Debate: Richard Epstein and Daniel Hemel, "Is Administrative Law Unlawful?"
Richard A. Epstein is the James Parker Hall Distinguished Service Professor Emeritus of Law and Senior Lecturer at the University of Chicago Law School. Epstein started his legal career at the University of Southern California, where he taught from 1968 to 1972. He served as Interim Dean of the Law School from February to June 2001. He is also the Laurence A. Tisch Professor of Law at New York University, and the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution. He received an LLD, hc, from the University of Ghent in 2003. He has been a member of the American Academy of Arts and Sciences since 1985 and a Senior Fellow of the Center for Clinical Medical Ethics at the University of Chicago Medical School since 1983. He served as editor of the Journal of Legal Studies from 1981 to 1991, and of the Journal of Law and Economics from 1991 to 2001. He has written numerous books and articles on a wide range of legal and interdisciplinary subjects.
Professor Daniel Hemel graduated summa cum laude from Harvard College and received an M.Phil with distinction from Oxford University, where he was a Marshall Scholar. He then earned his J.D. from Yale Law School, where he was editor-in-chief of the Yale Law Journal. He has served as a law clerk for Justice Elena Kagan of the United States Supreme court, Judge Michael Boudin on the U.S. Court of Appeals for the First Circuit and Judge Sri Srinivasan on the U.S. Court of Appeals for the District of Columbia Circuit.
Professor Hemel is now an Assistant Professor at the University of Chicago Law School, where his research focuses on taxation, risk regulation, and innovation law. His current projects examine the taxation of risk-based returns; the application of cost-benefit analysis to tax administration; and the role of international law in providing innovation incentives.
Presented by the American Constitution Society and the Federalist Society on May 17, 2016.
Transcript
Announcer: This audio file is a production of the University of Chicago Law School. Visit us on the web at www.law.uchicago.edu.
Host: This is the Federalist Society, and we're very excited to host this debate between Professor Epstein and Professor Hemel.
Richard Epstein: This is a discussion. I never disagree with my colleagues.
Host: This discussion on whether or not the administrative state is unlawful. Professor Epstein and Professor Hemel both do not need any introduction, but I will give them a short one because I know you want to hear them talk more than me. Professor Epstein is an emeritus professor of law here at the University of Chicago. He served as Dean at one point in our storied history. He also teaches at NYU and Stanford. Professor Hemel is a graduate of Yale Law where he was Editor-in-Chief. He also did two Court of Appeals clerkships before clerking for Justice Sotomayor, and now he is an associate professor of law here at the university. So please join me in welcoming them.
Daniel Hemel: So thanks for coming. I worry that folks were coming here thinking that we would duke it out. In fact, I think Richard Professor Epstein are going to agree on the main point which is that of course the administrative state is lawful. First we should ask what we mean by the administrative state. Are we referring just to independent agencies like the Federal Communications Commission and the Securities and Exchange Commission or are we also referring to agencies that are more directly under their control the president: the Environmental Protection Agency, the IRS, the Department of Housing and Urban Development. I think we're talking about a whole constellation of agencies not just independent agencies when we referred to the administrative state. We are referring to the whole apparatus that is broadly construed: the executive branch. And then we have to ask ourselves what we mean by lawful. Lawful as acting according to the rule of law. What do we mean by the rule of law? Well we could have a court based conception of the rule of law. So you are lawful if you obey what judges tell you to do. And you are unlawful if you get an order from the court and say I'm going to ignore it. We can have a rules based conception of the rule of law. The rule of law is the law of rules to use Justice Scalia's this famous phrase and the basic conception of the rule of law would be, if in that Case A, we apply Rule R-1 and then Case B comes along and Case B is indistinguishable from Case A except that B is a different person from A, then we should also apply Rule R-1 in Case B.
Daniel Hemel: We can't just say, "Hey I liked A so I applied favorable R-1 in his case, but B, I'm not a fan of, so I'm going to apply R-2 in hers. But we can have a third conception of the rule of law, that's a legal process theory conception of the rule of law. So agencies need to act according to set procedures and they need to give reasons for what they're doing. Reasons that connect outcomes to recognized legal norms.
Daniel Hemel: And I think under any conception of the rule of law the administrative state passes with flying colors. So first when it comes to obedience to courts, yeah the administrative state obeys courts. When the Supreme Court, well when originally a district judge and that the Fifth Circuit said that the Obama administration could not proceed with its DAPA program, Deferred Action for Parents of Americans, so this was the idea of giving deferred action status to parents who whose children are U.S. citizens or permanent residents and who had come here before 2000, and the district and the Fifth Circuit said to the administration, no, you can't do that. And I vehemently disagree and the administration vehemently disagreed. But the administration did not just go ahead and implement DAPA. With respect to the Clean Power Plan, so this is the Environmental Protection Agency's regime for regulating coal power plants.
Daniel Hemel: I agree with it, Professor Epstein, I think, disagrees with it as a policy matter. The Supreme Court said to the Obama administration, you can't go ahead. And the Obama administration didn't go ahead. Now they challenged the Supreme Court's decision and they're going to duke this out in the D.C. Circuit and then the Supreme Court. And I don't know what the outcome is going to be. But one thing that I do know with close to 100 percent confidence is that whatever results from the Supreme Court's decision, the administration darn well is going to obey. The administration is not going to implement the Clean Power Plan if a court tells the administration that it can. So in terms of obedience to courts, yes the administrative state is lawful. Second we could ask, does the administrative state act according to general principles. Does it act according to rules? I think the answer is yes.
Daniel Hemel: It's a little bit hard for me to prove the negative right? To prove that it's not impartial. But most of our objections to the Obama administration or most objections to the Obama administration are not "you are treating your friends favorably." It's "you're treating everyone according to rules that we don't like." But I don't think there's much of a claim that the private equity managers who donate to the Democratic Party get a 20 percent tax rate and the private equity managers donate to the Republican Party get a 39.6 percent tax rate. The administration seems at least to be acting according to the rule of law in the sense that it does apply first applying and personal principles cases regardless of the parties, we just might not like those principles. And third we might ask well is the administrative state acting according to set procedures and does it give reasons for what it's doing.
