Deep Dive Episode 121 – Book Review: The Dubious Morality of Modern Administrative Law
Prof. Richard Epstein’s The Dubious Morality of Modern Administrative Law examines how the growth of the administrative state as a result of FDR’s New Deal has coincided with many different Supreme Court decisions since the 1936-37 term of the Court that legitimized the reach of different administrative agencies by giving them far more control over substantive issues through different forms of judicial deference to agency interpretation, such as Auer and Chevron deference.
In this live podcast, Prof. Adam J. White interviews Prof. Epstein about his new book, and then Prof. Epstein fields caller questions on administrative law.
Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.
Dean Reuter: Welcome to The Federalist Society’s Practice Group Teleforum conference call as today, July 6, 2020, we discuss The Dubious Morality of Modern Administrative Law, the new book by Richard Epstein. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. I’m very pleased to welcome two returning guests to Teleforum today, of course, Professor Richard A. Epstein. He’s the Laurence A. Tisch Professor of Law and Director of Classic Liberal Institute at the New York University School of Law.
And we’re joined as well by our moderator and interviewer, Professor Adam White. He’s Assistant Professor and Executive Director of The C. Boyden Gray Center for the Study of the Administrative State at the Antonin Scalia Law School at George Mason University. Adam White is going to interview, essentially, Richard Epstein about his book, which by the way is available in stores everywhere now or online at Amazon and other online outlets. I’ve got a copy of it here.
I recommend it highly. Adam White’s going to interview Richard Epstein. But as always, we’ll be looking to the audience for questions, so have those in mind for when we get to that portion of the program. With that, Professor Adam White, the floor is yours.
Prof. Adam White: Well, thanks, Dean. It’s a real honor and pleasure to get to moderate this conversation with my friend, a professor that we all admire a great deal, Richard Epstein. By the way, I just want to say at the outset The Federalist Society has already published one review of this book by Ted Hirt of the Administrative Law Executive Committee. His review is titled “Is Our Modern Administrative State Unmoored from the Morality of Law?”
And so I recommend that, as well as another review by Jonathan Adler of The Federalist Society’s Regulatory Transparency Project. His review in National Review Online is titled “Is Administrative Law Immoral?” I’ve benefited a lot from both those reviews in preparing for this discussion, but I’ve also benefited over the years from my conversations with my friend, Richard. Richard, welcome to the conversation.
Prof. Richard A. Epstein: Well, it’s very nice to be here. I should tell you I’m on a precarious connection, but I’m going to do the best. It’s a long story, but let’s get to the story about the book, rather than about my fragile phone connections.
Prof. Adam White: Yeah. Let’s talk about the story of the book, so to speak. Let’s start with the beginning of it. Obviously, there’s a lot happening in administrative law these days, but things are always happening in all areas of law. Why did you settle suddenly upon this subject to write your latest book? What spurred you to write it?
Prof. Richard A. Epstein: Well, Adam, first of all, there was an immediate institutional cause, and then there was an intellectual one. The institutional cause was that I was approached by Jim Copland from the Manhattan Institute. He said, “Look. We would like you to write a short essay on the administrative law.” I said, “I’ve written a lot about this.” He said, “But we want you to sort of find an angle.” And the question is, intellectually why did we want to do that? And the answer’s really amazingly simple.
Everybody understands that administrative law now is at a potential tipping point. Throughout the Reagan years even there was kind of a rough consensus that the way in which the system wanted to operate was a lot of deference to administrative agencies on a wide number of questions. It was pretty wide open with respect to delegation and so forth. And yet, when you started to look at the Supreme Court, it was very clear that first Neil Gorsuch, most notably, and also Judge Brett Kavanaugh were having rather different thoughts on this. And so it was going to be pretty clear that many major cases were likely to come up on dealing with the subject. And it would be, I think, important to talk about it.
Then, there’s always the question when you write a book “Do you have a foil?” And in this particular case, I was especially blessed because two of my former colleagues now at Harvard Law School, Adrian Vermeule and Cass Sunstein, had written an article defending the morality of the modern administrative state, referring to Lon Fuller, who wrote this great book The Morality of Law back in 1964, in which what he did is he set out sort of the minimum requirements — the procedural requirements for the rule of law to hold predictability, uniformity of rules, notice of crimes, and so forth.
And they argued that the basic modern administrative state, with a little tugging and hauling, fit within the Fuller model. My view was that it did not. So essentially what you had is three ingredients to put this thing together. You had somebody who really wanted me to do this. It turns out it was a fortuitous time, and there was a foil. So you put all things together. You start writing. And then what you do is you realize that you can’t cabin this particular thing to a very small thing.
And so this 10,000-word essay slowly morphed and became a book. It’s nice to understand why. Like everything I write about — I have taught administrative law, environmental law, water law, FCC law, FDA law, all of which involved heavy administrative law. But I taught so many things that I’m the jack of all trades and arguably a master of none.
But I was extremely blessed particularly with my research assistant, Nate Teaser (sp), said, “Well, what about this case? And what about that case? And what about the other case?” So by the time you’re done, this small book became a very — this small article became a real sized book. And I was helped along by Jim Copland, by Howard Dickman and so forth. And I was very pleased about the way in which it came out, and I’m certainly very thrilled to talk about it now.
Prof. Adam White: You mentioned the Harvard Law Review article that was one of the things that spurred this — the one by Sunstein and Vermeule. I just want to note for the audience, as it happens, Sunstein and Vermeule’s own book length treatment of the subject—they called it Law and Leviathan: Redeeming the Administrative State—that comes out in mid-September. With any luck, we’ll get one or both of them back here for a Federalist Society teleforum. But back to Richard’s book. Richard, obviously there’s a lot going on right now. In a nutshell, how should we understand the modern administrative state? How should we think about the prospects for reform?
Prof. Richard A. Epstein: Well, I mean, as ever, when I do something, I always start at the beginning. There’s a kind of a standing joke that you and I have—and that I have with many other people—is that you always start with Roman law. And it turns out Roman public law was not, shall we say, extensive on these topics. But it did have a bunch of maxims in it associated with you must hear the other side, and you must have a neutral forum and the rest of it.
