS
21 (Vol. II).

Recommendation 82-5: "Federal Regulation of Cancer-Causing Chemicals,"
1 C.F.R. § 305.82-5.

132. Merrill, Richard A., Procedures for Adverse Actions against Federal Employees, 2
ACUS 1007 (1973).

Recommendation 72-8: "Adverse Actions against Federal Employees," 1 C.F.R.
§ 305.72-8.

133. Merrill, Richard A. and Michael Schewel, FDA Regulation of Environmental
Contaminants of Food, 66 Va. L. Rev. 1357 (1980).

Recommendation 82-5: "Federal Regulation of Cancer-Causing Chemicals," 1
C.F.R. § 305.82-5.

134. Morgan, Thomas D., Appropriate Limits on Participation in Matters before an
Agency by a Former Agency Official, 1980 Duke L. J. 1; 1979 ACUS 599.

Recommendation 79-7: "Appropriate Restrictions on Participation by a Former
Agency Official in Matters Involving the Agency," I C.F.R. § 305.79-7,

135. Morgan, Thomas D., Towards a Revised Strategy for Ratemaking, 78 U. ILL. L. Forum
21 (1978); 1978 ACUS 23.

Recommendation 78-1: "Reduction of Delay in Ratemaking Cases," 1 C.F.R.
$ 305.78-1.

ACUS BIBLIOGRAPHY 969

136. Murphy, Arthur W., The National Environmental Policy Act and the Licensing
Process: Environmentalist Magna Carta or Agency Coup de Grace? ^ 11 Colum. L.
Rev. 963 (1972); 3 ACUS 363 (1975).

Recommendation 73-6: "Procedures for Resolution of Environmental Issues in

Licensing Proceedings," 1 C.F.R. § 305.73-6.

137. Nathanson, Nathaniel L., The Administrative Court Proposal, 57 Va. L. Rev. 996
(1971); 2 ACUS 198 (1973).

Statement 1: "Views of the Administrative Conference on the 'Report on Selected
Independent Regulatory Agencies' of the President's Advisory Council on
Executive Organization," 57 Va. L. Rev. 927 (1971); 38 Fed. Reg. 19,794 (1973).

138. Nathanson, Nathaniel L., Report to the Select Committee on Ex Parte
Communications in Informal Rulemaking Proceedings, 30 Ad. L. Rev. 377 (1978); 4
ACUS 841 (1979).

Recommendation 77-3: "Ex Parte Communications in Informal Rulemaking

Proceedings," 1 C.F.R. § 305.77-3.

139. Neely, Alfred S., IV, Statutory Inhibitions to the Application of Principles of
Cost/Benefit Analysis in Administrative Decision Making, 23 Dug, L. Rev. 489
(1985); 1985 ACUS 37.

Recommendation 85-1: "Legislative Preclusion of Cost/Benefit Analysis,"
1 C.F.R. § 305.85-1.

140. Ogden, Gregory L., Report on Public Regulation of Siting of Industrial Development
Projects, 1984 ACUS 45.

Recommendation 84-1: "Public Regulation of Siting of Industrial Development
Projects," 1 C.F.R. § 305.84-1.

141. O'Reilly, James T., Regaining a Confidence: Protection of Business Confidential
Data Through Reform of the Freedom of Information Act, 34 Ad. L. Rev. 263
(1982); 1982 ACUS 29 (Vol. I).

Recommendation 82-1: "Exemption (b)(4) of the Freedom of Information Act,"
1 C.F.R. § 305.82-1.

142. O'Reilly, James T., Who's on First?: The Role of the Office of Management and
Budget in Federal Information Policy, 10 J. Legis. 95 (1983).

970 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

143. Paglin, Max D., Procedural Implications of Administering Emergency Shortages of
Natural Gas, 4 ACUS 871 (1979).

Statement 5: "Statement on Procedures to Deal with Emergency Shortages of
Natural Gas," 41 Fed. Reg. 56.770 (1976).

144. Park, Robert E., Report of the Committee on Personnel in Support of Adequate
Hearing Facilities, 1 ACUS 48 (1971).

Recommendation 68-1: "Adequate Hearing Facilities," 1 C.F.R. { 305.68-1.

145. Park, Robert E., Several Matters in Regard to Examiners and Government Attorneys,
1 ACUS 381 (1971).

Recommendation 69-9: "Recruitment and Selection of Hearing Examiners;
Continuing Training for Government Attorneys and Hearing Examiners; Creation
of a Center for Continuing Legal Education in Government," 1 C.F.R. { 305.69-
9.