Daniel Hemel: And here I think again the administrative state does pretty darn well. For the most part, the Obama administration follows EPA 553. So this is the law that says that before promulgating a legislative rule, the administrative agency needs to give 30 days notice. It needs to consider comments and then it publishes the final rule in the Federal Register. And I don't think there's much of a claim that the Obama administration is engaging in widespread disobedience of EPA 553. Yeah there are particular cases where it didn't go through EPA 553 where Richard or Professor Epstein probably thinks. Where he probably thinks that it should have. I probably think it should have either. So Deferred Action for Parents of Americans is a good example of that where the administrative state did not to go through the 553 process. And I think that was probably a mistake, but it doesn't render the entire administrative state off all the administrative unlawful. The administrative state does give reasons for what it's doing. Reasons that connect its actions to recognize legal norms. Professor Epstein's objection is going to be, he doesn't think those are very good reasons. Not that there are no reasons at all.
Daniel Hemel: So perhaps some people would conceive of the rule of law as the administrative state acting according to norms that they like, giving reasons that they like. And there we might say that the administrative state is unlawful. But that seems to me to be an impoverished concept of lawfulness, right. So the local zoning board won't let me paint my house purple. Well, is the local zoning board acting lawfully? Well yes if I can challenge the local zoning board, win in court and then the local zoning board will let me paint my house purple. Right. Yes if the local zoning board obeys the court. If the local zoning board tells me that I can't paint my house purple, but then tells Professor Epstein that he can and gives them a reason to distinguish Professor Epstein from me except that the local zoning board likes Professor Epstein more. Well well then the local zoning board is acting unlawfully. But that's not what the administrative state is doing here. And if the local zoning board gives me no reason for why I can't paint my house purple, or if it doesn't follow a set procedure for considering my application for a purple painted house, then it's acting unlawfully. But again that's not what's happening here. So I think in this debate, neither side has an exclusive... in this debate about the goodness of the administrative state,
Daniel Hemel: neither side has an exclusive claim to lawfulness. And it's important in a law school that neither of us says that the other's position is unlawful, right. If we both acknowledge that what we're doing is law, we have different conceptions of law, but we are appealing to norms within the set of law, then we can then we can have the reasoned debate in a law school setting. I think it's actually quite dangerous to accuse the other side of acting unlawfully because we're basically saying your your arguments do not belong in this law space, I don't have to listen to them. So I concede that most of what the Bush administration, what the administrative state did was lawful. I would even concede that Bush v. Gore, like my least favorite decision ever, it was lawful in the sense that it was a decision made by courts then respected lower down.
Daniel Hemel: I'm pretty confident that if there were a hanging chad controversy that comes up in the 2016 election and a majority of the court favors a candidate whose position is antagonistic to Bush v. Gore, the court will... Bush v. Gore is an exception in that it's precedential value is unclear but that the court would look to Bush v. Gore for authority and not just base its decision on whether it likes a particular party. And, in Bush v. Gore, the court gave reasons for what it was doing. They were reasons that I thought were not very good reasons, but they were definitely reasons. And acknowledge that the other side was lawful allows me to debate its premises in a setting like this. And I think Professor Epstein and I are going to agree that we both have claims to lawfulness and simply a disagreement as to whose policy is better.
Richard Epstein: Thanks. One of the things of course is that the Federalist Society and the American Constitution Society did not consult either of us when they picked the title of this particular debate. And it seems to me that anybody who wishes to argue that the administrative state writ small or large is unlawful needs to have serious re-examination of his or her premises. And the way in which I do this is I don't start with modern cases, many of which I think are not so smart. I go back as far as 1536 and what you see in the earliest possible date is that there are certain kinds of wrongs which cannot be effectively remedied by private rights or action so the state comes up and tries to fix these things going. And the first illustration of this is with you know somebody blocks a road or a river. And generally speaking anybody who runs into it has a private right of action. But some people with delayed inconvenience don't. That doesn't mean you let these things go. You have a situation in which slow transactions cost solutions are preferable to no solutions at all. And you allow an administrator to come in to handle those problems. As the state becomes more complicated, it turns out states have to start doing other things. And you know one of the things I'd like to say is that we are not just a nation of shopkeepers according to Napoleon, we're a nation of people who just keep roles, we have tax roles, we have property roles, we have drivers roles.
Richard Epstein: We have all sorts of roles that people have to maintain and the administrative state is in fact the only way in which you can do this. And what you hope to do is to have a fairly sensible low level civil service that can maintain these things. And if you mean that the administrative state is unlawful which means that nobody can keep records of anything that goes on in the country, that's not a particularly appealing kind of conception. What happens is society starts to change and become more complicated, the question is what is the role of the administrative state ought to be. And whether or not we think it's lawful in the sense of desirable enough and I don't have quite the Hemel sort of minimal view of the situation where so that whenever a court speaks, no matter what it says, and the administrative agencies obey, it's the rule of law. I think it's much more important to try to figure out what these agencies are doing and have to figure out whether or not that conception is consistent with what I would regard as a sensible and lawful administration.
Richard Epstein: So the first challenge to the rule of law in many cases was actually in the late 19th century and the rise of the big administrative state in connection with rate regulation starting with for example the Interstate Commerce Commission in 1886 and then going through the Sherman Act and the various State Public Utility commissions, and I think these things work are regulations that were consistent with my notion of the rule of law because I actually knew what they were trying to do and why they were trying to do it. They were trying to figure out what the response was to institutions that were necessarily monopolies that could therefore gouge people and refuse service in the very disadvantageous terms, and they put in place a system which says that you control the monopoly so long as you don't confiscate the resources. There are multiple tests for this and a lot of disagreements.
