The Volokh Conspiracy - FCC v. Fox Television Stations, Part V: A digression on what it takes to change a policy.

I haven't had time to post lately, but now let me return to my series of posts discussing the background of the Supreme Court's "fleeting expletives" case from last month, FCC v. Fox Television Stations. Click here to see the whole string of posts, including this one, on a single page, in chronological order. (As usual, click here to watch George Carlin's monologue if you haven't done so already!)

In past posts, we've seen the evolution of the FCC's policy on regulating expletives. Recall that the FCC's statute, the Communications Act of 1934, has two sections that are somewhat in tension. First, we have the no-censorship provision, now codified at 47 U.S.C. § 326, which says:

Nothing in this chapter shall be understood or construed to give the Commission the power of censorship over the radio communications or signals transmitted by any radio station, and no regulation or condition shall be promulgated or fixed by the Commission which shall interfere with the right of free speech by means of radio communication.

Then, we have the no-indecency provision, now codified at 18 U.S.C. § 1464:

Whoever utters any obscene, indecent, or profane language by means of radio communication shall be fined under this title or imprisoned not more than two years, or both.

Originally, the FCC announced a policy where, say, the George Carlin monologue was considered "indecent" and therefore sanctionable; this policy was upheld in FCC v. Pacifica Foundation in 1978 — that story is told in this post. But over the years, they took the policy that "fleeting expletives" — if an expletive occurred in an isolated context, or by accident — were either not indecent or, if indecent, didn't merit any enforcement action.

The FCC reversed its policy over the last 5 years, first announcing its change in a case involving Bono and then applying its new policy to dozens of complaints it had in its backlog. All this was challenged — and that challenge resulted in the recent FCC v. Fox Television Stations case, which upheld the FCC's change of course (though leaving the First Amendment arguments for another day).

We'll discuss that case in a later post. But first, a bit of background. What does it take for an agency to legitimately change course? The classic case on this is Motor Vehicle Manufacturers Ass'n v. State Farm Mutual Automobile Insurance (1983), called State Farm for short. That's what the rest of this post is about.

(show the rest of this post)

I. Highway safety policy

Let's forget about communications policy for a while and let's instead think about highway safety policy, as set by the Department of Transportation, through the National Highway Traffic Safety Administration (NHTSA).

The main statute here is the National Traffic and Motor Vehicle Safety Act of 1966, which directs the Secretary of Transportation to issue safety standards that "shall be practicable, shall meet the need for motor vehicle safety, and shall be stated in objective terms." In issuing the standards, the Secretary had to consider "relevant available motor vehicle safety data," whether the standard "is reasonable, practicable, and appropriate" for the type of car, and the "extent to which such standards will contribute to carrying out the purposes" of the Act. (This all was codified at 15 U.S.C. § 1392(a), but repealed in 1994.)

If this sounds pretty vague and open-ended to you, well, you're right; but those sorts of vague, open-ended statutes are the bread and butter of the modern American regulatory state. If you want to challenge that sort of thing, look up the nondelegation doctrine; but you'll probably lose.

In 1967, the DOT issued a safety standard, called Motor Vehicle Safety Standard 208. At first, all Standard 208 did was require seatbelts in all cars. But the problem with seatbelt mandates is to get people to actually use the things! Because seatbelt use was low, the DOT started to consider "passive occupant restraint systems," for instance automatic seat belts and airbags. In 1977, NHTSA estimated that passive restraints could save 12,000 lives and prevent over 100,000 serious injuries a year.

In 1969, the DOT proposed a standard requiring the installation of passive restraints. In 1970, it actually revised Standard 208 to include such requirements, and in 1972, it amended the Standard "to require full passive protection for all front seat occupants" of cars made after 1975. This was challenged and upheld in the Sixth Circuit in 1972 (472 F.2d 659). Cars made between 1973 and 1975, if they didn't have passive restraints, could satisfy the requirement by having ignition interlocks, but these turned out to be so massively unpopular that Congress intervened in 1974, prohibiting any motor vehicle standards that required or permitted compliance with ignition interlocks, and providing that any standard that could be satisfied by anything other than seat belts would have to be submitted to Congress, which could veto it. (This was all before legislative vetoes were invalidated in INS v. Chadha.)