146. Perritt, Henry H., Jr., Analysis of Four Negotiated Rulemaking Efforts, 1985 ACUS
637; abridgement. Negotiated Rulemaking in Administrative Law, 38 Ad. L. Rev.
471 (1986); expanded version. Negotiated Rulemaking: An Evaluation, 74 Geo. L. J.
1625 (1986).

Recommendation 85-5: "Procedures for Negotiating Proposed Regulations,"
1 C.F.R. § 305.85-5.

147. Perritt, Henry H., Jr., Negotiated Rulemaking in Practice^ 5 J. Pol'y Analysis &
Mgmt. 482 (1986).

148. Pierce, Richard J., Regulation, Deregulation, Federalism and Administrative Law:
Agency Power to Preempt State Regulation, 46 U. Pitt. L. Rev. 607 (1985); 1984
ACUS 517.

Recommendation 84-5: "Preemption of State Regulation by Federal Agencies,"
1 C.F.R. § 305.84-5.

149. Pierce, Richard J., Jr., Use of the Federal Rules of Evidence in Federal Agency
Adjudications, 39 Ad. L. Rev. 1 (1987); 1986 ACUS 133.

Recommendation 86-2: "Use of the Federal Rules of Evidence in Federal Agency
Adjudications," 1 C.F.R. § 305.86-2.

150. Popkin, William D., The Effect of Representation in Nonadversary Proceedings — A
Study of Three Disability Programs, 62 Cornell L. Rev. 989 (1977).

ACUS BIBLIOGRAPHY 971

151. Pou, Charles, Jr., Book Review, 36 Ad. L. Rev. 209 (1984).

152. Pou, Charles, Jr., Governmental Uses of Alternative Dispute Resolution, 9 Urban,
State and Local Law Newsletter 1 (1986).

153. Powell, Burnele V., Administratively Declaring Order: Some Practical Applications
of the Administrative Procedure Act's Declaratory Order Process, 64 N.C.L. Rev. 277
(1986).

154. Powell, Burnele V., Sinners, Supplicants, and Samaritans: Agency Advice Giving in
Relation to Section 554(e) of the Adminstrative Procedure Act, 63 N.C.L. Rev. 339
(1985).

155. Price, Monroe E., Executive Control of Rulemaking: The Office of
Administrative Law in California, Washington, D.C., U. S. Government Printing
Office (1981).

156. Pritzker, David M. and Willl^m J. Walsh, Scientific and Technical Decision-
Making in the National Flood Insurance Program of the Federal Insurance
Administration, Washington, D.C., Administrative Conference of the U. S. (1977).

157. Rabin, Robert L., Agency Criminal Referrals in the Federal System: An Empirical
Study of Prosecutorial Discretion, 24 Stan. L. Rev. 1036 (1972).

158. Rich, Malcolm C. and Wayne E. Brucar, The Central Panel System for
Administrative Law Judges: A Survey of Seven States, Chicago, American
Judicature Society (1983).

159. Robertson, Reuben B. and Mary Candace Fowler, Recovering Attorney's Fees from
the Government Under the Equal Access to Justice Act, 56 Tulane L. Rev. 903
(1982).

160. Robinson, Glen O., The Forest Service: A Study in Public Land Management,
Baltimore, John Hopkins Press (1975).

972 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

161. Robinson, Glen O., On Reorganizing the Independent Regulatory Agencies, 57 Va.
L. Rev. 947 (1971); 2 ACUS 218 (1973).

Statement 1: "Views of the Administrative Conference on the 'Report on
Selected Independent Regulatory Agencies' of the President's Advisory Council
on Executive Organization," 57 Va. L. Rev. 927 (1971); 38 Fed. Reg. 19,794
(1973).

162. Rosenblum, Victor G., The Administrative Law Judge in the Administrative Process:
Interrelations of Case Law with Statutory and Pragmatic Factors in Determining ALJ
Roles, in Subcomm. on Social Security, House Comm. on Ways and Means, 94th
Cong., 1st Sess., Recent Studies Relevant to the Disability Hearings and
Appeals Crisis 171 (Comm. Print 1975).

163. Rosenblum, Victor G., Contexts and Contents of "Good Cause" as Criterion for
Removal of Administrative Law Judges: Legal and Policy Factors, 6 W. New Eng.
L. Rev. 593 (1984), 1984 ACUS 937.

