Part 11- Regulation of Business, Chapter 47: Administrative Law, Doc 5

Legal Bases for Challenging Agency Actions: 1. Ultra Vires Claims: Agencies can be challenged if their actions exceed the authority granted by their enabling statutes. For example, in FDA v. Brown & Williamson, the U.S. Supreme Court struck down the FDA's attempt to regulate tobacco because Congress did not grant the FDA that authority under the Food, Drug, and Cosmetic Act. 2. Misinterpretation of Statutes: Courts may also invalidate agency actions based on the erroneous interpretation of statutory language. An example is the American Library Association v. FCC case, where the FCC exceeded its regulatory authority in requiring television and computer manufacturers to install broadcast flag technology. 3. Violation of Procedural Requirements: Agencies must follow procedural rules established by the Administrative Procedure Act (APA) or their enabling statutes. A challenge may be based on an agency failing to adhere to these procedures. 4. Insufficient Factual Basis: Agency actions can be challenged if they are not supported by substantial evidence, meaning there was inadequate factual support when the agency made its decision. Standards of Judicial Review: 1. De Novo Review: This is the most rigorous standard, where courts independently review the facts. It is applied when a statute mandates it, when fact-finding by the agency is inadequate, or when new factual issues are raised in a non-adjudicatory proceeding. 2. Substantial Evidence Test: This is used in formal rulemaking and adjudications. Courts examine whether an agency's findings are supported by substantial evidence. If not, the court may overturn the agency's decision. This standard ensures that courts do not substitute their judgment for that of the agency, but rather check the reasonableness of the agency's conclusions based on the factual record. 3. Arbitrary and Capricious Test: This is the least stringent form of review and is used for informal agency actions. Courts applying this standard ask whether the agency had an adequate factual basis for its decision and whether it made a clear error in judgment. The Massachusetts v. EPA case discussed earlier used this test, where the Court found the EPA's refusal to regulate greenhouse gases arbitrary and capricious. 4. Chevron Deference: In cases involving statutory ambiguity, courts will typically defer to the agency’s interpretation if it is reasonable, even if it is not the best interpretation. This was applied in Brand X Internet Services where the Supreme Court deferred to the FCC's interpretation of the Telecommunications Act. Additional Legal Challenges and Examples:   Massachusetts v. EPA: The Court ruled that the EPA's refusal to regulate greenhouse gases was arbitrary and capricious because the agency failed to provide a reasoned explanation for its action. The case emphasized that policy preferences (such as avoiding the President’s negotiating flexibility) cannot override statutory obligations. FCC v. Fox Television Stations: In this case, the Supreme Court applied the arbitrary and capricious standard to review the FCC's enforcement policy on indecent speech. The court found that the FCC had the authority to change its enforcement policy but remanded the case due to a lack of proper explanation for the change. These cases highlight that judicial review is a critical mechanism in ensuring that administrative agencies act within their authority, follow proper procedures, and make decisions grounded in adequate factual evidence. Courts exercise different levels of scrutiny based on the nature of the case, but always balance the need for agency expertise with the principle of legal accountability.