Richard Epstein: But the key feature about this portion of the administrative state is they had a reasonable objection of what they were trying to do. And they weren't trying to do anything collateral under that guise by creating massive wealth transfers between different parties who were subject to the general scheme of regulation. And I regard this confiscation theme as one of the signs of what does or does not make a particular state unlawful. But as you start to follow the administrative state has other kinds of functions and I regard these as much more ominous in terms of the way in which they start to work. And so just to give you some of them there is the question of how you start to deal with delegated power. And let me begin with the two cases or two events from 1926. A very great year. This is the year the Federal Radio Commission in which we are told that the standard by which you can allocate frequencies through the administrative state is with the public interest convenience and necessity.
Richard Epstein: And it turns out I regard this as a basically a terrible mistake because the alternative vision is to say what we will do is we will define frequencies in the interference of the boundary and then sell off the various networks to other people to work within those areas whereas the modern administrative state, which was championed in this case by Justice Felix Frankfurt, constantly tries to figure out ways in which he can decide who's going to be the correct user of a given form spectrum. This has been an effort that's gone on for 70 years. It turns out nobody has the slightest clue as to what should be done to answer this particular situation. The way the law actually emerged was that you have one of these phony hearings in which people say I'm the best applicant pretty pretty please give it to me. And then within a year they optioned it off, get the money instead of having the money go to the state by running its own option.
Richard Epstein: It's expensive. It's basically crazy. It is administrative law in the sense that when the state comes down with a decree it's going to be followed. Yes. Does that meet any minimal test of rationality or coherence? I think the answer to that question is no. And the costs that you'll have from this unbridled form of delegation are necessarily leads to huge amounts of administrative discretion, and because it turns out that spiel it's fine for the well understood he couldn't figure out what the norms were but what he did not understand is there was nobody who had the degree of expertise to figure them out in his place. And so with the constant theme of modern administrative law is, when your doctrine becomes a form of intellectual incoherence, the only solution that you have to the problem is in fact a form of abject deference to what administrators want to do.
Richard Epstein: And then for the most part news rational basis review of what's going on. So the courts rubber stamp everything that happened. I do not regard that as a desirable or a condition we want. 1926 is also the year of Euclid v. Ambler, a case that many people in this room have studied with me in the Land Use class. And this is another absolute intellectual disaster. It has no idea with the way property works. So what it does in effect is it's designed to control externalities in name but what it does is creates them in fact by taking unitary parcels of land dividing it up into artificial subdivisions, creating inconsistent uses next to one another and saying what we've done is improve the value of the community when you've knocked down the part of the land by about 85 percent and cannot identify any external benefits which will offset those losses and the moment you have a state which can decide that well you could be owned this way or that way and there's no compensation owing as is the current law to this situation.
Richard Epstein: The ability of discretion to move resources from favorite to unfavorite people are more likely than the reverse is in fact there. And nobody should forget the fact that behind Euclid was a kind of ugly form of racism at least many cases in which the folks who were going to be excluded were the most marginal members of a particular community which is the way in which zoning systems have actually worked. So I do not regard this as with any degree of affection. I think the moment somebody tells you it's a rational basis, a constitutional issue or a Chevron deference administrative commitment, I think they've committed a very serious breach of what I would regard as required by the rule of law. Now let's for that point I want to make and I don't want to go on too long about this as well is the administration really wonderful when it comes to the procedures?
Richard Epstein: And the answer is no. I mean let me just talk about something which is extremely current today because it relates to the question associated with the huge disputes over transgender people in restrooms in the United States. If you start looking at the Administrative Procedure Act, essentially what you do is you have some things which are just huge mistakes these formal hearings that nobody does. But there is with respect to major rules, the notion that you give notice in hearing. A notice and comment. The theory is it's important enough that you want to give people a chance to speak and then give them get the input they have before you form your critique. In fact the system has been completely messed up in many ways because the requirements of notice are much too ornate for what is sensible and of course constantly second guess what's going on in the way in which you put these things out.
Richard Epstein: But the key point is you never want an administrative agency to make major changes in the world unless they get some input from somebody. But it turns out there were things known as policy statements and interpretive rules which are basically trying to tell you I would have thought something like when we say that something is 90 days we're going to tell you which day you'll begin on whether the last day is included or excluded at the source. But the rise of the administrative guidance starting about 20 years ago in connection first with the FDA and now with virtually every agency is a classic illustration of what I regard as completely lawless kinds of behaviors perpetrated by all sorts of government agencies. And now what is a particular guidance and why is this thing so dreadful in terms of the way in which it goes? First of all what the agency does is it engages in a little bit of pious hypocrisy. It announces the rules that we're about to announce here are just announcements they don't fine anybody any particular way.
Richard Epstein: But by the way every single member of our particular agency is bound to follow them until we change them. And if you decide to cross us on this particular thing we will come and sue you for everything that it is worth. There's no human error here. My view is if they want to say that this guidance is nonbinding. What happens is they are now rebating the fundamental responsibility because everybody knows what is unbinding in the law is in fact deeply binding. In fact. What you really need to do under these circumstances therefore is to have a way in which these things can be challenged facially before they go into effect with enormous consequences with respect to party. One of the unlawful features of the administrative state today is that nobody has standing to challenge that guides until the guidance comes down with full force upon his or her head.
Richard Epstein: The net effect when you start putting the science out on a broad basis is they have vast into Raum effect which forces people to make the kinds of changes that they make up because they fear that A) they are going to be sued and more importantly particularly if you look at something like Title IX or what happens if you don't even have to sue you they can simply decide to withhold massive amounts of federal funds from any institutions any fraction of which does not follow the particular rules in question. If you start seeing the way in which the substantive rules become out of this thing what happens is since there is no judicial sanction on this unlawful behaviour is part of the deck if you want to talk about the words in modern life, all you have to do is to understand the words "Dear colleague" means you so-and-so I'm going to beat you over the head with a broom if you don't get things exactly the way in which I tell you.