The date when passive restraints were going to become mandatory ended up getting extended to 1976 — the Secretary of Transportation was afraid they would be as unpopular as ignition interlocks. Finally, the Secretary scrapped the mandate entirely. But the mandate was revived in the Carter Administration. In 1977, Modified Standard 208 came into being, mandating that passive restraints — either automatic seat belts or airbags — be phased in starting in 1982. The D.C. Circuit upheld this in 1979, and Congress chose not to veto it.

When the Reagan Administration came around — having promised, among other things, to reduce the regulatory burden on American industry and, in particular, the auto industry — the DOT reopened the rulemaking and ultimately rescinded Modifed Standard 208's passive restraint requirement.

II. NHTSA's rationale

Now an agency can't just enact requirements and rescind requirements just like that; they have to issue written statements, which they publish in the Federal Register. And courts then analyze those statements to see whether they make sense, are consistent with the statute, respond to the comments, etc. [UPDATE: Courts only get involved if someone sues, but if the agency doesn't provide reasoned analysis, you can usually bet someone (assuming they have standing) will sue!]

So what did NHTSA say? It said it couldn't find — as it had found in 1977 — "that the automatic restraint requirement would produce significant safety benefits." Why not? Not because of new beliefs about the effectiveness of the technology, but because of the auto industry's plans. Back in 1977, NHTSA had assumed that airbags would be installed in 60% of new cars and automatic seatbelts in 40%. But by 1981 it was clear that automatic seatbelts would be installed in 99% of new cars, which would, all by itself, satisfy the requirement. Thus, "the lifesaving potential of airbags would not be realized."

But here's the tricky part: The automatic seat belts could just be detached permanently, at which point they require "the same type of affirmative action that is the stumbling block to obtaining high usage levels of manual belts"! So there was no reliable basis for predicting any significant increased usage of restraints.

See, Modified Standard 208 allowed manufacturers to comply with either automatic safety belts or airbags. So a 99% rate of installing automatic safety belts meant almost no airbags would be required... even if the automatic safety belts were all disconnected and thus useless! So because Modified Standard 208, in NHTSA's view, would have miminal safety benefits, NHTSA determined that it wasn't worth the $1 billion it would cost to implement.

State Farm Insurance Co. sued, arguing that the rescission of the standard was arbitrary and capricious, and the D.C. Circuit agreed. The Supreme Court agreed.

III. Justice White's opinion

A. The scope of review

First, there was the question of the scope of judicial review. The auto industry argued that deregulation should be judged by a looser standard than regulation. Basically, if an agency decides not to regulate at all, there's very little a court can do about it. The DOT argued that if an agency rescinds an existing regulation, that's just restoring the previous lack of regulation, so that should be judged by the same standard as a failure to regulate in the first place. This was rejected very quickly — the Administrative Procedure Act makes it clear that rescinding a regulation and enacting a regulation are both examples of "rule making," and both should be judged by the same standard.

So the agency has to produce as convincing an argument for rescinding a regulation as it would have to produce for enacting it. This means they can't "rel[y] on factors which Congress has not intended it to consider, entirely fail[] to consider an important aspect of the problem, offer[] an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise."

(Relatedly, the Court disapproved the D.C. Circuit's suggestion that Congress's (implicit) ratification of the agency's previous attempts to require passive restraints put NHTSA under a heavier burden to justify its rescission. Legislative action, the Court said, doesn't change the standard of review.)

B. The rescission of the standard as to airbags

As to airbags, the Court found that the rescission was arbitrary and capricious because NHTSA apparently didn't consider mandating airbags at all. Recall the two-step above: the standard gave two options for compliance, automatic seat belts and airbags. First, manufacturers would (almost entirely) satisfy the standard by installing the cheaper automatic seat belts. Second, people would then disconnect the seat belts, making them no better than regular seat belts. Under the standard as it was, there was no way to prevent people from disconnecting the seat belts or requiring the installation of airbags. So why not just modify the standard to require airbags? The agency didn't have to actually require them, but at least, the Court said, they should have considered the option. In fact, they didn't even mention the alternative.