And so these kind of procedural virtues carried through in the 19th century. And so the way in which the book is organized is I first give an explanation as to why it is that I thought administrative law worked reasonably well up until the progressive New Deal reformation about 1937 and how it has gone off the rail since. And I think it’s a combination of two features.
One of them is I think clearly substantive. What happens under these circumstances is that the office of administrative law in the earlier period is much more modest than it is today. So what you did is you had a situation in which you did a large number of patent grants, a large number of land grants, a large number of employment contracts, both in the military and in the civil service. And so there was a pretty solid body of private law out there to which you could turn in order to figure out what you’re going to do.
And in fact, that’s exactly the way the system started to work. The judges were deferential, but they weren’t just deferential to any administrative decision. What they were deferential to was a course of dealing in a particular area which had been followed very consistently. So if it turned out that what you did is you had somebody come into court and said, “Look. I would like you to interpret this clause in an employment contract in the following way,” and there had been a uniform practice inside the Agency that was responsible for it, the demand for special treatment was always uniformly and emphatically kind of rejected.
And the theory was—in the old administrative state—is that custom actually worked. You had many, many small cases, had professional guys working these things one way or another. And that, well, what happened is you would slowly move until you reached that kind of consensus, and custom became the operative.
When you got to the modern period, all of a sudden, deference in the hands of Justice Stevens took exactly the opposite meaning. And the meaning that it undertook under those circumstances now said, “Look. If an agency decides to change it’s mind and to flip, we defer to the last decision of the agency, even if it turns out it deviates from the earlier decision.” And note the consequences of the shift in the two views of deference.
Under the older view, there’s continuous evolution but no sharp discontinuities. Under the newer view, every time you’ve got a change in agency control—this administration replacing that administration—you could have the whole thing turn completely upside down. And that’s exactly what happened in the Chevron case.
There had been one set of determinations that had been made with respect to this issue under the Carter administration and another set which had been made under the Reagan administration. And the issue was do we defer to the two agencies with inconsistent interpretations, or do we try to find some sense out of the particular language, which transcends the two? My view is that you always do the latter.
There will certainly be difficult cases, and people have many arguments of what we mean by a “point source” in connection to Chevron. But as far as I can see, what you always try to do is to make the best out of those particular claims rather than the worst out of it, rather than to say we can get all sorts of flip flops, which then became memorialized in the Brand Xdecision that Justice Thomas handed down some years later.
And the earlier cases do not support the modern interpretation. But what they do is they essentially are private law conception of how public administrative law should work. And Fuller, of course, was a noted contract scholar who believed in exactly that. And it’s interesting that the most damning condemnation that Fuller made of modern law was imposition of retroactive liability, which he said, by and large, were moral monstrosities. Those are his words, not mine.
And the only exception that he would have to that was a perfectly sensible one — an exception that applied in those particular cases. However, it turned out that there was some curative statute what was needed to correct the glitch in some implementation of some legal system, a very narrow category and so forth.
So that’s the first part of this stuff is that you have a methodology which is convivial to private law understanding.
The second part of this situation is what’s the objectives of administrative law. And in the 19th century, it was not, for the most part, a very grandiose or impressive system. What it wanted to do was to make sure that you got these grants correct, that you had tariffs and taxes correct, that the various roles that were put together to govern these things were put there.
And so what you do is the area in which a lot of administrative law developed was in the law of tariffs. So if you start thinking about the way in which the intelligible principle doctrine starts to develop from Chief Justice Taft, what you do is you have a case in which the United States decides that it wants to impose tariffs on foreign goods to offset subsidies that are given to those goods by their own nation. And it’s a very precise principle that you start to use to calculate what those tariffs are going to be. And what you can do is essentially use these things to offset it in order to create that kind of equilibrium.
Now, I’m not defending the use of tariffs under these circumstances. But that is certainly not a constitutional issue, given that tariffs are part of the warp and woof of all of American civilization. But what it was is it was the way in which you put these things into that kind of a framework, the situation started to work very, very well.
And what happens is, once you get to the Progressive Era, all of a sudden, you’re doing really very much more ambitious systems rather than trying to calculate tariffs. And if you start looking at the key decisions in administrative law on all of these issues, they all tended to take place right at the formation of the administrative state. 1937 is the constitutional transformation, and then you get cases like NBC having to do with the way in which you allocate frequencies. And you have cases like Chenery, which talk about the authority of the FCC. And these goals are much more ambitious.
So let me just talk about my favorite under this, which is Justice Frankfurter. He’s a Harvard man, and he was very much a determined progressive. He sits on the Supreme Court. And as far as he’s concerned, the whole system has the following extremely detractive kind of characterization. What it does is it allows for administrative expertise to take over complicated matter and to bring to it a kind of precision that you cannot hopefully get through some kind of common law adjudication.
So the famous illustration on this is he’s now trying to figure out how you allocate the frequencies. And the statute in effect is one which talked about the public interest, convenience, and necessities. And these are the terms that are drafted first in the Federal Radio Act and then carried over to the Federal Communications Act in 1934. And maybe you know what they mean, and I kind of think that I sort of know what they mean. But in truth, really nobody knows what, in fact, they start to mean.
So what happens is Frankfurter then meets the laissez faire challenge in the following way. He says, “There are some people who believe that the function of a government is simply to determine the rules of the road.” He says, “But I go much further, and I’m determined to basically have the government set the composition of the track.”
Well, the first of these tasks is relatively straight forward. You need to adapt standard exclusivity privacy laws when you get to the spectrum because there’s always going to be a little leakage back and forth in the spectrum. It’s a peak, and then it kind of goes off into sine curves. It kind of disappears or in a normal distribution.