Richard Epstein: And you know they would do this against anybody. And so to mention a couple of decrees that I think are really crazy: the Dear Colleague letter when is applied to Harvey says you are engaged in sexual harassment when adult students off campus do something which may arguably constitute rape but you now have to have this huge administrative apparatus to deal with all of this stuff. You try to figure out where it is in the ratings they are citing to this; they don't cite to anything in the race at all because there's nothing in the race that addresses any of these problems. And yet when they bring this suit but capitulates like any other sane institution would because it's better to pay thousands upon thousands of dollars in useless administrative costs than to run the risk that your entire institution is going to be bled dry by your inability to have your medical center habits fund.
Richard Epstein: Well that are "Dear colleagues" let us go to elementary schools and they started saying we're against disparate impact on racial enforcement. With respect to disciplinary sanction. Their definition of what is disparate impact is you just look at the number of students in the school and if there are more black students and white students in the school, it's disparate impact if the black students are punished more frequently than no whites even if it turns out that each individual case of punishment is fully justified. So that what happens is you now have a quota on the way in which you can administer punishment under these various rules and that means in effect that kids who are seriously and get engaged in serious forms and misconduct will not get punished with the sanctions that the government will put upon you. Just the other day, it turned out the attorney general and her various minions in the Office of Civil Rights and in the Office of Education put forward their review cases with respect that transgendered situation.
Richard Epstein: This is a huge change in the way in which business is conducted in the United States. There are many precedents that go against this. There are one or two that go in favor of it or the United States government sends a broadside out to every school in the United States and virtually every university to the state of North Carolina saying we know what Title IX under the 1972 Education Act means. And their entire legal memo consists of a string citation to a bunch of cases not one to which they analyze and which ignore many many other precedents that go in the opposite direction. I regard that as seriously unlawful. Now we've heard that we should be worried about appellate review. The problem here is not with appellate review. The problem in this particular case is that the entire process goes out on an informal basis.
Richard Epstein: And what you have to do is literally take your life into our hands in order to be able to make the challenge. Now how do I know this. Let me just give you one other case which is I think quintessentially unlawful even though it conforms to the administrative state. The Obama administration, following earlier administrations, takes the very bizarre view of what is a navigable waterway or water through the United States to include an upland which is hundreds of yards from navigable waters from which a drop of water at some time in the next hundred years may make it into a particular river. Well that's their view and they're nuts on the substance but that substance isn't water. So poor Mr. Sackett decides he wants to build a home on a plot of land where a hundred thousand dollars and wants to put up maybe $200,000 house and the governor comes knocking on the door and say you know this is just a piece of warning to you friendly but if you build this thing and we punish you and it is found that you have now interfered with the navigable waters of the United States, the fine ladies and gentlemen is $37,000 a day.
Richard Epstein: These are real numbers. Now what does this prove. Why you sit down and you work the numbers and essentially unless the guy is 99.9% sure that he is right, he will not build. You'll have to go to court. You'll have to do something else in some particular way because the interim effect of these kinds of decisions is in fact as dangerous and as disaster and as dastardly as anything else that you can imagine. Now what's the source of their unlawfulness. Well you could just gin up any penalty that you want without any kind of sanction. And so if an administrative agency could go in and say we think the damages are a million dollars a day and there's nothing you could do to go into court to challenge them unless you abandoned the building during the interim and then when you do that you don't get compensation for lost use.
Richard Epstein: This is abuse. This is very serious abuse. And the truth about the matter is the Obama administration is very bad on this, other administrations haven't been so good. But the current state of America on the rule of law issues is very grim indeed. Thank you.
Host: Would you like to respond to any of that?
Daniel Hemel: I'll responded to just two very quick responses. One, I agree that there are... that spectrum allocation was an intellectual disaster. I'm with you on auctioning off spectrum. I don't think administrative agencies have an exclusive claim to intellectual disasters. When you give any body more authority it will generate with a higher probability intellectual disasters. So even in our beloved law courts have generated intellectual disasters like proximate cause or res ipsa loquitur.
Daniel Hemel: Second, with guidance documents, when we get the Justice Department the ability to bring suits, we make courts the deciders. But we allow for some enforcement discretion. And this is almost inevitable in any system of public prosecutors that we have the problem that we want to monitor whether the Justice Department if it brings suit against A for violating R-1. And B also violates R-1, that the Justice Department is going to bring suit against B as well. And that's a real concern. And we can have a world in which the Justice Department never put out a guidance document, and it just brought claims against universities and states and maybe private employers for violating various civil rights laws. And we could deduce ex post the standards that the Justice Department is following. But the Justice Department doesn't tell us ex ante or the Justice Department could say, "Hey ultimately courts are the deciders here rather than us but heads up these are the cases in which we'll bring suit.
Daniel Hemel: And these are the cases in which we won't." If the Justice Department does do that then we can evaluate whether they are in fact exercising their enforcement discretion in an impartial way. Now a negative aspect of that is when the Justice Department says, "Hey anyone who violates R-1, we're going to bring a suit against you." That is going to have an interforum effect, it's going to cause people to start obeying R-1. But I'm not sure whether the alternative in which the Justice Department doesn't tell us ex ante what it's going to do, is a preferable one. So I'm with you here. Probably Notice and Comment and the Section 553 process would be desirable. But it's a long leap from that point of agreement to say "and the way the Justice Department is doing this now is unlawful." It may be nuts. But there is a range of nuts that still within, that lies within the set of lawful.
Richard Epstein: Let me comment. I do teach Common Core subjects. There are some confusions associated with res ipsa loquitur, there are some with proximate cause. If you're trying to figure out all the variations, what you have to do is as follows: ask yourself what the percent of the shifts in the GDP would be if you move from the directness to the foresight test with respect to the causal intervention by malicious actors and what you will discover is it will influence 0.00001 percent of the economy. These things are only important to the ex post state of the world when you selected for all the thousands of cases which the common law rules deal with accurately and well with the tiny number of think was to a dispute. So you take the great case which you spent hours on in a law school class and you're trying to figure out whether or not this thing moves the needle at all.