In fact, the original proposed standard only contemplated airbags. The automatic seat belts were added later as an option, because it was thought they would be as good as airbags. At the time, those automatic seat belts were going to be non-detachable. Later, the agency approved of the detachability feature. Now that the detachable seat belts were determined to be worthless, the whole series of modifications to the original standard turned out to be an evisceration! Given the Act's mandate to achieve traffic safety, it seems that mandating airbags would be a logical alternative to consider. But wait a minute, does this mean that a court can "broadly require an agency to consider all policy alternatives in reaching decision"? No, said the Court: "the airbag is more than a policy alternative to the passive restraint Standard; it is a technological alternative within the ambit of the existing Standard. We hold only that given the judgment made in 1977 that airbags are an effective and cost-beneficial life-saving technology, the mandatory passive restraint rule may not be abandoned without any consideration whatsoever of an airbags-only requirement."

C. The rescission of the standard as to automatic seat belts

As to the seat belts, the Court found that "the issue is closer." But still, the Court found that the agency had acted wrongly: it "was too quick to dismiss the safety benefits of automatic seatbelts." The agency found that, because the industry was going to install detachable seat belts, "it could not reliably predict 'even a 5 percentage point increase as the minimum level of expected usage increase.'" (There were a number of studies on automatic seat belt usage, but the agency chose to discount them, arguing that, for various reasons, they were unrepresentative of what would actually happen in real life.)

The Court (unlike the D.C. Circuit) agreed that uncertainty could be sufficient grounds for rescinding a policy. But in this case, it's implausible to think that automatic seat belts wouldn't substantially increase seat belt usage: Regular seat belts require an affirmative act to fasten them, while automatic seat belts require an affirmative act to unfasten them. Inertia — drivers' unwillingness to move their muscles — cuts against seat belt usage for conventional seat belts, but in favor of seat belt usage for automatic seat belts. "Whether this is in fact the case is a matter for the agency to decide, but it must bring its expertise to bear on the question."

Also, the agency "failed to articulate a basis for not requiring nondetachable belts." This argument was similar to the one in the airbags section: If the problem with the automatic belts was that they would become useless by being detached, then why not adopt a standard that (1) mandates airbags or (2) makes automatic seat belts nondetachable (i.e., continuous)? "By failing to analyze the continuous seatbelts option in its own right, the agency has failed to offer the rational connection between facts and judgment required to pass muster under the arbitrary-and-capricious standard."

For these reasons, the Court remanded the matter to the agency for reconsideration.

IV. Justice Rehnquist's partial dissent

Justice Rehnquist, plus three others (Chief Justice Burger, Justice Powell, and Justice O'Connor), agreed with the majority on the airbags but disagreed on the seat belts.

Given that the agency didn't like the existing studies of automatic seat belt use, it discounted those studies and said there was too much uncertainty about what the increase in seat belt use would be. The majority rejected that because of the argument described above — that drivers' inertia would make them not disconnect their automatic belts. Rehnquist thought this was insufficiently deferential to the agency: "It seems to me that the agency's explanation, while by no means a model, is adequate. The agency acknowledged that there would probably be some increase in belt usage, but concluded that the increase would be small and not worth the cost of mandatory detachable automatic belts. The agency's obligation is to articulate a '"rational connection between the facts found and the choice made."' I believe it has met that standard."

Rehnquist closed by connecting the standard with the election of a new President with different regulatory priorities: "The agency's changed view of the standard seems to be related to the election of a new President of a different political party. It is readily apparent that the responsible members of one administration may consider public resistance and uncertainties to be more important than do their counterparts in a previous administration. A change in administration brought about by the people casting their votes is a perfectly reasonable basis for an executive agency's reappraisal of the costs and benefits of its programs and regulations. As long as the agency remains with the bounds established by Congress, it is entitled to assess administrative records and evaluate priorities in light of the philosophy of the administration."

Well, that's the standard for changing a previously adopted regulatory standard. Next time, we'll see how the Supreme Court evaluated the FCC's attempt to do this with its indecency standard.