And what you then have to do is you figure out how much interference you could tolerate at the margin. And essentially, as the system gets better, it turns out that the peaks get higher, and the level of interference starts to go down. So what you could do is kind of to build (inaudible 00:14:04) spacing. And then what you can do is, within the frequency that anybody has, you can allow them to subdivide it as they see fit because, if they’re not going to interfere with anybody else, they’re certainly not going to interfere with each other. And then, slowly, what you do is you would get, essentially, a more and more intensive use of the spectrum in the way it went.
But that’s not what Frankfurter thought was correct. So you set the frequency. You issue licenses. And then he says, “Oh, I’m going to tell the FTC — rather the FCC they’ve got to figure out what the composition of the traffic is.” So for the next 17 years, what they do is they try to list the kinds of factors which would influence you to give it to one particular applicant over another.
And it turns out that the tests are infinitely malleable so that, if you get two rivals, you could always change the way you give to any of these factors—and it really doesn’t matter what they are—so that any result becomes defensible by an agency. At that point, you then have the question of judicial review. And if the system is so malleable, it turns out that there’s really no way to say that you made a wrong decision unless there’s some specific guideline that you get rid of. So you develop a very strong culture of deference, but you have no idea whether the frequencies are well allocated or not.
So what happens (inaudible 15:17) FCC then said, “Oh, we have another rule, which says after the frequency is allocated the recipient of the license can now sell it to somebody else who has to say subject to the same bulky conditions.” At which point, you now have an auction, but you had this wasteful hearing to begin with. And none of the money goes to the government.
So this is an absolutely crazy system. And it turns out that it was heavily attacked by people like Ronald Coase in dealing with all these outrageous costs. It turns out that what you do is you have this very complicated system that is trying to work, and you can’t make it go.
And that’s the sort of parable of the modern administrative state. You have these infinitely flexible substantive kinds of arrangements. And it turns out that there’s absolutely nothing you could do to implement them in an intelligent fashion, which then immediately gives rise to the older notion “Go back to property rights. Define then and then have bids,” which is what we do with respect to broadband.
So what happens is the administrative state — what does it have to do? It uses a test that’s completely amorphous because there’s no form of test that can cover the full range of circumstances. Then it’s indeterminate. And then what you do is you get a set of massive social inefficiencies on the one hand and a very powerful tradition of judicial deference on the other hand, except in some odd cases.
Let me just give you one example, another one of my favorite cases. There is one thing that you cannot do when you have a license, which is you cannot basically sublicense it. So there’s a famous case involving the Cosmopolitan radio company — or Broadcasting Company. And what it did is it said, “We don’t know whom to give this to, and so we’re going to basically divide it up into small slots. And we’ll sell them off to bidders. So the Italians could take these. The Spanish could take these. The Chinese can take those.”
So essentially, what you do is you introduce diversity into the system by subleasing. And Skelly Wright in 1978 said that’s absolutely illegal, and he shut the station down. Why? Because it turns out you, as the radio station, have to make these choices. And this was regarded as an infamous reform of delegation.
So it’s kind of episodes like that that happen over and over again in the modern administrative state, which come from the fact that when you have extremely broad substantive command that lack any kind of clarity what you do in the end, almost in every one of these cases, is you have to develop a culture of deference to administrative decision because there’s no system of right and wrong which will allow you to say, “You can’t do it this way; you have to do it that way.” That’s a long answer, but I think it’s the heart of the book.
Prof. Adam White: Well, obviously — and you mentioned the tariff situation. And that dates back to one of the earliest statutes in the federal government’s history. From the very first Congress onward, we’ve seen Congress grapple with how to structure the departments in later agencies. We saw the predecessors to the modern independent agencies arising as early as the 1850s with the Steamboat Commission and then the Interstate Commerce Commission a few decades later.
But let me just ask you at a very high level of generality. There’s always going to be some vagueness in the statutes that Congress passes to govern technical regulatory matters. It’s almost unavoidable for the reasons the James Madison said in Federalist 37. There’s always some vagueness in law because written laws are written with an imperfect language by imperfect minds. So there’s always going to be some vagueness to be sorted out.
The deference that we’ve seen in recent years — you referred to Chevron and the doctrines that preceded it. We’ve had various ways that judges have tried to grapple with that vagueness and regulatory statutes. You’ve mentioned Chevron. I guess to just cut to the chase, what would you propose in this book as the alternative to Chevron deference?
Prof. Richard A. Epstein: Well, my view has always been the same. I take the same view with constitutional interpretation that I take to contractual interpretation, to regulatory interpretation, and statutory interpretation. Their terms, generally speaking, have ordinary means. And for the most part, if you ever want to invoke a canon which starts to give deference to one side or another, it’s basically going to be in clash with that particular principle. And it’s going to create all sorts of trouble.
Now, I do not want to say that if you use the, quote, “ordinary meaning” test or the frame meaning test — whatever you wish to do it, that every case is going to come out easily. But what happens is if you don’t use it, then no case will start to come out. And the purpose in all of these circumstances is to figure out essentially can we get to it in straightforward ways. When it turns out that you come up after every tool has been exhausted with a tie, then you might say, “Uh-huh. There’s a situation that we have to give legislative deference or administrative deference.”
And in fact, if you looked at recent cases, you can see exactly how this is going. The first of the cases, one of the most dreadful decision every in my mind in administrative law, was the Auer v. Robbins case in which Justice Scalia, on a very bad day—which he himself criticized later on—was trying to figure out who counts as an executive professional or administrative employee for the purposes of the Fair Labor Standard Act.
And this was absolutely critical because, if you fall into these categories, you were not subject to overtime regulations and minimum wages, where overtime is the much more important category when you’re dealing with high level officials. And nobody wants to doubt that a patrolman is, in fact, kind of none of these three in EAT.
But if you start getting to sergeants and you start getting to office commanders, what happened is Robert Rice, who was Secretary for Labor, said, “These guys are not executives, even though they overrule a team, because they’re subject to punishment in the terms of demotion of one kind or another if they make some sort of mistake. And that’s a characteristic which also applies to line workers who essentially are not found to have forfeited their minimum wage protection when they’re docked a few dollars or pennies or whatever it is when they messed up with respect to some of the production unit.”
