The Administrative Procedure Act (APA) creates a presumption in favor of judicial review of agency action. Yet in order for an agency action to be subject to judicial review it must be "final," and what constitutes a "final agency action" for APA purposes can be a surprisingly difficult question.
The prevailing test for what constitutes "final agency action" was articulated in Bennett v. Spear. Under Bennett, for an agency action to be "final" for purposes of judicial review, two requirements must be met. First, the action "must mark the consummation of the agency's decisionmaking process," and not be "of a merely tentative or interlocutory nature." Second, "the action must be one by which rights or obligations have been determined, or from which legal consequences will flow" (cleaned up). The Court has elaborated and applied this test in recent cases such as Sackett v. EPA and U.S. Army Corps of Engineers v. Hawkes, but reasonable jurists can (and do) continue to disagree about its precise application to various types of agency action.
A case in point is Soundboard Association v. Federal Trade Commission, in which a divided panel of the U.S. Court of Appeals for the D.C. Circuit held that an "informal" FTC opinion letter declaring use of a particular technology for telemarketing to be subject to FTC regulation. According to the panel majority -- Judge Wilkins writing, joined by Judge Rogers -- the letter did not constitute a "final agency action" for APA purposes because the letter merely represented the opinion of FTC staff, rather than the Commission itself, and therefore the issuance of the letter did not constitute the "consummation" of the Commission's decisionmaking process about the use of Soundboard's technology.
Judge Millett wrote a powerful dissenting opinion arguing that despite the FTC's characterization of the opinion letter as "informal," it nonetheless satisfies the Bennett test. Her dissent begins:
Why let reality get in the way of a good bureaucratic construct? In holding that the 2016 Letter from the Federal Trade Commission's Division of Marketing Practices is not a judicially reviewable "final agency action," the court's opinion focuses on the Commission's structuring of its own regulations to preserve its right to disagree (or not) with the Division at some "later" date. 16 C.F.R. § 1.3(c). In so doing, the court's opinion measures finality exclusively from the Commission's vantage point.
But there are two sides to this story. Finality is supposed to look at both whether "the agency's decisionmaking process" has "consummat[ed]," and the reality of whether "rights or obligations have been determined" by or "legal consequences will flow" from the challenged agency action. Bennett v. Spear, 520 U.S. 154, 178 (1997) (internal quotation marks and citations omitted). And in deciding whether the agency process has ended for purposes of Bennett's first prong, courts must look beyond the agency's say-so to objective and practical indicia of finality. See, e.g., Sackett v. EPA, 566 U.S. 120, 127 (2012) (holding that compliance order that triggers potential penalties is final even though agency provided for ongoing "informal discussion" and consideration of the accuracy of its findings).
In this case, the agency's emphatic and directive language in the 2016 Division Letter, combined with the absence of any avenue for internal administrative review, unleashes immediate legal and practical consequences for the industry, forcing its members to choose between complying by shuttering their businesses or exposing themselves to potentially significant financial penalties. When agency action threatens such severe repercussions, the "mere possibility that an agency might reconsider" does not deprive the action of finality. Sackett, 566 U.S. at 127.
In my view, the Administrative Procedure Act should not countenance an agency telling an individual or industry that its business must end, while fending off court review on the ground that its own internal administrative processes have not ended. Because the structure of the Commission's regulations, the substantive content of the Division's Letter, the absence of an internal appeal mechanism, and the consequences that flow from it together render the Division's 2016 Letter the end of the agency's process, I respectfully dissent.
Judge Millett's dissent highlights why this area of law can be so tricky. Applied formalistically, the Bennett test risks excluding many agency actions from judicial review that have the same practical effect as a more formal and final agency pronouncement. Further, agencies have every incentive to take advantage of this test by taking actions that create regulatory risks for regulated entities but that are nonetheless immune from judicial review. On the other hand, a doctrine that subjects each and every guidance letter or staff opinion to litigation would be completely unworkable. As a consequence, I expect the Supreme Court will have to wade further into this question before too long.
Judge Millett's opinion concludes:
As the opinion for the court notes, agency advice that is genuinely advisory can play an important role in allowing the regulators and regulated to communicate effectively and work together in coordinating voluntary compliance measures and improving the effectiveness of regulatory programs.
But "such a 'count your blessings' argument is not an adequate rejoinder to the assertion of a right to judicial review[.]" Hawkes Co., 136 S. Ct. at 1816. If agencies want to give advice, they should speak in advisory terms, allow for internal review, or not attach substantial consequences to noncompliance with what is supposed to be mere advice.
To be sure, allowing judicial review in this case might increase the fact-finding burden on agencies issuing advisory opinions, but that will only be true for a certain subset of decisions—those with unambiguous pronouncements of a legal position, announced compliance dates, and substantial legal consequences for failure to fall in line. And those seem to be precisely the cases in which the law should force agencies to take a harder look, to substantiate their judgments, and to submit their decisions to judicial review. If the agency does not yet have all the facts or is not yet committed to its position as a matter of statutory policy, perhaps it should finish the job before telling an industry to shutter its operations.
At bottom, finality is about agency accountability for the decisions it makes and the consequences it unleashes. The Division's 2016 Letter, after all, is not about just adjusting or modifying business behavior to comport with regulatory standards. Rather, the Letter announces that plain regulatory language broadly condemns as illegal an entire business model. The Letter then assigns a date certain by which businesses are expected to comply by largely ceasing their operations, laying off employees, and writing off significant financial investments. Failure to toe the Division's line will expose the soundboard industry to potentially severe penalties, with no right first to administrative appeal or review. The Division Letter leaves the soundboard industry whipsawed between abandoning its business and facing potentially ruinous enforcement actions and penalties. In these circumstances, the benefits of informal and collaborative interchange between the regulator and the regulated have evaporated. And the agency should not be able to transmogrify the mantle of "staff advice" into both a sharp regulatory sword and a shield from judicial review.
No doubt a technology used for telemarketing is hardly a sympathetic poster child for a dissenting opinion. But the pride of our legal system is its evenhandedness and fairness to all who come before it. Plus the issue here is not whether the Commission can regulate the soundboard industry or telemarketing. It is only whether the Commission must own up to the regulatory actions it has set in motion, and whether those who are told to close up shop and discharge their employees are entitled first to a day in court. In my view, if the law requires us to treat the 2016 Division Letter and its business-ending consequences as just some informal, take-itor-leave-it staff suggestion, then the law is being stingy with reality. I respectfully dissent.
As Aaron Neilson noted in the latest installment of "D.C. Circuit Review," this is an important case that distills the difficulty and division on what constitutes "final agency action" under the APA. Unless and until we get further elucidation of the text from the Supreme Court, I would not be surprised for it to become a staple of Administrative Law syllabi in the near future. I know I will include it on mine.