(hide most of this post)

	[Sasha Volokh, June 2, 2009 at 1:45pm] Trackbacks FCC v. Fox Television Stations, Part V: A digression on what it takes to change a policy. I haven't had time to post lately, but now let me return to my series of posts discussing the background of the Supreme Court's "fleeting expletives" case from last month, FCC v. Fox Television Stations. Click here to see the whole string of posts, including this one, on a single page, in chronological order. (As usual, click here to watch George Carlin's monologue if you haven't done so already!) In past posts, we've seen the evolution of the FCC's policy on regulating expletives. Recall that the FCC's statute, the Communications Act of 1934, has two sections that are somewhat in tension. First, we have the no-censorship provision, now codified at 47 U.S.C. § 326, which says: Nothing in this chapter shall be understood or construed to give the Commission the power of censorship over the radio communications or signals transmitted by any radio station, and no regulation or condition shall be promulgated or fixed by the Commission which shall interfere with the right of free speech by means of radio communication. Then, we have the no-indecency provision, now codified at 18 U.S.C. § 1464: Whoever utters any obscene, indecent, or profane language by means of radio communication shall be fined under this title or imprisoned not more than two years, or both. Originally, the FCC announced a policy where, say, the George Carlin monologue was considered "indecent" and therefore sanctionable; this policy was upheld in FCC v. Pacifica Foundation in 1978 — that story is told in this post. But over the years, they took the policy that "fleeting expletives" — if an expletive occurred in an isolated context, or by accident — were either not indecent or, if indecent, didn't merit any enforcement action. The FCC reversed its policy over the last 5 years, first announcing its change in a case involving Bono and then applying its new policy to dozens of complaints it had in its backlog. All this was challenged — and that challenge resulted in the recent FCC v. Fox Television Stations case, which upheld the FCC's change of course (though leaving the First Amendment arguments for another day). We'll discuss that case in a later post. But first, a bit of background. What does it take for an agency to legitimately change course? The classic case on this is Motor Vehicle Manufacturers Ass'n v. State Farm Mutual Automobile Insurance (1983), called State Farm for short. That's what the rest of this post is about. (show the rest of this post) I. Highway safety policy Let's forget about communications policy for a while and let's instead think about highway safety policy, as set by the Department of Transportation, through the National Highway Traffic Safety Administration (NHTSA). The main statute here is the National Traffic and Motor Vehicle Safety Act of 1966, which directs the Secretary of Transportation to issue safety standards that "shall be practicable, shall meet the need for motor vehicle safety, and shall be stated in objective terms." In issuing the standards, the Secretary had to consider "relevant available motor vehicle safety data," whether the standard "is reasonable, practicable, and appropriate" for the type of car, and the "extent to which such standards will contribute to carrying out the purposes" of the Act. (This all was codified at 15 U.S.C. § 1392(a), but repealed in 1994.) If this sounds pretty vague and open-ended to you, well, you're right; but those sorts of vague, open-ended statutes are the bread and butter of the modern American regulatory state. If you want to challenge that sort of thing, look up the nondelegation doctrine; but you'll probably lose. In 1967, the DOT issued a safety standard, called Motor Vehicle Safety Standard 208. At first, all Standard 208 did was require seatbelts in all cars. But the problem with seatbelt mandates is to get people to actually use the things! Because seatbelt use was low, the DOT started to consider "passive occupant restraint systems," for instance automatic seat belts and airbags. In 1977, NHTSA estimated that passive restraints could save 12,000 lives and prevent over 100,000 serious injuries a year. In 1969, the DOT proposed a standard requiring the installation of passive restraints. In 1970, it actually revised Standard 208 to include such requirements, and in 1972, it amended the Standard "to require full passive protection for all front seat occupants" of cars made after 1975. This was challenged and upheld in the Sixth Circuit in 1972 (472 F.2d 659). Cars made between 1973 and 1975, if they didn't have passive restraints, could satisfy the requirement by having ignition interlocks, but these turned out to be so massively unpopular that Congress intervened in 1974, prohibiting any motor vehicle standards that required or permitted compliance with ignition interlocks, and providing that any standard that could be satisfied by anything other than seat belts would have to be submitted to Congress, which could veto it. (This was all before legislative vetoes were invalidated in INS v. Chadha.) The date