And this is just looking at one feature of a cases, completely different what the promotion structure is, what the penalty structure is for officers. And then he says, “Well, I can subject them to the situation.” That’s not ordinary language.
And it turns out, if you just simply take out a book and look at the description of the job that are given to basically district commanders, to lieutenants, and the platoon leaders, they all ooze of administrative oversights and so forth. So what Justice Scalia did in the Auer case was he looked at this one little reject feature of the overall situation, and then what he did, after all that was done — he said, “That’s the only thing I care about.” And he never bothered to look at the standard definition.
I’ve done a lot of contracts law in my life. And one of the things that I think is important to understand is that the mentality that often takes over interpretation of language and all of these areas are in some impossibly difficult case that makes it to the Supreme Court, comes out five to four, and then that’s treated as representative of the way in which language works as a whole. And that is just plain false.
When you draft these languages, you use a kind of evolution. You start with something. It’s pretty clear. A glitch comes in, and somebody drafts the clause in order to fix it.
So there are two kinds of ambiguities, Adam. One of them is irreducible ambiguity, which no amount of language can correct. So if you look at somebody and you have to decide whether or not he’s bald, there will always be cases of people who are partially balding where you’re not quite sure which side of the bald/non-bald line are. And in ordinary language, you say, “Well, he’s largely bald.” But if you have a statute which requires bald men to wear hats and non-bald men not to wear it, you don’t have the luxury of continuity. You have to draw a sharp line. Amen, brother.
But if it turns out that you have what H.L.A. Hart called open texture edits, ambiguity in a particular clause as to whether or not, for example, a mineral includes oil or whether it only includes hard (inaudible 23:13) — if you get it wrong the first time, you can correct that by statute and make sure that either the oil and gas is in or out from the mineral and get rid of it. And that’s the way in which to try to draft — a contract that’s drafted. What is it is is it’s kind of (inaudible 23:28) situation where everybody takes the standard form, upgrades it for errors, and then codifies it or modifies it for their own particular case. And that’s a much more (inaudible 23:37) way in which to sort of think about the law.
So when I start looking at a number of cases, it turns out that perhaps the one case which is kind of really a little bit tricky is Chevron itself because it’s asking the question what’s the source? And there’s always the question is half a source a source, just the way there’s the question whether half a heap is a heap. Well, to me, the correct answer in that case is you start looking at industry practice, and you ask yourself, “Well, what would be the appropriate unit for analysis if you’re worried about trying to control emission?”
And if it turns out you got a plant with ten smokestacks, all of which are within of five feet of one another, it would be odd to say each smokestack is a separate source that needs a separate regulation. You treat the plant or the basic facility as that. And certainly, you don’t want to say, “Oh, well, here’s the smokestack. But if you look at it, it has three different separate flews in it, and each of those should be treated as a separate source.”
So what you do is you then start looking at standard practice within the industry to get that kind of effort. And that’s not at all what Justice Stevens did. He spread the one section, which is I thought perfectly clear, or reasonably clear — he said, “But this term is used somewhere else in a different context.” And what he did is he did the fundamental sin of a statutory or contractual interpretation — is he manufactured ambiguity when it turned out there was no reason for him to do so.
So I think, in effect, if you start with the right frame of mind, the number of cases that are going to fall into this sort of difficult category become relatively small. And the others will be subject to relatively clear stuff. And you do not want to sort of make your general judicial administrative law philosophy depend on odd, quirky cases. You want to look at 1,000 cases.
And you look at case after case after case. And the judge has said, “Well, here’s the plain meaning of this particular statute,” and nobody contests them because what they’re worried about under the circumstance is whether it’s valid or not. So if you look at all the antitrust laws, it’s pretty clear what is a tie-in arrangement, what’s an exclusive dealing arrangement, what’s a resale price maintenance. The question is not whether you have those kinds of arrangements. It’s not.
The question is whether or not you think that they have efficiencies that outweigh their restrictive practices or the reverse, which is not a definitional question. It’s an analytical question on which you can have, obviously, a very different kinds of disputes. But I think the single biggest flaw of most modern lawyer philosopher types is they overestimate the indeterminacy with respect to language. I think if you actually are more philosophically inclined on that, the miracle of language is not the few cases in which communication breaks down. It’s the thousands upon thousands upon thousands of cases in which all of us are able to communicate almost effortless with one another, even to the point where we agree, oh, my god, all language is so indeterminate we can’t possibly know what it means. And we have a perfect understanding of what that phrase is.
Prof. Adam White: Language works on a day to day basis because usually we’re not trying to pin down with absolute pinpoint precision the precise boundaries of each term we’re using. And most of our casual conversations don’t involve the degree of economic or policy stakes that were at stake in say, Chevron. Justice Scalia, all those years that he was defending Chevron deference against critics on both the left and the right, his concern was that you needed Chevron deference’s framework to prevent — to minimize the rooms that judges would have to micromanage consequential policy questions that Congress had committed really to agencies rather than courts.
And this is a point that Ted Hirt raises in his review of the book: this risk that if we push judges to decide more cases — more regulatory cases for themselves without any kind of deference framework, elections will have much, much fewer consequences on questions of administration and instead we’ll get back to the days where — Ted doesn’t say this, but Scalia would — we’ll get back to the days of Skelly Wright micromanaging the Nixon administration and Ford administration and Reagan administration agencies.
Prof. Richard A. Epstein: I don’t agree with that. There aren’t any (inaudible 27:46) goes the other way. Calvert Cliffs’ is, of course, classic illustration of Skelly Wright going off the deep end and starting to create private rights of action in a legal system where the statute itself doesn’t require it. I’m not in favor of doing anything of that particular sort. And let me, for the audience, sort of explain what was at stake and how it was that the very ingenious D.C. court—the fearsome foursome in the 1970s: Skelly Wright, David Bazelon, Carl McGowan, and Harold Leventhal—managed to completely upend the nuclear industry. What they did is they ceased on any particular confusion or ambiguity and used that as a wholesale source to change the system.
