Loper Bright Doesn’t Allow Abuse of the ‘Good Cause’ Exception

President Donald Trump’s recent memorandum directing executive branch agencies to repeal “unlawful regulations” by using the Administrative Procedure Act’s “good cause” exception likely will cause more legal trouble than the exception is worth.

The exception permits agencies to forgo the notice-and-comment procedures required by the APA to repeal regulations. The move may allow agencies to quickly repeal identified regulations, but the implications of what appears to be an imminent regulatory upheaval is certain to cause a significant amount of chaos for regulated entities.

Interestingly, the memorandum also cites the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, which eliminated Chevron deference, among nine other Supreme Court cases, as justification for these upcoming regulatory repeals.

Repealing Regulations

Under the APA, repealing a rule is, by definition, a rulemaking. The APA requires agencies to undertake notice-and-comment procedures when engaging in rulemaking. As a result, it’s black-letter law that agencies must follow notice-and-comment procedures to repeal a regulation on the books.

Even in repealing regulations, agencies must consider the benefits and advantages of the regulations against the costs and disadvantages of repealing them, including the reliance interests that regulated parties have gained in existing regulations.

The APA allows agencies to skip notice and comment when the agency for “good cause” finds that the notice and public procedures are “impracticable, unnecessary, or contrary to the public interest.” Courts have construed the exception “narrowly,” typically limiting its use to matters such as emergency health or safety standards that can’t be delayed, regulations that simply parrot the statute, or technical amendments to the regulations.

Agencies must explain their rationale for invoking the exception in writing, but the courts don’t defer to an agency’s rationale for the exception (as they may when reviewing some other agency decisions).

Trump Administration Moves

On Feb. 19, the president issued an executive order to “commence the destruction of the overbearing and burdensome administrative state.” The order required executive branch agencies to identify regulations they would propose to be rescinded.

Trump specifically directed the agencies to identify regulations the agencies believe are unconstitutional, not based on the best reading of the statute, or that harm the national interests, among other reasons. The agencies had until April 20 to comply with the order.

As the 60-day deadline neared, the president issued the April 9 memorandum directing all federal agency heads to “immediately repeal” all “facially unlawful” regulations “without notice and comment, where doing so is consistent with the ‘good cause’ exception.”

The memorandum states that the good cause exception applies to “facially unlawful” regulations because they are “clearly contrary to the public interest” and “unnecessary.”

Proving the Rule

The good cause exception is just that—an exception. Applying it as broadly as the administration suggests likely will face significant challenges.

First, the administration can’t simply state that the good cause exception applies because withdrawing an existing regulation is in the national interest or public interest. If it could, the exception would swallow the rule.

Every administration believes its agenda is in the national interest, but this belief doesn’t permit federal agencies to repeal properly promulgated rules without taking notice and comment to consider all the benefits and disadvantages of the existing regulation. The administration’s attempt to apply this narrow exception so broadly will likely receive immediate (and successful) pushback from interested parties.

Second, permitting the federal agencies to determine which regulations best align with their governing statutes in this manner turns Loper Bright on its head. In that decision, the Supreme Court held that the courts are the authority on which regulations are lawful and which aren’t. The administration’s proposal to repeal regulations the agency deems unlawful is inconsistent with this recent decision.

If the administration fails to articulate its new position that a previous administration’s regulation is unlawful, a challenge to the repeal would likely be successful under the APA’s “arbitrary and capricious” standard.

If the administration moves forward with its proposed use of the good cause exception, regulated industries will be left uncertain about their compliance requirements.

Imagine the following scenario: An agency repeals a regulation under the good cause exception, and challengers successfully move for a temporary restraining order or preliminary injunction, reinstituting the rule. The agency then announces it simply won’t enforce the regulation (a potentially dubious administrative action) rather than trying to properly repeal it.

What is a regulated entity supposed to do?

If an entity complies with regulations on the books, it may lose a competitive edge or profits to other entities that choose not to. But if it fails to comply, what happens if the next administration decides to enforce the regulation? The statutes of limitations for federal enforcement actions extend past the termination of this administration, creating a perilous situation for regulated entities.

Even if the agency, in this scenario, opts to comply with the APA’s notice-and-comment requirements to repeal the regulation, proper consideration of any comments received may not lead (or permit) the agency to repeal the regulation as it intends.

The administration hasn’t yet announced which regulations it intends to repeal in compliance with the memorandum. But given the administration’s stated intentions and directives, we know the rapid repeal of numerous regulations is likely on the horizon. Regardless of the merits of the administration’s goal, its proposed plan may not really permit regulated entities to exercise the freedom it envisions, undermining its true policy intentions.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Christopher J. “CJ” Frisina is an attorney with Alston & Bird’s health care team.

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