Richard Epstein: The answer is it does not. And the same thing is true with all these other things this does not mean that common law cannot be disastrously changed. And this again is the movement away from laissez-faire to the modern disposition identical to that which takes place in the court which does it. So the traditional view on tort liability was that only defects in ordinary use by products in their original condition could cause responsibility. The moment you say something which is open and obvious can nonetheless still be defective, what you do is you now do switch the liability that is associated with this particular room known as tort law by a factor of 1000. So you just can't sort of say which rule it is, you have to know something about it. And interestingly enough the only rules that keep you sane are those which are consistent with the libertarian vision that the tort laws designed to deal with with force and misrepresentation and property rights.
Richard Epstein: That's the exact same thing in the public side. With respect to the guidelines I think that you are missing the key point. If these guys want to announce this stuff then somebody should be able to make a facial attack on this before any enforcement action starts to take place. Because if your alternative situation which they sort of just go after one guy, everybody else just sits there and goes about their business and you have to wait four or five years before something is going to be decided. And if you think the case is going to lose or fall for it and you dare the government because it will not do this or be able to do is to say well you know we won this case, now we're going back five years and everybody else who wasn't in violation of an agreement with us is going to be subject to this norm. It will be treated as a precedent going forward not as a precedent going back.
Richard Epstein: So the difference is that if you give the guidance its current effect it has an immediate effect on everybody and in the other situation it's just the usual kind of rule making, and if you will allow for the standing to be taking place the moment the rule was announced. The only rules that are going to be attacked are those which can be dangerous or potentially pernicious and the system might work itself out. But the other feature is, if you start to look at what these guys do. There was a paper given, it was a dreadful paper. This is being recorded, but by Professor Sunstein praising our deference and how they did was the geniuses at work for the Fair Labor Standards Board and the Department of Labor, the department of organized labor let's understand who these guys are. And so what they come up with is a genius interpretation that you treat as an hourly worker sergeants and lieutenants in the police force who have extensive supervisory superpowers over all of the people because it turns out that the statute says when you're dealing with routine hourly workers you can deduct from their pay if they don't produce enough widgets or they produce widgets of the wrong code.
Richard Epstein: And nobody believes that they're telling the truth. But on the other hand our deference did this. What does it do? It completely transforms the scope of the Fair Labor Standards Act. So it is now you know ten times larger than it otherwise would have been done. And. You should never allow an agency by perverse interpretation of language to expand the scope of its jurisdiction. Is this a conservative attack on the liberals? No. This is a rule of law attack on everybody. And this includes Justice Scalia who wrote that wretched decision. He recanted it later on. But the Supreme Court is still in that position and we now have in the Perez case the ridiculous conclusion that mortgage brokers guys are in fact to be treated as hourly workers of one kind or another and subject to the overtime provision. If you look at any firm's definition of what these guys do, it comes within the class of administrative, professional, and executive people.
Richard Epstein: And the danger of course of deference is it leads to systematic unlawfulness in that you change the content of the stance you change it for the worst, you change it by many of the most political operators on the face of the globe. And frankly I just do not approve this. Now mind you. I think the failure of the Standards Act is unconstitutional. That's not the battle I'm fighting. About and fighting is here. If you do have a statute, for heaven's sake enforce it consistently. And I just defy anybody to tell me how our deference is consistent with the rule of law. Tell me how it is.
Daniel Hemel: Well, if an agency is using its authority under says in the first case, here's how we interpret the statute. And then in a second case, it, without giving any reason for why it's changing its interpretation of the statute, changes interpretation of the statute then it doesn't get our differences. Perez only said that the agency didn't have to go through the whole notice and comment process again. It didn't have to give 30 days notice, but it does have to give a reason. And if the agency interpretation appears to be ginned up for this case, if it's a convenient litigating position, if it's a post hoc rationalization, then under those circumstances the agency doesn't get our deference which isn't to say that our deference is a good idea. It is to say that our deference still lies within within the lawless.
Richard Epstein: This is fantasy as far as I'm concerned. What they do is they put forward shockingly inept reasons and the fact that you could articulate something which says it's at ease. So the argument here is everybody at the top level is subject to loss of pay if they do something wrong. And since that's one of the tests is that since people who go on hourly wages could lose something these guys an hourly wage because they lose some. And the analogy is we dock you 15 cents per hour for bad wages and the other thing is we dismiss you from your job because of major professional incompetence or disciplinary stuff. This is not law. This is basically a situation where under the test they use if they bothered to think about it, the commander in chief who's subject to discipline and loss of wages is also an hourly worker.
Richard Epstein: What you have to do is to ask yourself the following question: If you start off with a statute which uses words like professional executive and administrative, these are not completely useless words although they're not precisely precisely clear in all cases. And then if you have first a regulation and then an application and you come up with the notion that a lieutenant commander is an hourly, it means that you slipped up in one of the two places. I don't care which in this case it was in the second case rather than the first. There is a basic consistent for the rule of law. Every time somebody says that this is what a word means, you apply to them to test for ordinary meaning. There is no Chevron deference under a rule of law situation. There is no hour deference, no Skidmore deference. And what happens is once you do that will happen something like the Fair Labor Standards Act actually turns out to be incoherent which is why it should be unconstitutional. Why is it incoherent? Because you start with 16 different ranks of offices and elaborate reporting structures and these geniuses pass the statute saying there are only two: non-managerial managerial when in fact in any command structure it's much more centralized and more common. So I regard the statute was completely irrational but that's not the battle I'm fighting. If in fact there is a statute like this, patrolmen are covered, sergeants are covered. Now somebody ask a question.
Host: We can open it up to questions now.
Question One: [inaudible] Of the Congress and the legislature because if you have very bad guidance from what I understand, you can stop it from being a rule, no?
Richard Epstein: Fourscore and seven years is what it will take. Remember to get something through Congress you have to go through committees, veto gates, and everything else. So the attorney general announces her particular situation, and by the way, in the letter that they wrote to North Carolina you remember what the timeframe was. They send the letter on May 3rd or 4th and they demand an answer on May 9th.