So in Calvert Cliffs’ what happened is we had NEPA – a statute which is now very much under attack and under review. And what it did is it required that the agency before it entertained a private or a public project on public land, like the building of a nuclear powerplant, would start to take information and gather teams. And so the standard policy, you start listening to everybody. Folks come in, and then the agency starts to make up its mind. And this is not illegitimate in any sense because that’s exactly what the statute empowers it to do.
But what Skelly Wright did is he says, “You know what? I really want to welcome a flood of litigation, so I’m going to allow anybody who disagrees with the consensus opinion inside the agency to challenge it in court.” Well, that decision completely changes the structure of administrative law, in my viewing, in a completely illegitimate fashion. Because what it means is the only people who are going to dissent are going to be the outliers.
Once they decide to come in, nobody else really starts to matter. Then you get the fly specking that constantly takes place under that statute so that what happens is the tiniest confusion, which is better handled downstream, is now forced into an immediate agency decision where disclosures have to do everything. Harold Leventhal, when he talked about all of this — the statutes were pretty clear.
What you had to disclose, generally, under these various things were the basic aims of the statute, had to give people what it is that you would like to get hearings about. And he said, “Well, we don’t want to take this literally. We’re lawless.” And what he meant by that — he said, “Well, you may just tell us that this is what we’re looking at, but we would like to see every reference and have every reference explained in terms of the ultimate conclusion.”
And what happened is — if you remember in Vermont Yankee, the Supreme Court actually blew up at that. It stopped some portion of this, but the campaign kept on going on. What’s the consequence of this? Well, when you start having that kind of review of agency behavior — just today, the Atlantic Pipeline was abandoned, and they’re going to sell off the company, all of its assets to buffets because of just one administrative flaw after another. And is this sensible under the statute? No.
And you start looking at some of these other statutes. It’s really a very interesting thing. You take something which is extremely complicated and controversial like the Army Corps of Engineers. And I’ve actually gone back and read some of the reports that they wrote on approving various kinds of nuclear power plants. And frankly, they’re excellent.
These guys really understand the nature of this business. They are pretty thorough in their consideration of what’s going on. And yet, somehow or other, there’s always some sort of nitpicking that can take place so that, in the end, we now have developed a structure of administrative law with this kind of romancing that is taking place by judges, not consistent with the text of the statute, I might add. So we haven’t built a new nuclear power plant in the United States since 1977, and it’s likely that we’re never going to be able to build any of these things.
So I think, Adam, it is extremely important to note that just because you take the ordinary language view of the world, simple as I am, doesn’t mean that judges can do whatever they want. Administrative deference is sometimes extremely abusive, but so, in many cases, is judicial intervention on the top. So it goes everywhere.
To give but another illustration, I thought that Justice Gorsuch wrote one of the worst opinions imaginable when he managed to give an interpretation to Title VII that nobody who had ever had anything to do with the statute at the time of its passage would even have understood to be a serious question. It’s not textualism to come up with a theory of language that imposes upon a text a meaning that none of the participants to it understood when, in fact, you could figure out what they said. And it’s perfectly consistent with the plain text of the statute.
So I agree that there are all sorts of problems under these particular cases. But if it’s constant stakes sophistication on how it is that you read the words of a statute, that’ll get you into trouble — Now, there’s another point that I should mention here, which is statutory construction is not just a question of linguistic meaning. Going back to the Roman tradition and through the medieval tradition, everybody understood that statutes were subject to a serious of implied exceptions that were read in, unless they were explicitly ruled out.
And these were very detailed in terms of the language they went. So if you take the lex Aquilia, the Roman statute with respect to the law of torts, the word “iniuria” was an open invitation for people to figure out, well, what do you do with necessity? What do you do with defense? What do you do with trespass? What do you do with privilege? What do you do with assumption of risk?
And they simply went through all of those things as a matter of first principle. And that’s the way in which when you interpret modern statutes like the Takings Clause that you real have to do. So it’s important to understand not only can you have ordinary meaning, but you also have to understand that there are cases in which the full construction of a particular statute requires that you understand the generalized term. And in order to do that, you have to be much more historical in terms of the way in which these norms of interpretation have evolved.
They were amazingly constant all the way through the New Deal period. And what happens is they get disregarded in favor of just a mishmash of ad hoc kinds of considerations, which lead to, shall we say, a decline not only to administrative law but also in contractual interpretation and so forth.
You can see the same kind of silliness sometimes taking place when you hear Justice Trainor talking about, “Well, there’s no fixed meaning in any language. So for all other instances in title to be introduced into every case in which you want to do it.” So this is a more endemic problem. And again, I want to say this is a space where H.L.A. Hart, who I thought was pretty much sensible on this point, though wrong on many — he said, “You’ve got to avoid the nightmare, which is that everything is open ended. You have to avoid the noble dream, which is that everything is complete precise.”
But what happens is if you have a sensible interpretation and try to work these things, most of these cases will come out reasonably well. And we don’t want to embrace either of the two poles of interpretation. And we don’t want to engage in, shall we say, some assault of imagination of the sort that took place in Calvert Cliffs’ when it came to trying to figure out the way in which the NEPA statute was worked. It was highjacked, in fact. And the consequences of that hijacking are still very much with us today, and they’re awful.
Prof. Adam White: I have just one last question to ask before we open it up to the floor. Richard, just one last question from me. You cover so much ground in this book. We’re not able to begin to even touch on most of it in this conversation — everything from nondelegation to deference to guidance documents to factual findings and even things — I noticed one issue that didn’t get quite as much treatment in the book but I really commend to the audience, your essay a few years ago for National Affairs on government by waiver.
I mean, there’s just so many issues that you’ve raised in your work on this. I hate for you to pick the least favorite of all of your children, so to speak. But if you could just pick one issue that you think is the most in need of the fastest reform by the courts or Congress or the agencies themselves, which one issue would you pick?