164. Rosenblum, Victor G., Handling Citizen Initiated Complaints: An Introductory
Study of Federal Agency Procedures and Practices, 26 Ad. L. Rev. 1 (1974); 3
ACUS 611 (1975).

165. RuHLEN, Merritt, Manual for Administrative Law Judges, Washington, D.C.,
U. S. Government Printing Office (1974).

166. RuHLEN, Merritt, Manual for Administrative Law Judges, Washington, D.C.,
U. S. Government Printing Office (rev. ed. 1982).

167. Ruttinger, George D., Acquiring the Services of Neutrals for Alternative Means of
Dispute Resolution and Negotiated Rulemaking, 1986 ACUS 863.

Recommendation 86-8: "Acquiring the Services of 'Neutrals' for Alternative
Means of Dispute Resolution," 1 C.F.R. § 305.86-8.

168. Scalia, Antonin, The Hearing Examiner Loan Program, 1971 Duke L. J. 319 .

169. Scalia, Antonin and Frank L. Goodman, Procedural Aspects of the Consumer Product
Safety Act, 20 U.C.L.A. Law Rev. 899 (1973).

ACUS BffiLIOGRAPHY 973

170. SCHLESINGER, STEVEN R., EDITOR. VENUE AT THE CROSSROADS, Washington, D.C.,

National Legal Center for the Public Interest (1982). 1982 ACUS 219 (Vol. I).
[Original publication not funded by A.C.U.S.]

Recommendation 82-3: "Federal Venue Provisions Applicable to Suits Against

the Federal Government," 1 C.F.R. § 305.82-3.

171. Schuck, Peter H., When the Exception Becomes the Rule: Regulatory Equity and the
Formulation of Energy Policy Through an Exceptions Process, 1984 Duke L. J. 163 ;
1983 ACUS 513.

Statement 10: "Agency Use of an Exceptions Process to Formulate Policy,"
1 C.F.R. § 310.10.

172. Schwartz, Teresa M., The Consumer Product Safety Commission: A Flawed Product
of the Consumer Decade, 51 Geo. Wash. L. Rev. 32 (1982); 1982 ACUS 578 (Vol.
11).

173. Schwartz, Teresa M. and Robert S. Adler, Product Recalls: A Remedy in Need of
Repair, 34 CaseW. Res. L. Rev. 401 (1983-84), 1984 ACUS 135.

Recommendation 84-2: "Procedures for Product Recalls," 1 C.F.R. § 305.84-2.

174. Schwartz, Warren F., The Administration by the Department of the Treasury of the
Laws Authorizing the Imposition of Antidumping Duties, 3 ACUS 187 (1975).

Recommendation 73-4: "Administration of the Antidumping Law by the
Department of the Treasury," 39 Fed. Reg. 44,846 (1974).

175. Scott, Kenneth E., The Dual Banking System: A Model of Competition in
Regulation, 30 Stan. L. Rev. 1 (1977).

176. Scott, Kenneth E., In Quest of a Reason: The Licensing Decisions of the Federal
Banking Agencies, 42 U. Chi. L. Rev. 235 (1975); 4 ACUS 83 (1979).

Recommendation 75-1: "Licensing Decisions of the Federal Banking Agencies,"
1 C.F.R. § 305.75-1.

177. Shapiro, Sidney A., Scientific Issues and the Function of Hearing Procedures: An
Evaluation of FDA's Public Board of Inquiry, 1985 ACUS 795; 1986 Duke 288.
Statement 11: "Statement on Hearing Procedures for the Resolution of Scientific
Issues," 1 C.F.R. § 310.11.

974 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

178. Shaw, William R., The Procedures to Ensure Compliance by Federal Facilities with
Environmental Quality Standards, 5 Envtl. L. Rep. 50,211 (1975); 4 ACUS 283
(1979).

Recommendation 75-4: "Procedures to Ensure Compliance by Federal Facilities
with Environmental Quality Standards," 1 C.F.R. § 305.75-4.

179. Singer, Michael J., United States, Administrative Secrecy in Developed
Countries 309, New York, Columbia University Press (D. C. Rowat ed. 1979).

