Bargaining in the Shadow of Administrative Procedure: The Public Interest in Rulemaking Settlement

By Rossi, Jim | Duke Law Journal, December 2001 | Go to article overview

Bargaining in the Shadow of Administrative Procedure: The Public Interest in Rulemaking Settlement


Rossi, Jim, Duke Law Journal


INTRODUCTION

In recent years, a new account of administrative law, favoring private ordering over state-imposed solutions, has bolstered the acceptability of negotiated approaches to regulatory problems. (1) Consistent with this account, administrative law has seen a growing trend toward flexible, consensual mechanisms for regulation, (2) emphasizing less rigid, cooperative approaches over prolonged adversarial disputes. Procedural innovations, such as negotiated regulation (known less formally as "reg neg"), have proliferated as alternatives to more traditional administrative procedures, such as notice and comment rulemaking. Reformers' embrace of such solutions for their promise in promoting private consensus over public mandate has engendered much discussion in the literature. (3)

This Essay addresses the type of private ordering relating to the settlement of lawsuits challenging administrative rules or final agency actions, also known as "rulemaking settlements." Hardly a procedural innovation, the prospect of settlement is a traditional component of any strategy to influence agency decisionmaking. Rulemaking settlement is not only a private strategy, but also may serve as an important vehicle for an agency to implement its policy decisions. Despite its significance, the settlement of lawsuits is an understudied tool for implementing regulatory policy. (4) Settlement is certainly more common than negotiated regulation, (5) but unlike negotiated regulation it has received scant attention in the administrative law literature. One recent study describes rulemaking settlement as a "blind spot," mysteriously unaccounted for in both doctrinal and theoretical accounts of administrative law. (6)

In an effort to bring this blind spot into view, I describe rulemaking settlements in Part I and discuss how they differ from other collaborative governance mechanisms. Put simply, the basic process by which such settlements are implemented does not necessarily afford the same procedural protections as the routine agency rulemaking process or other collaborative approaches such as negotiated regulation. The Essay draws on a simple principal-agent structure to illustrate how administrative agencies face strong incentives to ignore the interests of important stakeholders--principals who otherwise would be afforded procedural protections--presenting a principal-agent gap in the rulemaking settlement context. This gap is widened by the threat of private parties' exit from settlement negotiations, coupled with high expected litigation costs that sometimes lead agency litigants to make concessions on appeal that they would not make in the context of the ordinary notice and comment process.

Part II addresses an example that raises an especially salient concern for administrative law doctrine and theory: rulemaking settlements against the backdrop of presidential transitions. The presidential transitions that follow elections often cause policy shifts, sometimes even when a new administration is of the same political party as an outgoing one. The prospect of an outgoing administration's settlement binding an incoming president's agency, or an incoming administration's settlement undermining one or more regulatory initiatives of an outgoing president, is hardly a new concern. However, the special legitimacy problem raised by settlements against this backdrop illustrates a need for serious reflection on the procedural protections in place during settlement--if indeed there are any at all. Since private bargaining and agency concessions during settlement occur largely outside of the apparatus of administrative procedure, procedural protections designed to protect and promote the public interest may readily be skirted. In negotiating settlements, an agency will tend to afford large weight to some principals, including the executive branch and settling parties, but little or no weight to other key principals, including Congress. …

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