Retroactive Rulemaking

By Weien, Geoffrey C. | Harvard Journal of Law & Public Policy, Spring 2007 | Go to article overview
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Retroactive Rulemaking


Weien, Geoffrey C., Harvard Journal of Law & Public Policy


INTRODUCTION

Can a federal agency create a new rule and use it to penalize past actions? Can the Department of Health and Human Services change Medicare reimbursement rules and use the new rules to force a hospital to refund amounts it was paid several years in the past? (1) Can the FCC set new rules reducing the scope of cellular telephone frequency licenses that it has already issued? (2) Can an application for Social Security benefits be denied because of a rule change that occurred after the application was made? (3) In Bowen v. Georgetown University Hospital, (4) the Supreme Court held that agencies could not adopt retroactive rules without explicit congressional authorization. (5) In the years since Bowen, however, courts of appeals have not applied this rule consistently. Consistent application has been difficult because of conflicting definitions of "retroactivity." These conflicting definitions flow from fundamental disagreements about the nature of "fair notice," the extent of the rights and actions that an anti-retroactivity presumption should protect, the temporal scope of such a presumption, and the necessity of reconciling retroactivity restraints with the principle of strong judicial deference to agencies. (6)

Twelve years ago the Supreme Court affirmed the longstanding principle that federal legislation should affect future rather than past actions, noting that "the presumption against retroactive legislation is deeply rooted in our jurisprudence, and embodies a legal doctrine centuries older than our Republic." (7) The Court noted that the Constitution itself prohibits at least some forms of retroactive action by the government, pointing to the Ex Post Facto Clause, the Contracts Clause, the Takings Clause, and the Bills of Attainder Clause as examples. (8) In addition to these express provisions, Congress is constrained by a judicially-created presumption that all laws will be interpreted to have only future effect unless the text of the statute explicitly states otherwise. (9) The Supreme Court remains active in clarifying--and perhaps modifying--this statutory presumption. (10)

Administrative agencies exercise power delegated by Congress and are required to act both within the limits given by their enabling (or organic) act and within the procedural limits established by the Administrative Procedure Act (APA). (11) The APA classifies agency actions into two main categories: rules, which are analogous to legislative acts; (12) and orders, which are analogous to judicial decisions. (13) Agencies are also able to adopt nonlegislative rules that purport to interpret or clarify existing regulations or statutes without following the notice-and-comment procedures required of other rulemaking. (14)

As noted, Congress is subject to certain restraints regarding retroactive action, but it is not immediately clear that identical restraints bind administrative agencies. Two differences between Congress and administrative agencies support an intuition that there must be an administrative retroactivity doctrine distinct from statutory doctrine. First, the APA's definition of "rule" includes the words "future effect," but its definition of "order" does not, which suggests that the APA itself may constrain retroactive rulemaking in the agency context. (15) Second, agencies can act in both a judicial fashion (adjudication resulting in orders) and a legislative fashion (rulemaking resulting in rules), but Congress is capable of acting only legislatively.

The Supreme Court explained the agency-specific retroactivity doctrine in Bowen, which is commonly cited for the proposition that agency rules are presumed not to have retroactive effect unless Congress has explicitly given the agency such power. (16) Justice Scalia's concurrence (17) and the opinion of the D.C. Circuit (18) in Bowen are also frequently cited for the even more restrictive principle that the APA's rule-order dichotomy independently prohibits rules from having retroactive effect.

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