when passive restraints were going to become mandatory ended up getting extended to 1976 — the Secretary of Transportation was afraid they would be as unpopular as ignition interlocks. Finally, the Secretary scrapped the mandate entirely. But the mandate was revived in the Carter Administration. In 1977, Modified Standard 208 came into being, mandating that passive restraints — either automatic seat belts or airbags — be phased in starting in 1982. The D.C. Circuit upheld this in 1979, and Congress chose not to veto it. When the Reagan Administration came around — having promised, among other things, to reduce the regulatory burden on American industry and, in particular, the auto industry — the DOT reopened the rulemaking and ultimately rescinded Modifed Standard 208's passive restraint requirement. II. NHTSA's rationale Now an agency can't just enact requirements and rescind requirements just like that; they have to issue written statements, which they publish in the Federal Register. And courts then analyze those statements to see whether they make sense, are consistent with the statute, respond to the comments, etc. [UPDATE: Courts only get involved if someone sues, but if the agency doesn't provide reasoned analysis, you can usually bet someone (assuming they have standing) will sue!] So what did NHTSA say? It said it couldn't find — as it had found in 1977 — "that the automatic restraint requirement would produce significant safety benefits." Why not? Not because of new beliefs about the effectiveness of the technology, but because of the auto industry's plans. Back in 1977, NHTSA had assumed that airbags would be installed in 60% of new cars and automatic seatbelts in 40%. But by 1981 it was clear that automatic seatbelts would be installed in 99% of new cars, which would, all by itself, satisfy the requirement. Thus, "the lifesaving potential of airbags would not be realized." But here's the tricky part: The automatic seat belts could just be detached permanently, at which point they require "the same type of affirmative action that is the stumbling block to obtaining high usage levels of manual belts"! So there was no reliable basis for predicting any significant increased usage of restraints. See, Modified Standard 208 allowed manufacturers to comply with either automatic safety belts or airbags. So a 99% rate of installing automatic safety belts meant almost no airbags would be required... even if the automatic safety belts were all disconnected and thus useless! So because Modified Standard 208, in NHTSA's view, would have miminal safety benefits, NHTSA determined that it wasn't worth the $1 billion it would cost to implement. State Farm Insurance Co. sued, arguing that the rescission of the standard was arbitrary and capricious, and the D.C. Circuit agreed. The Supreme Court agreed. III. Justice White's opinion A. The scope of review First, there was the question of the scope of judicial review. The auto industry argued that deregulation should be judged by a looser standard than regulation. Basically, if an agency decides not to regulate at all, there's very little a court can do about it. The DOT argued that if an agency rescinds an existing regulation, that's just restoring the previous lack of regulation, so that should be judged by the same standard as a failure to regulate in the first place. This was rejected very quickly — the Administrative Procedure Act makes it clear that rescinding a regulation and enacting a regulation are both examples of "rule making," and both should be judged by the same standard. So the agency has to produce as convincing an argument for rescinding a regulation as it would have to produce for enacting it. This means they can't "rel[y] on factors which Congress has not intended it to consider, entirely fail[] to consider an important aspect of the problem, offer[] an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise." (Relatedly, the Court disapproved the D.C. Circuit's suggestion that Congress's (implicit) ratification of the agency's previous attempts to require passive restraints put NHTSA under a heavier burden to justify its rescission. Legislative action, the Court said, doesn't change the standard of review.) B. The rescission of the standard as to airbags As to airbags, the Court found that the rescission was arbitrary and capricious because NHTSA apparently didn't consider mandating airbags at all. Recall the two-step above: the standard gave two options for compliance, automatic seat belts and airbags. First, manufacturers would (almost entirely) satisfy the standard by installing the cheaper automatic seat belts. Second, people would then disconnect the seat belts, making them no better than regular seat belts. Under the standard as it was, there was no way to prevent people from disconnecting the seat belts or requiring the installation of airbags. So why not just modify the standard to require airbags? The agency didn't have to actually require them, but at least, the Court said, they should have considered the option. In fact, they didn't even mention the alternative. In fact, the original proposed standard only contemplated airbags. The automatic seat belts