Prof. Richard A. Epstein: I don’t know. I think I would probably stick with everybody else and would start to talk about the interpretation questions: ordinary meaning, statutory deference, and so forth. Because it’s absolutely ubiquitous across all of these things. But there’s something else I wanted to say about how you do this.
One of the things about this is that I always say in virtually everything I write — I’m an outsider to administrative law because I teach it not only as administrative law but as part and parcel of other courses. And one of the central themes of my book is that, if you start looking at these cases, you really can’t talk about whether you got it right in Chenery unless you know something about how securities are organized. You can’t figure out what’s going on in Skidmore having to do with deference to respect in labor regulations unless you understand how overtime rules start to work. And the same thing with the FCC.
So what happens is I think that the reform that you need in terms of judges is they really have to commit themselves to understanding the statutory scheme as a substantive matter before they start to reminisce about the administrative overlay with respect to it. And I think that this is a real danger in the public law curriculum that we have today in which public law is treated as sort of wholly separate from and independent of all private law considerations. If you note, I always stress that the continuity and the connections between the two of them at every particular level.
And I fear the decline of private law in American law schools today and the decline in interest in them among scholars is going to lead to a kind of situation where people will be super expert on the various presumptions, Chevron 1, Chevron 2, this kind of deference, that kind of deference, without knowing anything about how it is a labor statute starts to work. So in terms of the doctrine, I think Chevron’s probably the place I would start first.
The other one I would do is State Farm. Why is that? Because it turns out on factual questions we don’t have one standard; we have two standards. And I think it’s unsustainable. If somebody wants to challenge a particular finding by the administrative agency, we tend to fly spec and say, “Oh, if you consider something that’s irrelevant or didn’t consider something that’s relevant, you’re going to be in deep trouble.” And with complicated schemes, it means it’s a setup to fail.
But on the other hand, if it turns out that the agency declines the prospects and you, as an applicant, want to challenge it, then it’s pure rational basis. If there’s any one good reason that does this, all the other reasons on the other side don’t matter. And it cannot be that you have that kind of asymmetry, which then gives much too much power to the challenges of these agencies and much to much power to the agency when private developers of government are there.
You don’t want to have a situation in which there’s built in antidevelopment buys into the system, which is the way in which State Farm has been construed. So that would be my short-term riff on this issue.
Prof. Adam White: Well, thanks, Richard. Dean, should we open the floor?
Dean Reuter: Yeah. Let’s turn now to our first caller right here in Washington, D.C. Go ahead, caller.
Caller 1: Hello. I’m a practitioner of an adulatory law, and I have been impressed over the years by how unbelievably complex some statutes are, like the Medicare statute, for example. It’s un-construable in any objective way by a judge who has not spent years and years perusing it. And I was interested in your statement, Professor Epstein, before that, if there’s really, really, really a doubt this is the meaning of a statute, then the agency should be given Chevron type deference. I hope I did not misunderstand you on this point.
But instead of giving the agency deference, why not adopt a rule of construction that if there’s doubt as to the meaning of the statute, the default goes to freedom, in other words, against the deprivation of life, liberty, or property, unless the statute clearly requires that? In other words, turn Chevron around entirely. Why not adopt that?
Prof. Richard A. Epstein: Look. As a normative matter, I’m all with you, which would mean that I would strike down half of these statutes on exactly that kind of a ground. But I don’t think that we’re dealing with sort of a blank space. That is I think — and I’ve written. I always thought the National Labor Relations Act is unconstitutional. I regard much of Medicare as unconstitutional. But if each of the —
Caller 1: I’m not talking about striking them down.
Prof. Richard A. Epstein: I understand. But if I can strike them down and the statutes themselves don’t have a presumption of liberty built in favor of them, then as a matter of construction, I don’t think you superimpose that upon the statute, which starts with exactly the opposite situation. So if you’re trying to figure out, for example, what would the word “coercion” means in terms of the National Labor Relations Act, it’s clear that the statute does not work if you say it only means the threat or the use of force against another individual or breech of contract.
So the statute basically starts with an assumption about certain kinds of inequality of bargaining powers so that offers to workers are essentially going to be regarded as threats if it undercuts the position of the union. I regard those as correct interpretive matters. So my view about this is you can’t use that to salvage a statute which is so irremediably considered to admit to exactly the opposite position. And that if you’re trying to play the game of ordinary meaning, this is essentially going to be a thumb on the wrong side of the scale.
Now, it also turns out that you’re right about this. Sometimes these statutes are completely unintelligible, and you don’t know what to do. Well, here’s what I think you have to say. I’m not going to give deference to either side. But if the practitioners like you in the government and in the private sector have worked on this thing for years put the function of good briefing and work by amicus parties as well to sort of explain which way you think these things ought to come out.
And I think one of the reasons we’ve seen the rise in the use of amicus curiae briefs in recent years is exactly what you [inaudible 41:55] to. The huge level of complexity is so great that the parties can’t cover all the issues. So what they do is they roped in their friends, and they each pick up one particular piece in order to do it.
This is a strong argument in favor of simplification of the statutes. I did write a book called Simple Rules for a Complex World. I still devoutly believe in the proposition. But I have to say, in a modern administrative state where the ends are so diffuse, it turns out that it’s a pipedream to think that that particular maximum is going to get us through the statutory construction question. Okay. Next question?
Dean Reuter: Richard, while we wait to see if somebody else rings in, I don’t know if Adam has another question, but I’ll ask you about the enormity of the administrative state and the number of rules. You just mentioned that you might need several amicus briefs just to explain a regulatory provision or a provision in a statute. And that’s just one sliver of what somebody in the regulated community has to comprehend and act under on a daily basis.
Do you want to speak to the vastness of the administrative state and the regulatory regimes? And then throw on top of that guidance. How is somebody in this world supposed to comply with the law even if they’re inclined to do that?