Richard Epstein: And that's five days including a weekend and let's just keep this straight. You want to go back to Congress? In 2525, we may be able to get some kind of response. The whole point about this is if I can switch this thing administratively the burden is now with somebody to get back to the status quo ante and the administrative decision is almost always final. So that is a worthless answer because it means any piece of indecent behavior is always subject to a Congressional override which is in turn subject to a professional veto by a president whose attorney general with his approval, did that. Do you agree with that, Dan?
Daniel Hemel: I don't think it's unlawful to make the North Carolina attorney general work on a weekend.
Richard Epstein: I agree with that. Give him two weekends.
Daniel Hemel: We have a legislature that can't pass law. If it could pass law, the laws would be so inconsistent with the president's positions that they would likely be vetoed. So, the high school civics conception of how a bill becomes a law very very rarely yields results now. So one possibility is we can have a robust administrative state come in and try to cover the place. We live in a complicated society where there is a need that both Professor Epstein and I would recognize. For some degree of governance on a wide range of economic issues.
Richard Epstein: But I do not agree that the governor says that every local school board every private school has to have the benevolent oversight of an illiterate and unintelligent Department of Education telling it how to do things. The question is not whether you have governance; the question is who's doing the governing? And the single greatest spice that comes when you do this is these guys make commando like raids; they force you to spend infinite amounts of money-time on doing things. They offer you not a single piece of protection against the potential liability that its rules will create or any of the costs that are needed to cover the compliance. So what you do is you now have a governing structure with a perfect externalization. What I declare I can do with nominal cost what you have this suffer is going to cost you thousands upon thousands of dollars millions of dollars to deal with. These school districts are heavily done.
Richard Epstein: And do I really think that they ought to be spending millions of dollars trying to figure out how to do the federal accommodation on toilets when in fact they came up with a perfectly sensible solution on their own. At one-one millionths of the cost. The issue is not whether you have administrative law. It's who is going to be the administrator, and the last person you want to administer anything in this particular case is the Department of Justice. They are enforcement agencies for criminal behavior. They are known in fact the dispensation of wisdom with respect to all these things. I mean even when I agree with them I think they have absolutely no place in doing it. And with this administration I disagree with them with stunning regularity.
Daniel Hemel: Does somebody have a question?
Question Two: This is more geared to Professor Hemel. Do you think it's OK that the administrative state can send out a letter that basically says if you don't comply, we're going to kill you and there is basically nothing you can do to challenge that right off the bat?
Daniel Hemel: Well, no. I would get the death penalty.
Question Two: My question is like what would be the problem with allowing facial challenges of guidance letters as a check on the administrative state's capacity to change everyone's behavior. And make them wait until they get sued before they can challenge whether it their behavior was lawful.
Daniel Hemel: So two responses. I'll freely admit that I think that the standard for when a... The standard for what is a rule right. The standard for when an agency should go through the 553 process, that should be broader. There should be more agency actions that have to go through 553. And that is your that's your proposal. It's going to be hard to draw lines. We'll probably never have a workable rule of rules. We'll have to have a standard of rules. But I'll agree with you on that point. I would disagree is as follows. Where we have the federal government funding agencies or funding local governments which is what we have here, right. We have resources going from the federal government to states and localities that under Professor Epstein's world, under Professor Epstein's world and in Professor Epstein's world, everyone's funding is pulled. No one is getting block grants from the Department of Education.
Richard Epstein: Yeah ok, you make your statement and then I'll make mine.
Daniel Hemel: If we do have these co-operative federalism arrangements where the federal government is giving money to actors down the chain. And there is there is any discretion over loose allocations. Then we could have a world without guidance documents in which case it would be very hard to find out whether grantees were just the states municipalities agencies organizations that the relevant bureaucrat in Washington likes or we could have a world in which the sponsor in DC, the funding agency, sets forth its allocation criteria, its funding priorities. Now it is true that when the Department of Education sets forth its funding priorities, that will that will affect behavior. But if it doesn't, if it stays silent then it is very difficult to know whether it's acting partially or impartially. We could have a world in which DOJ can tell us who's going to sue until it until it filed suit. But then it would be very hard for us to monitor the DOJ's exercise of enforcement discretion. So yes I agree with you that in the ideal world, the Education Department and the Justice Department more frequently set their spending priorities and their enforcement priorities through the 553 process. But we also have to recognize that when we, when we force DOJ and DOE to go through 553 every time, they tell us how they're going to allocate their resources, then we'll see administrative agencies hiding the ball more and that might not be a more desirable result.
Richard Epstein: Well let me give a slightly different view. I think with respect to major changes of which certainly this policy is one, if you start to go through the notice and common proceedings you can't do anything for several years. This means that the passion of the moment will not be able to drive everybody one way or another and it will mean in many cases that will not be a single administration acting on a single day which will do this. And so that by the temporal element there's a diffusion of power even within the administrative state which would lead to some degree of course. The second thing is I believe that it's important to understand that I do not believe that the government should be allowed under circumstances to say if you don't do X we're going to take all your tax revenues away. The mistake here starts with Frothingham v. Mellon, one of the many mistakes of the administrative state in which it turns out that nobody is allowed to challenge legislation which is by the Constitution. And this means in effect that
Richard Epstein: unless there's somebody who is hurt in a direct and individual way, major programs start to get funded. And yet the correct response when you're dealing with the Maternity Act as it was in 1923 is, if this is not an illicit form of public expenditure because basically the correct reading of the Constitution is transfer payments are not allowed by the United States. When the general welfare of the United States means a collective welfare not individual payments between A and B. What happens if we can't do that, the program gets put into effect. And since nobody suffers a concrete industry the whole thing goes. This came up in the Medicaid cases under the Obamacare. I did write a brief on this saying it was utterly unconstitutional and completely unconscionable for the United States to do the following: to say either you decide to give the Medicaid extension or we're going to take all your Medicare and Medicaid benefits from you.