were added later as an option, because it was thought they would be as good as airbags. At the time, those automatic seat belts were going to be non-detachable. Later, the agency approved of the detachability feature. Now that the detachable seat belts were determined to be worthless, the whole series of modifications to the original standard turned out to be an evisceration! Given the Act's mandate to achieve traffic safety, it seems that mandating airbags would be a logical alternative to consider. But wait a minute, does this mean that a court can "broadly require an agency to consider all policy alternatives in reaching decision"? No, said the Court: "the airbag is more than a policy alternative to the passive restraint Standard; it is a technological alternative within the ambit of the existing Standard. We hold only that given the judgment made in 1977 that airbags are an effective and cost-beneficial life-saving technology, the mandatory passive restraint rule may not be abandoned without any consideration whatsoever of an airbags-only requirement." C. The rescission of the standard as to automatic seat belts As to the seat belts, the Court found that "the issue is closer." But still, the Court found that the agency had acted wrongly: it "was too quick to dismiss the safety benefits of automatic seatbelts." The agency found that, because the industry was going to install detachable seat belts, "it could not reliably predict 'even a 5 percentage point increase as the minimum level of expected usage increase.'" (There were a number of studies on automatic seat belt usage, but the agency chose to discount them, arguing that, for various reasons, they were unrepresentative of what would actually happen in real life.) The Court (unlike the D.C. Circuit) agreed that uncertainty could be sufficient grounds for rescinding a policy. But in this case, it's implausible to think that automatic seat belts wouldn't substantially increase seat belt usage: Regular seat belts require an affirmative act to fasten them, while automatic seat belts require an affirmative act to unfasten them. Inertia — drivers' unwillingness to move their muscles — cuts against seat belt usage for conventional seat belts, but in favor of seat belt usage for automatic seat belts. "Whether this is in fact the case is a matter for the agency to decide, but it must bring its expertise to bear on the question." Also, the agency "failed to articulate a basis for not requiring nondetachable belts." This argument was similar to the one in the airbags section: If the problem with the automatic belts was that they would become useless by being detached, then why not adopt a standard that (1) mandates airbags or (2) makes automatic seat belts nondetachable (i.e., continuous)? "By failing to analyze the continuous seatbelts option in its own right, the agency has failed to offer the rational connection between facts and judgment required to pass muster under the arbitrary-and-capricious standard." For these reasons, the Court remanded the matter to the agency for reconsideration. IV. Justice Rehnquist's partial dissent Justice Rehnquist, plus three others (Chief Justice Burger, Justice Powell, and Justice O'Connor), agreed with the majority on the airbags but disagreed on the seat belts. Given that the agency didn't like the existing studies of automatic seat belt use, it discounted those studies and said there was too much uncertainty about what the increase in seat belt use would be. The majority rejected that because of the argument described above — that drivers' inertia would make them not disconnect their automatic belts. Rehnquist thought this was insufficiently deferential to the agency: "It seems to me that the agency's explanation, while by no means a model, is adequate. The agency acknowledged that there would probably be some increase in belt usage, but concluded that the increase would be small and not worth the cost of mandatory detachable automatic belts. The agency's obligation is to articulate a '"rational connection between the facts found and the choice made."' I believe it has met that standard." Rehnquist closed by connecting the standard with the election of a new President with different regulatory priorities: "The agency's changed view of the standard seems to be related to the election of a new President of a different political party. It is readily apparent that the responsible members of one administration may consider public resistance and uncertainties to be more important than do their counterparts in a previous administration. A change in administration brought about by the people casting their votes is a perfectly reasonable basis for an executive agency's reappraisal of the costs and benefits of its programs and regulations. As long as the agency remains with the bounds established by Congress, it is entitled to assess administrative records and evaluate priorities in light of the philosophy of the administration." Well, that's the standard for changing a previously adopted regulatory standard. Next time, we'll see how the Supreme Court evaluated the FCC's attempt to do this with its indecency standard. (hide most of this post)