News from the Circuits

Eighth Circuit holds statute unconstitutional as an excessive delegation of legislative powers

In South Dakota v. U.S.D.O.I., --- F.3d ---- (1995), a split panel of the Eighth Circuit held a portion of the Indian Reorganization Act of 1934 unconstitutional as an excessive delegation of legislative authority. The Act authorizes the Secretary of Interior, "in his discretion, to acquire ... any interest in lands ... for the purpose of providing for Indians." 25 U.S.C. 465. Over the objections of South Dakota and the city of Oacoma, the Secretary acquired 91 acres of land in trust for the Lower Brule Tribe of Sioux Indians for use as an industrial park. The court, observing that the statute was passed in the same year as the only two statutes that the Supreme Court has ever declared excessive delegations of legislative authority, found "no perceptible 'boundaries,' no 'intelligible principles,' within the four corners of the statutory language" to constrain the delegated authority. Moreover, because the government, arguing that the acquisition was not judicially reviewable, claimed that it was committed to agency discretion by law, this was further evidence of the lack of any constraint on the agency delegation. The court then looked to the legislative history to determine if there was any basis for a limiting standard there. It found that Congress's purpose was not generally to "provide for Indians," but more narrowly to enlarge existing reservations, restore alienated lands, and provide other lands for agrarian (not industrial park) uses. While normally that would have provided a basis for a limiting interpretation of the Act to save its constitutionality, here the Eighth Circuit in 1978 had upheld the Secretary's expansive interpretation of his authority, and a subsequent panel may not overrule a prior panel. Thus, a limiting construction based upon the legislative history was not available. Finally, "[g]iven the extensive standards that Congress has built into other procurement programs, the total absence of procurement principles and safeguards [in the Act] violates the nondelegation doctrine."

Federal Circuit declares FIRREA's new capital requirements a breach of contract by the government with those banks who agreed to take over failing institutions on the condition that "supervisory goodwill" would satisfy capital requirements

At the beginning of the savings and loan crisis, the FSLIC and the FHLBB entered into agreements with healthy banks to take over failing banks. One of the incentives to the healthy banks was the agreement that "supervisory goodwill" would count toward the capital requirements for the newly merged institution. When Congress passed the Financial Institutions Reform, Recovery, and Enforcement Act, however, it specifically limited the use of "supervisory goodwill" to meet capital requirements, so that many of the banks who had acquired the failing banks now were in violation of capital requirements and were taken over by the government. In Winstar Corp. v. United States, 64 F.3d 1531 (1995), the Federal Circuit, en banc, held that the agreements between the banks and the government regulators constituted contracts that allowed the use of "supervisory goodwill" to meet capital requirements. Ordinarily, a contract with the government can be set aside by subsequent legislation, unless the contract specifically provides otherwise, and here the agreements did not. Otherwise, ordinary government contracts could restrict the government's power to legislate. Here, however, the court found the general rule inapplicable, because the government's power to legislate was not at issue; the issue was only whether it might be liable for damages as a result of that legislation. The government also argued that the Sovereign Acts Doctrine, which excuses performance of a contract when it is precluded by a "public and general sovereign act." The court found the particular provisions of FIRREA not to be such an act, stating that "[g]overnment action whose principal effect is to abrogate specific contractual rights does not immunize the government from contractual liability."

Seventh Circuit holds that interest on OSHA administrative penalty begins on the day of final agency action, not when entry of judgment is made in court enforcement order

In Reich v. Sea Sprite Boat Co., 64 F.3d 332 (1995), the Secretary of Labor had instituted an administrative proceeding against the company for violations of the Occupational Safety and Health Act and a penalty was imposed against the company. The company did not appeal but did not pay the penalty. Thereafter, the Seventh Circuit ordered the company to pay the penalty as well as almost $1.5 million in contempt. Then, when the company did pay, it included interest only from the date of the court order, and the Secretary brought an action for interest back to the date of the original administrative order. The Occupational Safety and Health Act is silent as to when interest should begin to run in administrative penalty cases. The general rule against prejudgement interest in penalty cases relates to situations where a court imposes the penalty for some violation in the past. Here, the court said, no one doubted that if a district court ordered the penalty, interest would run even while the defendant appealed the district court decision to the court of appeals. By analogy, under an administrative penalty system, the court reasoned, the agency imposition of the penalty order stands in the same position as a district court imposition of a penalty, and consequently, interest should run from that date.

Circuits split on whether termination of Medicare provider status implicates a property interest under Due Process Clause

In Erickson v. United States, 67 F.3d 858 (1995), the Ninth Circuit followed the Tenth Circuit's lead in Koerpel v. Heckler, 797 F.2d 858 (1986), and rejected the Fourth Circuit's contrary decision in Ram v. Heckler, 793 F.2d 444 (1986), in concluding that a doctor is not an intended beneficiary of the Medicare program, so that his financial losses because of his exclusion from the program were "not of constitutional significance for the establishment of a protectable property interest." Nevertheless, the court held that here, where the doctor was being excluded because of a criminal conviction for submitting false claims to Medicare, the doctor had a protectable liberty interest under the Due Process Clause. The doctor contested the validity of his conviction, which he was appealing, and he maintained that he was entitled to a hearing to contest his conviction before being excluded from the Medicare program, at least pending his criminal appeals. The court, applying Matthews v. Eldridge, found that the government's interest was substantial and there was little risk of error in its reliance upon the jury's conviction.