180. Smith, Loren A., Foreword to Symposium on Administrative Law, 18 New Eng. L.
Rev. 777 (1983).

181. Smith, Loren A., Judicial Review of Administrative Decisions, 7 Harv. J. L. & PUB.
Pol'y61 (1984).

182. Smith, Loren A., Judicialization: The Twilight of Administrative Law, 1985 Duke
L. J. 427.

183. Smith, Loren A., The Vision of the Exchange, 27 Wm. &. Mary L. Rev.
(1986).

184. Sofaer, Abraham D., The Change-of-Status Adjudication: A Case Study of the
Informal Agency Process, 1 J. Legal Stud. 349 (1972); 2 ACUS 303 (1973).

Recommendation 71-5: "Procedures of the Immigration and Naturalization Service
in Respect to Change-of-Status Applications," 2 ACUS 32; [1971-72] ACUS Ann.
Rep. 56.

185. Sofaer, Abraham D., Judicial Control of Informal Discretionary Adjudication and
Enforcement, 72 Colum. L. Rev. 1293 (1972).

186. Spritzer, Ralph S., Uses of the Summary Power to Suspend Rates: An Examination
of Federal Regulatory Agency Practices, 120 U. Pa. L. Rev. 39 (1971); 2 ACUS 765
(1973).

Recommendation 72-4: "Suspension and Negotiation of Rate Proposals by Federal

Regulatory Agencies," 1 C.F.R. § 305.72-4.

187. Steadman, John M., "Forgive U. S. Its Trespasses?" Land Title Disputes with the
Sovereign — Present Remedies and Prospective Reform, 1972 Duke L. J. 15.

ACUS BffiLIOGRAPHY 975

188. Steinberg, Ann, Federal Grant Dispute Resolution. Mezines, Stein, Gruff,
Administrative Law, New York, Matthew Bender (1983); 1982 ACUS 137 (Vol. I).
Recommendation 82-2: "Resolving Disputes under Federal Grant Programs,"
1 C.F.R. § 305.82-2.

189. Stevenson, Russell B., Jr., Fees Under the Freedom of Information Act. 1981 ACUS
85.

Recommendation 81-1: "Procedures for Assessing and Collecting Freedom of
Information Act Fees," 1 C.F.R. § 305.81-1.

190. Stevenson, Russell B., Jr., Protecting Business Secrets Under the Freedom of
Information Act; Managing Exemption 4, 34 Ad. L. Rev. 207 (1982); 1982 ACUS
81 (Vol. I)

Recommendation 82-1: "Exemption (b)(4) of the Freedom of Information Act,"
1 C.F.R. § 305.82-1.

191. Strauss, Peter L., Disqualification of Decisional Officials in Rulemaking, 80 Colum.
L. Rev. 990 (1980); 1980 ACUS 375.

Recommendation 80-4: "Decisional Officials' Participation in Rulemaking
Proceedings," 1 C.F.R. § 305.80-4.

192. Strauss, Peter L., Mining Claims on Public Lands; A Study of Interior Department
Procedures, 191 A Utah L. Rev. 185; 3 ACUS 451 (1975).

Recommendation 74-3: "Procedures of th^i Department of the Interior with
Respect to Mining Claims on Public Lands," 39 Fed. Reg. 23,043 (1974).

193. Sullivan, Neil J., Independent Adjudication and Occupational Safety and Health
Policy: A Test for Administrative Court Theory, 31 Ad. L. Rev. 177 (1979).

194. SzANTON, Peter L., et al.. Federal Reorganization: What Have We Learned?,
Chatham, N.J., Chatham House (1981).

195. Thomas, Larry W., The Courts and the Implementation of the Government in the
Sunshine Act, 37 Ad. L. Rev. 259 (1985).

196. Thomas, Norman C, Politics, Structure and Personnel in Administrative Regulation,
57 Va. L. Rev. 1033 (1971); 2 ACUS 267 (1973).

976 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

197. Tomlinson, Edward A., Discovery in Agency Adjudication, 1971 Duke L. J. 89, 1
ACUS 577 (1971).

Recommendation 70-4: "Discovery in Agency Adjudication," 1 C.F.R. § 305.70-4.

198. Tomlinson, Edward A., Modification and Dissolution of Administrative Orders and
Injunctions, 31 Md. L. Rev. 312 (1971); 2 ACUS 511 (1973).

Recommendation 71-8: "Modification and Dissolution of Orders and Injunctions,"
1 C.F.R. § 305.71-8.