Prof. Richard A. Epstein: Look. I mean, the reason we have this huge degree of ambition — or complexity is we have a huge degree of ambition. So for example, you take something like the Obamacare statute. It literally is designed to try to figure out how you rework the entire provision of services in an industry which is, say, one-fifth or one-sixth of the total size of the economy at large.
There’s just no easy way in which you can start to do that. And what we do is we have different kinds of programs. We have certain kinds of programs where essentially the government specifies the kinds of services that are going to be given and the payments that are there. The moment you do that everybody understands that a physicians’ or a hospital group is going to try to figure out a way to game the particular statute so as to be able to manage to get themselves the largest possible payment under it.
The government agency understands that. And then what it tries to do is to develop some kind of a counter measure on this particular situation. And then what happens is another round in which people go wrong. So that’s one of the problems is just that gambit.
Take another problem. You put together in some of these statutes ambitions that you have nowhere else in the law. So (inaudible 44:22) exactly what it is that you want to cover in these kinds of statutes in terms of the private plan? And what I would have said is an upper bound is as follows.
If you find a provision of a particular benefit which is found in no private plan anywhere on the face of the globe, it’s a very strong argument for government work not to mandate that you put those kinds of services into a government plan. You have no private references to believe to work off of, and you have no particular reason that the demand for this thing is going to be work it’s cost. But the moment that this thing came to the list of essential benefits under regulation, they went in exactly the opposite direction.
And all of a sudden, now what you do is you have these very powerful things coming in there, and nobody knows how to price them. At which point you then start having all sorts of other kinds of complications. So you can do a much better job within the regulatory framework if you’re attentive to the fact that you have some information that you could derive from private markets. But this is never accepted as far as I can tell in these government circles because the whole premise behind the Obamacare situation was that all private plans in some sense fail.
So the President, in what I thought was a spectacular display of ignorance on the topic, announces that, overall, these plans are really quite terrible. They just don’t give you the kind of protection that every American needs. So that essentially denounced the private sector. Don’t use it as a benchmark. You instead use it as a target of criticism.
But the point that I would want to make is that these voluntary arrangements, having been worked out over years of constant modification in one direction or another, basically are probably have much better room for (inaudible 46:06) than some agency which has no particular experience on how these things go on the ground or the way in which they ought to be put into place. So it’s a kind of institutional hubris that drives them to get the expansions. Then there are the cost pressures that come on.
Then what you do is you start trying to retrench and cut back. The payment provisions become absolutely crazy under these circumstances. So it goes back to the point that I originally mentioned. The difficulties you get in the modern administrative state come from the fact that you have a level of ambition about what you’re trying to achieve, which was utterly unheard of in the 19th century version. 19th century administrative law did not give rise to any of the kinds of problems that we have today. 20th century administrative law, 21st century administrative law — these problems are built into the warp and woof of the entire system.
Dean Reuter: We do have one question pending. Let’s check in with our next caller. And we do have a question after this next caller. Go right ahead, caller.
Juscelino Colares: Hi, Juscelino Colares from Cleveland, Ohio. Quick question for Professor Epstein. How much of your argument on the immorality of the modern administrative state is or can be — is reducible, I guess, to your view that a lot of the problem with agencies interpreting, which is inevitable, is a factor or is a function of the fact the agencies are dealing with either the APA or very broad statutes? And they often — and the courts often lack information that is policy specific.
And then, what you have is courts deferring to agencies because they don’t have that policy specific knowledge that agencies do. And then, what you see is a process where agencies — that ends up being run by agencies in terms of courts become disassociated from engaging interpretations enriched by and driven by policy. My question to you if this is a correct depiction of what your criticism is, would, perhaps, splitting administrative law into different courts — into different subject matter courts, like in trade—my area of expertise—would perhaps splitting — creating subject matter specific federal courts for different administrative regulatory areas, domains, would that perhaps alleviate your concerns?
Prof. Richard A. Epstein: I’m strongly in favor of that proposal, but I stress the word courts. That is what happens is there’s no question that taxation is tough. Patents are tough. International trade is tough. And the creation of Article I courts giving you a series of expert judges in those particular areas I think, in many cases, is a perfectly salutary development.
There was an objection based upon the fact that Article III courts seem to be exclusive under the basis. The reason why that never held was the interaction between administrative courts of the Article I variety and Article III, a tension that arose before anybody called attention to the difference. So if you go back to Murray’s Lessee v. Hoboken [Land & Improvement Co.], a tax collection case, it turned out the reason why the court was very reluctant to strike down Supreme Court and Article I court was that it well knew that these kind of Article I courts dealing with customs disputes had been in full operation for about 35 years. And nobody had challenged them.
So what happened is they became kind of prescriptively entitled. And I think that that’s not a bad thing. And then I think most people institutionally came to the further conclusion that if they’re trying to figure out one of the major constitutional difficulties in the organization of our judicial system, the notion of life tenure for Article III judges is an institutional constructual mistake. It’s perfectly unambiguous in the statute, but it’s a mistake.
So if you’ve got this historical item for Article I courts, I’m told today that virtually everybody who proposes a new kind of court proposes it as an Article I court, taking advantage of the custom rather than working with the statute. And the line of tension between custom and text is a very powerful one that pervades administrative law.
Now, the thing that I truly object to, however, has nothing to do with that. It has to do with notion that you’re going to allow the adjudicator function to be put into the hands of the administrative agency that turns out to be in charge of both creating the rules and then bringing enforcement action. And the Supreme Court had two recent cases on this. I’ll mention them briefly. One was the Oil States case in which it was held that the PTAB—the patent trial and the appeals board—could essential adjudicate challenges after its patents had been issued.
The 19th century cases, most notably a case called McCormick, decided in 1898, was emphatic in the opposite direction, that once you had made permanent grant, the question of its validity or its invalidity is to be adjudicated, as it is with any other grant inside a court. But the Supreme Court today makes light of the separation of powers issues, and it put it into the hands of an agency. And before it was recently cleaned up, there was one kind of administrative outrage after another in terms of the due process collection that you’ve given, including the power of the head of the PTAB to appoint those particular judges to a particular case whom he thought would give a ruling favorable to what outcome he particularly wanted. Which to my mind is an absolutely violation of everything that Lon Fuller stood for when he was talking about adjudication.