D.C. Circuit applies Chevron deference to an agency's interpretation of Supreme Court precedent interpreting the agency's statute

The Federal Election Commission dismissed a complaint filed against the American Israel Public Affairs Committee for illegal expenditures, because it determined that AIPAC was not a "political committee" under the Federal Election Campaign Act and therefore not subject to the limitations. The Act defines a political committee as any group which receives contributions or makes expenditures in excess of $1000 "for the purpose of influencing any election for Federal office." The FEC conceded that AIPAC probably made such expenditures, but it held that influencing federal elections was not a "major purpose" of the organization, but was merely incidental to its lobbying activities. The D.C. Circuit, with Judge Silberman dissenting, cited Chevron and indicated it must defer to the agency's permissible interpretation of the statute. Akins v. FEC, 66 F.3d 348 (1995). The complainant argued that the definition of "political committee" in the Act was clear and provided no basis for the FEC's "major purpose" requirement, so that the court need not defer to the FEC's interpretation. The court conceded that the plain language of the statute did not support the FEC's narrowing construction, but it said that its inquiry had to include consideration of relevant case law to determine whether the FEC had gone beyond the statute. The court then noted that the Supreme Court in Buckley v. Valeo and some earlier lower court cases had suggested that the definition of political committee was so broad that it could raise First Amendment problems. Accordingly, the term, it said, "need only encompass organizations that are under the control of a candidate or the major purpose of which is the nomination or election of a candidate." Even if this language was dictum, the court said, it was permissible for the FEC to rely on it in making its interpretation. Judge Silberman dissented on the grounds that the FEC had incorrectly interpreted Buckley and the other cases, all of which, he said, narrowed the construction of the term political committee with respect to its expenditures, not its contributions. The FEC, however, had interpreted them to apply to both expenditures and contributions. The court should not, he argued, defer to the agency's interpretation of precedent.

Third Circuit holds Agency's interpretative guidance is entitled to Chevron deference and preempts state law

Under the Hyde Amendment to the Medicaid program, federal funds may be used to pay for abortions when "the pregnancy is the result of rape or incest ... [or when] necessary to save the life of the mother." Moreover, under the program, certain categories of care, including abortions, must be provided by participating states. Pennsylvania's Abortion Control Act prohibits funding abortions through Medicaid for pregnancies caused by rape or incest unless certain reporting requirements are met by the physician and the woman, including a verification that a crime has been reported to the appropriate law enforcement agency. The Health Care Financing Administration has issued a directive allowing states to impose "reasonable reporting or documentation requirements," but the directive further provides that "any such reporting requirement must be waived..., if the treating physician certifies that in his or her professional opinion, the patient was unable, for physical or psychological reasons, to comply with this requirement." The Pennsylvania law contains no provision for a waiver of its reporting requirements. In Elizabeth Blackwell Health Center for Women v. Knoll, 61 F.3d 170 (1995), a split panel of the Third Circuit held that the HCFA directive was interpretive, because it clarified and explained existing law, and was therefore exempt from notice and comment under the APA. The court then cited Chevron v. NRDC as justification for deferring to the agency's intepretation, saying "[s]uch deference is appropriate here even though the Secretary's interpretation is not contained in a 'legislative rule.'" Consequently, the Pennsylvania law is in conflict with federal law and is preempted.

First Circuit declares NRC's change in its decommissioning policy to be arbitrary and capricious, because the agency failed to explain its change, and a violation of the procedural requirements of the Atomic Energy Act

When a nuclear power plant closes, it submits a decommissioning plan to the Nuclear Regulatory Commission for its approval. A nuclear plant convinced the NRC to allow it to remove certain components from the plant before its decommissioning plan had been approved. A citizens group challenged this action, and the First Circuit held in Citizens Awareness Network, Inc. v. NRC, 59 F.3d 284 (1995), that the action was unlawful. The NRC argued that its prior policies were not themselves incorporated into regulations and, in any case, an agency can change its interpretation of its own regulations. The court accepted these claims for purposes of argument but found that any such change "must be accompanied by some reasoning -- some indication that the shift is rational, and therefore not arbitrary and capricious." Here, the NRC had provided no justification for its change, neither any new facts, information, or changed circumstances nor any legal analysis explaining how the new policy comported with existing regulations. Moreover, because the Atomic Energy Act requires the NRC to grant a hearing upon request "in any proceeding for the ... modification of rules and regulations," the court found the refusal of the NRC to grant the citizens their requested hearing a procedural violation as well, saying that the Act's language "encompasses substantive interpretive policy changes like the one involved here."