199. Tomlinson, Edward A., Report on the Experience of Various Agencies with Statutory
Time Limits Applicable to Licensing or Clearance Functions and to Rulemaking,
1978 ACUS 119.

Recommendation 78-3: "Time Limits on Agency Actions," 1 C.F.R. § 305.78-3.

200. Tomlinson, Edward A., Strengthening the Informational and Notice-Giving Functions
of the Federal Register, 4 ACUS 427 (1979).

Recommendation 76-2: "Strengthening the Informational and Notice-Giving
Functions of the Federal Register," 1 C.F.R. § 305.76-2.

201. Tomlinson, Edward A. and Jerry L. Mashaw, The Enforcement of Federal Standards
in Grant-In-Aid Programs: Suggestions for Beneficiary Involvement, 58 Va. L.
Rev. 600 (1972); 2 ACUS 531 (1973).

Recommendation 71-9: "Enforcement of Standards in Federal Grant-In-Aid

Programs," 1 C.F.R. § 305.71-9.

202. Tomlinson, Edward A., The Use of the Freedom of Information Act (FOIA) for
Discovery Purposes, 43 Md. L. Rev. 119 (1984); 1983 ACUS 277.

Recommendation 83-4: "Use of the FOIA for Discovery Purposes," 1 C.F.R.
§ 305.83-4.

203. Verkuil, Paul R., Congressional Limitations on Judicial Review of Rules, 57 Tulane
L. Rev. 733 (1983), 1982 ACUS 443 (Vol. II).

Recommendation 82-7: "Judicial Review of Rules in Enforcement Proceedings,"
1 C.F.R. § 305.82-7.

204. Verkuil, Paul R., A Critical Guide to the Regulatory Flexibility Act, 1982 Duke L. J.
213; 1981 ACUS 203.

ACUS BIBLIOGRAPHY 977

205. Verkuil, Paul R., Jawboning Administrative Agencies: Ex Parte Contacts by the
White House, 80 Colum. L. Rev. 943 (1980); Regulatory Reform Legislation of
1981: Hearings on S.344 and S.1080, Senate Committee on Governmental Affairs,
May 12 and June 23, 1982, 97th Cong., 1st Sess. 464 (1982); 1980 ACUS 513.

Recommendation 80-6: "Intragovernmental Communications in Informal

Rulemaking Proceedings," 1 C.F.R. § 305.80-6.

206. Verkuil, Paul R., Judicial Review of Informal Rulemaking, 60 Va. L. Rev. 185
(1974).

Recommendation 74-4: "Preenforcement Judicial Review of Rules of General
Applicability," 1 C.F.R. § 305.74-4.

207. Verkuil, Paul R., Study of Informal Adjudication Procedures, 43 U. Chi. L. Rev.
739 (1976).

208. Verkuil, Paul R., A Study of Immigration Procedures, 3 UCLA L. Rev. 1141 (1984);
1984 ACUS 987.

209. Vetter, Jan, Affirmative Action in Faculty Employment Under Executive Order
11246, 4 ACUS 147 (1979).

Recommendation 75-2: "Affirmative Action for Equal Opportunity in
Nonconstruction Employment," 1 C.F.R. § 305.75-2.

210. Vining, G. Joseph, Direct Judicial Review and the Doctrine of Ripeness in
Administrative Law, 69 Mich. L. Rev. 1443 (1971).

211. Welborn, David M., Governance of Federal Regulatory Agencies, Knoxville,
Univ. of Tennessee Press (1977).

Statement 4: "Strengthening Regulatory Agency Management Through Seminars
for Agency Officials," 1 C.F.R. § 310.4.

212. Welborn, David M., William Lyons and Larry Thomas, Implementation and Effects
of the Federal Government in the Sunshine Act, Mezines, Stein, Gruff,
Administrative Law, New York, Matthew Bender (1986); 1984 ACUS 197.

Recommendation 84-3: "Improvements in the Administration of the Government

in the Sunshine Act," 1 C.F.R. § 305.84-3.

213. Williams, Jerre S., Fifty Years of the Law of the Federal Administrative Agencies —
and Beyond, 29 Fed. Bar J. 267 (1970).

978 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

214. Williams, Stephen F., "Hybrid Rulemaking" under the Administrative Procedure Act:
A Legal and Empirical Analysis, 42 U. Chi. L. Rev. 401 (1975); 4 ACUS 499
(1979).