Richard Epstein: So if you don't want to take the two billion subject to conditions you're going to lose 18 billion. Now Justice Roberts in a lack of precision called this a gun at the head, but the correct way to say it is just a complete misuse of monopoly power that you have over somebody and nobody is going to turn down, you know, basically a government command if they have to forfeit everything that they own. Justice Roberts did the same thing recently in the coin case when he announced that the government cannot say if you want to sell your things into the market you have to give one third of this to us. So it's always voluntary. The Mafia says exactly the same thing. What you have to understand therefore is that when the federal government does something, it doesn't do what with its money it does with our money.
Richard Epstein: And the money it doesn't with his money that it taxes from individuals. And in any decent society or the uses of tax money obtained by coercion has to be limited to the provision of public goods for the individuals from whom it is taken and what's happening under these programs is that the government is saying you comply, you get all our money and some of that money comes from the guys in the other state. And so it's a massive wealth transfer programs between states. And what I think I would say to Daniel is. Look maybe on the administrative law there's some feeble justification you can get for this outrageous conduct. But if you're trying to think about this constitutionally the rot starts at the highest level when it turns out we turn the taxation power into a transfer machine which allows government agencies to pick those states that are compliant and those which are not. Is this political? Well. Just a coincidence. Every Democratic state was happy with the conditions. Every Republican state was unhappy with it. There's no politics involved in this. This disinterested passionate judgment by people on how these things ought to be organized. It is not the way to run a ship and the administrative times is the tip of a very corrupt iceberg. Somebody?
Question Three: Professor Hemel said that it is dangerous to call the other side unlawful. I thought that was an Interesting point. Do you think that means that the administrative state is still lawful if it violates the Constitution or do you think there is no legitimacy to the constitutional arguments?
Daniel Hemel: It's a good question. So. I don't think the following could be the case. Every time an administrative agency does something unconstitutional, it is therefore unlawful. When President Obama tried to appoint heads of agencies during a recess, during a very short break in this Senate session, he was ex post rule, ex post loss before the Supreme Court. But he had a good interpretation of the Constitution that the Supreme Court turned out to disagree with.
Daniel Hemel: The mistreated agency says or acts according to the following view, I just don't care what the Constitution says. I don't even look at it; I don't look at decisions interpreting it. I'm just going to do my own thing. Then we enter the territory of unlawfulness. But I think that's what the Obama administration is doing; I don't think that's what the Bush administration is doing. I think we have to go pretty far back to find an administration that was doing that. Administrations have... take good faith interpretations of the Constitution, that we might disagree with, but they are still think by by almost any definition of lawfulness, they act lawfully when they act according to those interpretations. But once they throw the Constitution and decisions interpreting the Constitution out the window and say I don't care, I'm going to do my own thing. Then unconstitutional administrative action becomes unlawful administrative action.
Richard Epstein: Look I take a harder view on this line. I mean the President is supposed to take care that the law be faithfully executed, and on the immigration debate what we do is we have multiple statements by the president which said that it is not within his power as the executive to alter the status quo of illegal aliens or undocumented aliens. I prefer the former term because it's more accurate simply because their children are citizens of the United States. And then what happens is he gins up an opinion from his office of legal counsel which says exactly the opposite. It seems to me that whenever you can contradict yourself and now when it says oh look at this, they didn't do anything so we're changing our view. That's very close to bad faith in fact that is bad faith. To put it in another particular way, you have to have extraordinarily powerful reasons as to why you were making that particular shift from your own announcement. And if the only explanation you give is that the reason I'm doing this is an executive matter,
Richard Epstein: it is because the Congress hasn't done what I've asked them to do. That is a per se confession of the fact that it has exceeded executive authority under the circumstances of this case. Because the Congress is supposed to have the power to pass these particular laws. And the second thing is well what does he do? Well the most you can say is some discretion that prosecutorial discretion covers the fact that certainly the strengths and weaknesses of individual cases is a prosecutorial matter. It may well be in certain small kinds of situations that not prosecuting an entire class of cases within executive discretion. But this is a massive switch far beyond anything else in any other executive has done. Worse than this, it is not just a non prosecution decision. It is a decision to say that once you do this, you're now eligible under the states to get your driver's license, this benefit and that benefit. There is absolutely nothing that the president has when he chooses not to prosecute or to tell states exactly how they have to deal with people who are not legally inside this particular country.
Richard Epstein: Now it turns out on the merits actually. I'm not particularly hostile to the position that Obama's taken; I don't like breaking up families. I think the immigration policy is a disaster. But I just don't think it's close. The definition of good faith in this context is not a definition do you agree with the substantive outcome that the president has done. The question in good faith is is he consistent with the obligations of this ordinance and you do not take care to see that a law was faithfully executed if you consciously decide to flout it at every turn when you admitted that you're doing so. That seems to me to be the quintessential statement of bad faith. And that's when I would say in this particular case, and am I wrong?
Daniel Hemel: Well I think there's two factual issues upon which we disagree. One is did President Obama ever say that he lacked the authority to defer action on removal of undocumented immigrants? When?
Richard Epstein: If you go back and read the blogs, there are a dozen statements to that effect. At that point when he was basically on the other side of the political fence. And if they're not just before the article invasion at this stage. He didn't have, he knew he didn't have the power. And then it turned out he couldn't win, then he does have the power.
Daniel Hemel: His deferred actions of the... deferred action of parents with Americans was consistent with deferred action of childhood arrivals. It's been at least for the majority of the administration, their policy. And I am unaware of any prior statement by President Obama saying that he lacked this authority. That might be wrong. Second, I'm unaware of any statement from the Justice Department to the state of Texas saying to grant driver's licenses to anyone.
Richard Epstein: Well, don't they have to something?
Daniel Hemel: Well that's the question. That's the standing issue in the case.
Richard Epstein: Well the question is if these people start to come here, what can the state do they have any claims against the state of Texas? Can they send their children to schools? Can they get driver's license? You can look at all of this stuff. I mean it's simply a non-prosecution agreement then they remain in limbo. And that was certainly not the intention of the president. He wanted to put much more heavily on the question of what they can do. And you know this may be perfectly humane but all you can do by non-prosecution at the most is to say I won't prosecute you. You cannot do anything above and beyond that. And you know the thought that somehow the States which now have large populations of people inside the country can't do it. This again is the danger of the modern standing doctrine is when you try to prove disparate industries, it's the same problem with Frothingham, that means that nobody can challenge something on the grounds that it's ultra vires suppressant. And that to me is the central flaw of all modern standing law. Frothingham is a total disgrace. It is a complete abdication of constitutional government. If Marbury v. Madison is right, then Frothingham is wrong. I mean it's as simple as that.
