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agency rule which shall afford parties an
opportunity to submit for the record such
written data, views, or arguments and an
opportunity to respond to the data, views
or arguments submitted by other parties.
Such procedures may include the use of show-
cause orders, reliance upon generic rules
promulgated by the agency, or the use of
rebuttable presumptions, as the agency may
determine to be appropriate. In order to aid
the expedition or fairness of a hearing the
agency or presiding employee, upon a finding
that no party will be unduly prejudiced thereby,

may alter hearing procedures promulgated by
general agency rule for good cause shown.
Except as otherwise provided by general agency
rule or by a ruling of the agency or presiding
employee, upon good cause shown, At-the-request
of-any-party-in-the-proceeding, the hearing shall
include an opportunity for oral argument with
respect to such written submissions.
extent-authorized-by-section-555-of-this-title
or-other-law,the-hearing-shalt-be-preceded-by
discovery-procedures-as-the-agency-or-presiding

employee-determines-appropriate.

Fo-the

Whenever

appropriate to a just disposition of any disputed material issue of fact, the agency or presiding employee shall allow a party, on motion showing good cause and inability of counsel to agree, to obtain discovery of matters not privileged relating to that issue, including oral depositions, written interrogatories, and the discovery or production of written documents."

Initial Submissions

Section 554 (b) as amended by S. 262 should read as follows:

"When private persons are the moving parties, other parties to the proceeding shall give prompt notice of issues controverted in fact or law; and in other instances agencies may by rule require responsive pleading. In the case of any proceeding required by this section or by general agency rule to be conducted pursuant to subsection (e), each agency shall require the moving party, including the agency, to submit in written form at the time the proceeding is initiated all the facts and arguments upon which the moving party proposes to rely that are known at such time to that party. The moving party may apply to the agency or the presiding employee for a full or

50-941 0 - 80 - 34

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partial waiver of such a written submission
upon a showing that the issues raised by the
moving party are, or are likely to be,
unopposed or where the written submission
will unduly delay the proceeding or otherwise
cause undue prejudice to the moving party.
fixing the time and place for hearings, due
regard shall be had for the convenience and
necessity of the parties or their representa-
tives."

In

Discovery

Section 555 (e) as amended by S.262 should be revised to substitute "subpoena, discovery authorized pursuant to subsection 554(e) (2), or other similar process" wherever the term "subpoena or similar process" appears.

The next two witnesses are Prof. Paul Verkuil and Prof. Thomas Morgan. Professor Verkuil is dean and professor of law at Tulane Law School. Professor Morgan is a professor of administrative law at the University of Illinois.

Gentlemen, we welcome you, and I ask each of you to summarize your statements briefly so we can then have time for a few questions. Your statements will be inserted in the record.

Dean Verkuil, why don't you proceed?

TESTIMONY OF PAUL R. VERKUIL, DEAN, TULANE LAW
SCHOOL

Mr. VERKUIL. Thank you, Senator Levin.

I would like to say my testimony today relates principally to title II of S. 262 and S. 755. I have not considered the other titles of those bills, nor have I considered the other bills that were mentioned at the outset of the hearing.

I support the efforts in these bills to review and rethink administrative procedures. In my view, the notion of a modified procedure introduced in both bills is the most significant development in administrative procedure since the APA was enacted over 30 years ago. The stated findings and purpose of the bills correctly identify two basic problems in administrative decisionmaking; namely, those of delay and overjudicialization, as Mr. Gardner has just testified. These are the two factors that most observers of the administrative scene would agree upon as crucial in trying to evaluate the performance of an administrative agency. The bills propose sensible correctives; first to find flexible procedures, and second to give more agency control over the administrative process. In effect, these correctives really are an act of faith in the administrative agencies on the part of Congress. I don't think that faith is misplaced. Inevitably, it seems, as we grant administrative agencies expanded substantive responsibility, we have to grant them expanded procedural responsibility. We have to give them the power to make decisions in ways that are different perhaps than they typically decided things 30 years ago. In that sense, the flexibility and agency control are important components of the process.

The first major matter that the bills deal with in title II is what is now section 553, the informal rulemaking provision. S. 262 leaves section 553 alone, whereas S. 755 makes several important changes. I think it is important to note, however, that neither bill tries to change the basic nature of section 553.

As you know, there is much activity these days both in the courts and in agency legislation over the concept of hybrid procedure in rulemaking, the notion that somehow we have a unitary procedure and give it more the character of what the bills label general hearing or expedited procedure.