Recommendation 76-3: "Procedures in Addition to Notice and the Opportunity
for Comment in Informal Rulemaking," 1 C.F.R. { 305.76-3.

215. WiLLRicH, Mason, Administration of Energy Shortages: Natural Gas and
Petroleum, Cambridge, Ballinger Publishing Co. (1976).

216. Zengerle, Lynda S., Procedural Deficiencies in Labor Certification of Immigrant
Aliens, 3 ACUS 129 (1975).

Recommendation 73-2: "Labor Certification of Immigrant Aliens," 38 Fed. Reg.
16,840 (1973).

217. Zimmer, Michael J. and Charles A. Sullivan, Consent Decree Settlements:
Optimizing Public and Private Interests in Antitrust and Employment Discrimination
Settlement Proceedings, 1976 DukeL. J. 163.

ACUS BIBLIOGRAPHY 979

INDEX

(Numbers Refer to Entry Number)

Adjudication 6. 7, 23, 24, 25, 27, 36, 45, 51, 83, 89, 97, 114, 152, 193, 197, 207, 208, 217

Administrative Conference of the U. S. 1, 213

Administrative court 116, 137, 158, 193

Administrative law judges 4, 5, 6, 7, 48, 57, 113, 114, 116, 145, 158, 162, 163, 165, 166,

168
Administrative Procedure Act (generally) 8, 42, 43
Adverse actions 132
Adverse publicity 79
Advice, governmental 17
Advisory committees 46
Affirmative action 209
Agency policies 19, 32, 51, 70, 72
Aliens 184, 185, 216
Alternative dispute resolution 94, 167
Antidumping laws 14, 174
Antitrust 69, 217
Arbitration 2, 94, 152
Ash Council Report 137, 161, 196, 213
Atomic Energy Commission 54
Attorney discipline 52
Attorney's fees 159
Bank regulation 175, 176
Board of Parole 98
Book review 68, 112, 151
British administrative law 183
British administrative tribunals 1
Broadcast licensing 15
Broadcasting 22
Bumpers Amendment 107
Business secrets 141, 142, 190
California Office of Administrative Law 155
Carcinogens 130, 131, 133
Case management 45
Caseload accounting 6, 7
Chairman, regulatory agencies 211
Citizen complaints 55, 164
Citizen suits 41, 60, 123
Civil Aeronautics Board 23, 75
Civil money penalties 18, 71, 86, 88
Civil Service Retirement Act 44
Claims adjudication 122, 124, 150
Clean Air Act 61
Conflict of interest 49, 134
Consent decree 217
Constitutional torts 119
Consumer Product Safety Act 169
Consumer Product Safety Commission 130, 172, 173
Continuing legal education 145

980 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Contract Disputes Act 118