And then there was the case of Mr. Lucia, who was essentially hounded out of business by the SEC over some public presentations he made. It turns out they did this before an administrative judge, who was a Social Security expert, who had convicted everybody who’d been brought before them. And one little detail that was just told recently about this case by a lawyer who worked on it is, if you want to testify on behalf of the person who was being charged—Mr. Lucia—you had to submit all of your financial records to the government for the last five years so they could figure out what it is they wanted to do with you.
Nobody in a court would ever require that. And what the Supreme Court did was exactly the wrong thing. They said, “Oh, there is an appointments clause difficulty here because we’re not sure that the head of a particular agency made the appointment.” That does cure anything because what you do is you figure out who the appropriate head is, and then you reappoint everybody with the right paperwork, leaving the due process argument completely unresolved with these kinds of results.
So the correct answer under the modern system is, oh, yes. There’s a real difficulty in figuring out which agencies are going to be independent, which agencies should be executive. And if you’re trying to figure out how you sort out the comingling of administrative and legislative stuff, it seems to me you’re never going to be able to find out a sensible way in which to do that. But I think it’s perfectly clear that the adjudicative function should never, ever be in the hands of an agency which has either rulemaking or enforcement power but must be either in a general court or in an Article I court.
And indeed, in many cases, like in (inaudible 53:43), you go to Article I courts. Sometimes those judges do a perfectly good job. I do believe that judges, when properly briefed on a particular cases who are conscientious and are trying to get things right, can do better than we sometimes think. So yes, I do favor, in some cases, shall we say, specialized courts. But I’m always impressed that the more serious that the judges in Article III courts take their task the better the work they give.
So in certain areas, like in labor relationships, the so-called claims about expertise are really nothing more than claims that basically take a certain kind of contractual provision and to torture them in an agency which turns out that you’re either pro-Republican or pro-Democrat, depending on which particular party happens to be in power at any given time.
Dean Reuter: We’ve got about two or three minutes remaining. Let’s see if we can get this final question in. One question pending.
Neil Chilson: Hi, this is Neil Chilson from Washington, D.C. Professor Epstein, congrats on the new book. I can’t wait to read it. Much of the administrative state that you discussed involves complex rule making regimes, like those at the FCC or the EPA. And I’m curious, from some personal background, how you think about agencies like the Federal Trade Commission, which are largely enforcement driven, case by case application of what is undoubtedly an extremely broad and vague statute. Is the morality of such agencies less dubious or more dubious?
Prof. Adam White: I just want to add that Neil is being modest. He was the former chief technologist for the FTC. Go ahead, Richard.
Prof. Richard A. Epstein: Look. You’re not being modest. That’s an extremely important question. Right now, literally on my desk I’m trying to write up something about the Qualcomm decision, which was brought in the waning days of the administrative. And it was brought by the FCC, and it turns out the Department of Justice, in a public dispute, is on the exact opposite side of the case. I did work from time to time with Qualcomm on some of those issues, and I’m strongly inclined in its particular direction.
I think, in effect, on that particular circumstances I know of no effective way, apart from strong judging, to control prosecutorial discretion. And I say this with deep regret because Chevron, non-Chevron — nothing is going to stop that, because as you know as well as I do, the power to investigate in many cases is the power to destroy. And you start an investigation on January 17th, 2017, when you’re out of office—or in the IBM case, you do it on January 19th or whatever it was in the last days of, I guess it was the Johnson administration—you’re asking for trouble. But the only cure for that is strong Article III judges.
And if you get the right personnel, somehow these things get handled correctly. You get the wrong personnel, who knows? One of the things I think that both of us would agree is that if you actually looked at the kinds of people who serve on the federal courts, the range of abilities and temperaments and expertise is very much unanimously judge by judge.
And one of the reasons why its so difficult to get some kind of good institutional generalization on controlling this stuff is you never know from one end of the day to the next whether you’re going to get a judge who’s absolutely super or whether you’re going to get a judge who is, in many ways, just not equal to the particular task. And that is just a fact of life. Judges are not of equal ability, not of equal temperament. And then, of course, I think the other thing that we have to say today — with increasing polarization taking place, where virtually most judges now — it’s understood that they’re going to be defending votes the moment that judge walks into court. You’re going to see an even more difficult situation to start the hand.
And this means, ultimately, the point that I started with is that if you have huge substantive ambitious, which are not subject to constitutional constraint, are then trying to control that in the second best method in the administrative state will get you some of the things that you have to get done. But you’ll never be able to stop those particular problems. If you’re Felix Frankfurter and you think that you know how to allocate this record and if it turns out you’re the head of the Medicare Association and you think you know how to allocate everything having to do with healthcare, that kind of conceit is going to be very, very difficult to stop any sort of formal administrative rule. So I think the long-term project is one of the downward spiral, unless we reverse ourselves on the large substantive question from what it was that we think of as courts. Okay?
Prof. Adam White: Well, thank you, Richard, for all that. Thanks to the audience for the questions. Dean, are we going to wrap it up?
Dean Reuter: We are out of time, and we’re out of questions. So I want to thank both of our experts today, Adam White and Richard Epstein, for joining us. I want to thank the audience as well. A reminder to look the book up on Amazon or elsewhere: The Dubious Morality of Modern Administrative Law by Richard Epstein, who has been our guest today, along with Adam White. Also, thanks to the audience for dialing in. A reminder to check your website and emails for notices of upcoming Teleforum conference calls. But until that next call, we are adjourned. Thank you very much, everyone.
Laurence A. Tisch Professor of Law and Director, Classical Liberal Institute
New York University School of Law
Assistant Professor and Executive Director, The C. Boyden Gray Center for the Study of the Administrative State
Antonin Scalia Law School
Federalist Society’s Practice Groups