Daniel Hemel: So I agree with you that modern standing doctrine is another intellectual disaster generated by courts not by administrative agencies. But on the facts of deferred action. One, Texas' claim is look, we grant subsidize driver's licenses to anyone who has deferred action status. So by giving deferred action status to more people, you're causing us to grant or subsidize driver's licenses. There's no requirement that Texas has to grant driver's licenses to undocumented immigrants. That's the problem with Texas's standing argument here. Well I don't see that the problem is within the confines of the intellectual disaster that is my understanding of modern standing law. This gets back to the question. That we've discussed a few times. Would we rather the Obama administration pick willy-nilly who it's going to deport and who it's not. We know that there's no way that the administration is going to be able to deport all the people who are here illegally. And what the administration has said is here are the criteria that we will follow. We're not just going to choose based on the whims of a roving commissioner.
Richard Epstein: Well the issue is whether or not they could simply insulate entire classes of individuals from prosecutorial discretion simply by calling this an administrative necessity. I think the answer to that question is there was a previous policy on this which seemed to have would willy nillness in this in some sense which is consciously deviating from. My own view is he has to give a very strong explanation as to why he's changing the result. As to the question of why it is that the courts got this wrong it's an interesting problem and it stems from the fact that they don't know when the law in the following way. The Constitution provision says the judicial powers shall extend to all cases in law and equity and every one of these characters have read out the inequity languages from this, and what equity does is it allows you to sue anybody for ultra virus behavior.
Richard Epstein: That was a mistake made by someone that was one that was compounded by Scalia and other people. And so what's really important about this for this discussion is the only way you can read the Constitution in a remotely intelligent fashion is to connect it back with this system of private law institutions that have been developed. If you do that, then you could figure out what the words inequity mean. If you don't do that, then what happens is you will come to the situation that the only direct impact is going to be there. And that's what makes the Texas decision so awkward. This should not be this elaborate standing battle one way or another. It should be an open and shut case and anybody who's a citizen of the United States or any state can challenge unlawful action. And if multiple people do use consolidation hearings to figure out how it is that you can manage the judicial stuff. That's the deepest error that we have.
Richard Epstein: And from that error, all these other errors start to flow to the point where we do have an administrative state on steroids which I'm sorry to say is much too often either flat out illegal or perilously close to line.
Daniel Hemel: One of the great things about talking with Professor Epstein is realizing how many areas we agree on. Professor Epstein is not... does not follow the ideological line. And just expressed I think quite articulately, much more articulately than I can or that they have, the standing view of William O'Douglas, William Brennan, and John Paul Stevens.
Richard Epstein: Antonin Scalia.
Daniel Hemel: No, it is entirely antagonistic to the standing view.
Richard Epstein: Oh oh oh no. Brennan to some extent yes. He was better on this selectively I agree on this particular issue, generally speaking the liberals were there, and also all the libertarian organizations are exactly on the same side. But I think the first rule of conduct in this stuff is if you actually figure out what you believe by reading what Supreme Court judges are aligned by you, you ought to resign your commission and find some other profession. I do know that Brennan said that but he's also the same guy who believes that everything in the Constitution turns out to be living, that every living innovation always moves you for that to a larger government stake. So you know I could accept them on one and reject them on the other. But the key question in every case is what's the merits of the underlying argument not the question of who it is who manages to profound it.
Richard Epstein: And I think the single greatest tragedy in American constitutional law in many situations is that so-called judicial conservatives in fact have yielded all too readily to the expansion of government power under a wide variety of things and that includes you know people who are Republicans like John Paul Stevens and the Chevron doctrine and Sutherland who is also Republican. The progressive tradition in many cases is at work in this case because it's an effort to sort of increase the scope of the administrative state given its ostensible expertise on the one hand then it's public legitimacy on the other, which is an issue in both those assumptions seemed to be false. And the expansion of the administrative state in its current forms are rethought the major challenge to this country. In virtually every area in which I work whether it's financial regulation, whether it's labor regulation in one form, whether it's civil rights, it's a state that's too big, too powerful, and too disrespectful of the private rights of ordinary individuals in the way in which they lead their daily lives. So that's my view.
Daniel Hemel: It's a view with which I disagree, but I think it's still well within the set of lawful.
Richard Epstein: You know look, I mean look we had another paper here by Richard Fallon and this would sort of represented I think everything that was wrong with modern constitutional law. The only question he was trying to figure out whether or not somebody was in good faith and I sort of barely got it on the right side of that line I suppose. But the issue in constitutional law is to figure out what the right answer is and if you can in good faith disagree, that doesn't give you much help as to what it is. And so you have to be much more willing to go back to traditional notions having to do with tax structure, history, and the origin and so forth. And the great achievement of the good faith maneuver is it takes essentially with a few egregious exceptions, what was a classical liberal limited government strong property rights doctrine and turns it into a progressive Mecca by expanding the size of jurisdiction at the congressional level and whittling away on all the economic and property rights with a rational basis test. That's the underlying thing, and if you didn't make those two mistakes, just think of it. Does the United States government actually have jurisdictions over a coequal sovereign? Do you really think that those decisions are right?
Richard Epstein: I mean they can, that the federal government can tell the states how they run their minimum wage laws? By the way, and the Congress doesn't the subject itself to the Fair Labor Standards, right? I mean this is just an outrageous form of lawlessness of the worst order. I don't want to be particularly melodramatic about it. I just want to sound mildly hysterical.
Host: And we're out of time!
Announcer: This audio file was a production of University of Chicago Law School. Visit us on the web at www.law.uchicago.edu.