Cost-benefit analysis 21, 66, 128, 139

Council on Tribunals 1

Criminal prosecution 157

Customs Service 84

Debt Collection 105

Declaratory orders 153, 154

Defense and space contracts 16

Delay, administrative 6, 7, 53, 135, 199

Department of Agriculture 89

Department of Energy 1 1

Department of Interior 50, 192

Department of Justice 69, 86, 157, 217

Department of Labor 66, 216

Department of Treasury 174

Deregulation 182

Discovery 197, 202

Discretionary review 75, 76, 182

Disqualification of officials 163, 191

Economic analysis 69

Energy policy 171

Energy shortages 11, 143, 215

Environmental law 13, 21, 41, 59, 60, 61, 136, 156

Environmental Protection Agency 13, 41, 61, 178

Environmental quality standards 178

Equal Access to Justice Act 159

Equal employment opportunity 209

Equal Employment Opportunity Commission 217

Evidence 149

Ex parte communications 9, 138, 205

Exceptions 171, 189

Executive Order 11246 209

Executive Order 12044 115

Federal Advisory Committee Act 46

Federal Aviation Administration 101

Federal Communications Commission 15, 76

Federal Debt Collection Act 105

Federal Deposit Insurance Corporation 175, 176

Federal employees 44, 119, 132, 191

Federal Home Loan Bank Board 176

Federal Insurance Administration 156

Federal Power Commission 143, 215

Federal Register 200

Federal Reserve System 175, 176

Federal Rules of Evidence 149

Federal Tort Claims Act 27

Federal Trade Commission 37, 38, 39, 40, 69

Federal Water Pollution Control Act 61

Federal-State relations 87, 120, 140, 143, 148, 175, 201

Fee waivers 33, 189

Flood insurance program 156

Food and Drug Administration 92, 133, 173, 177

Foreign affairs function exemption (APA) 29

Forest Service 160

ACUS BIBLIOGRAPHY 981

Forfeitures 86

Forum shopping 62, 127

Freedom of information 179

Freedom of Information Act 33, 85, 141, 189, 190, 202

Government contracts 118

Government in the Sunshine Act 26, 195, 212

Grant disputes 45, 188

Grants, federal 87, 102, 126, 188, 201

Hazardous wastes 13

Hearing facilities 4, 5, 144

Immigration and Naturalization Service 103, 184, 185, 208

Immigration legislation 104

Indian lands 50

Indian Trust Counsel Authority 49

Industrial development projects 140

Informal action 13, 51, 110, 184, 185, 207

Information policy 142

Information, public 17, 22, 212

Injunctions 198

Interlocutory appeals 82

Internal Revenue Service 18, 63, 129

International Trade Commission 14

Intragovernmental communications 205

Judicial activism 181, 182

Judicial review 9, 28, 56, 61, 62, 64, 65, 84, 107, 127, 170, 181, 185, 203, 206, 210

Jurisdictional amount 56

Labor certification 216

Land management 50, 156, 160, 187, 192

Legislative veto 10, 81, 108, 109

Licensing 15, 136, 176, 199

Magnuson-Moss 37, 38, 39

Management seminars 2 1 1

Mandatory retirement exemption 44

Medicare 100

Merit Systems Protection Board 2

Military function exemption (APA) 29

Mining claims 192

National Environmental Policy Act 59, 136

National Highway Traffic Safety Administration 173

National Transportation Safety Board 101

Natural gas 143, 215

Negotiation 13, 93, 146, 147

No-action letters 1 1 1

Nonlawyer representation 96

Nuclear power plant siting 54

Occupational Safety and Health Administration 66

Office of Management and Budget 78, 142

Official liability 119

Ombudsman 55

Orders 198

Paperwork Reduction Act 78, 142

Parole 98

Parties defendant 56

Petroleum regulation 11,215

982 ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

Poor people's counsel 31

Preemption 148

Presidential appointees 44

Primary jurisdiction 34

Prison procedures 98, 106

Product recalls 173

Prosecutorial discretion 157

Public interest fee waivers 33, 189

Public participation 19, 30, 31, 32, 37, 38, 58, 80, 140, 172

Race to the Courthouse 127

Ratemaking 135, 186

Regulatory agencies 70, 72, 137, 161, 196, 211, 212

Regulatory analysis 21, 66, 128, 204

Regulatory equity 171

Regulatory Flexibility Act 204

Regulatory negotiation 93, 146, 147, 152, 167

Regulatory reform 3, 42, 43, 95, 180, 204

Renegotiation Board 16

Reorganization, agency 23, 137, 161, 194, 196, 213

Reports, agency 115

Representatives 150

Review boards 48, 75, 76, 103

Revolving door 134

Rulemaking 9, 10, 24, 31, 37, 38, 39, 51, 81, 90, 93, 108, 109, 115, 128, 146, 147, 155, 172,

191, 199
Rulemaking exemptions 29, 30, 99
Rulemaking, formal 25, 92
Rulemaking, hybrid 37, 38, 39, 40, 214
Rulemaking, informal 35, 67, 138, 205, 206
Rulemaking, interpretive 19, 32
Rulemaking petition 117
Safety and health 21, 66, 91, 193
Safety hearings (FA A) 101
Science and technology 47, 177
Secrecy, administrative 179
Securities and Exchange Commission 1 1 1
Selective Service System 28
Separation of functions 20, 23
Siting 140

Small business 159, 204

Social Security Administration 12, 73, 74, 120, 121, 125
Sovereign immunity 56, 119, 187
Split-enforcement 97
Standards 201

Standards, safety and health 91, 178
State administrative law 109, 155, 158
Statistics 6, 7
Subpoena power 25
Summary procedure 77, 83, 186
Sunshine Act 26, 212
Superfund 13

Supplemental Security Income Program 120
Taxation, federal 18, 63, 129
Time limits 199

ACUS BIBLIOGRAPHY 983

Torts 27

Trade secrets 14, 141, 142, 190
Uniform procedures 85, 102
Validity of rules 107
Venue 62, 127, 170
Veterans Administration 64
Welfare adjudication 73, 74, 122
White House 205

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