I think the bills wisely preserve 553 as an independent decision category. It strikes me if one were to collapse all of the administrative procedure into the general hearing model, you would lose the advantages of 553, which are themselves efficient and flexible, because they have a stripped-down form of notice, comment and concise statement-three ingredients essential in deciding certain kinds of rulemaking. If one automatically switches to the hybrid procedure, the danger is that the total amount of procedure will increase; many rulemakings today should still be conducted under ordinary 553 requirements. S. 755 makes several additions to 553, none of which I think convert it into hybrid rulemaking, but each of which should be commented on.

The new notice requirement in S. 755 states that the time, place and nature of any hearings to be held concerning the proposed rule should be stated at the outset of the rulemaking proceeding. I have some difficulty with the nature of the "any hearings" provision, especially if it has to be stated at the outset. There are two basic problems. One, given the confusion these days over the meaning of the term "hearing," it is conceivable that use of that term in this could itself imply hybrid rulemaking, something I don't think the bill intends to do. Second, by forcing the announcement of the place of the hearings at the initiation of rulemaking, the agency must make a choice about whether to permit oral comments before it really knows what the written comments themselves will reveal, since they have not yet been circulated and received. This choice, it seems to me, if it is made at the outset would force the agency more than it might want to to operate in favor or orality, or oral hearing, if that is what the term "hearing" means, and I suspect that it is. I think the potential for adding orality in every proceeding is greater just for that reason. I am not sure the word "hearing" ought to be there, just because it will lead to these other kinds of problems.

A related concern is that if an agency doesn't notice a hearing at the outset and then tries to do so in the hearing, parties might object as not being in compliance with amended 553. Indeed, I think we are about to see parties going to court to complain, not about the denial of an oral hearing in rulemaking, but about the granting of it, because those parties in favor of the proposed rulemaking may be equally penalized by delay caused by a second round of comments or by oral hearings, as other parties are perhaps prejudiced by the failure to grant these additional procedures. In the other sections mentioned, a 60-day comment period is added to section 553. The current provision requires only an opportunity to particpate. It strikes me that the 60-day period may be an

excessive compromise. I think most rules certainly have a 30-day period in practice today. I don't believe that should be any different-maybe even come up with a compromise between 30 and 60. But I don't think all rules ought to have a 60-day comment period imposed, if indeed one of the aspects of the bills is to increase flexibility and provide for efficient decisionmaking.

Third, S. 755 adds to the concise statement of basis and purpose, which is the third ingredient of the 553 rulemaking. It requires that significant issues raised in the comments be addressed in this concise statement. I have no difficulty with that in principle. I think that is what should be done, indeed what should be done in the current language, and certainly the courts have so held. But I wonder if by adding that language we might not again be introducing the notion of hybrid rulemaking, of additional procedures, and creating more incentives to look at a rule very carefully, examining the way it was analyzed and shaping some requirement for findings of fact and conclusions of law, something clearly not intended. That is only a caution. I guess it is based on my reading of the judicial review cases and a tendency when you are changing language already incorporated in an existing statute, you might be doing more than was planned.

In balance, I think a fair question to ask is whether one ought to deal with 553 at all in this new bill. I don't think it is crucial that it be amended. In some cases it could be done without difficulty; in other cases, I think difficulties could arise.

One other point on 553. For some reason as I read the bills, section 553(e), which allows an interested person to petition for the issuance, amendment or repeal of a rule is omitted. I see no reason to omit that. I think it is a necessary provision in the law and it ought to stay.

The heart of S. 262 and S. 755 is the concept of expedited procedure. This is where the bills focus, and this is where much good work is done. I prefer applying S. 262's definition category to include initial claims for subsidies and other benefits. I think, as Mr. Gardner just testified, there are many cases of subsidy awarding in this Government where formal hearings are imposed to great disadvantage.

The other areas where the two bills vary somewhat is in the detail in which they describe the expedited procedure. S. 755 talks about factual assumptions underlying expert opinion, and also goes further and talks about credibility and competence of experts as worthy matters for formal hearings. I would be very concerned about that latter addition of credibility and competence. Indeed, I think it is possible that S. 755 would even give a right to a formal hearing on those questions where they are not currently according in many administrative proceedings. I think it is exactly those areas that cross-examination of experts does not pay off in the main, and that we ought to keep this as a rather narrow proceeding with cross-examination for factual assumptions, but not for competence of credibility.

There are several sections where the bills provide increased powers to administrative decisionmakers, principally administrative law judges. Here again I have general agreement, but express some caution. S. 262 talks about the power to disqualify attorneys for

failure to adhere to reasonable standards of orderly and ethical behavior. This is a powerful provision to put in the Administrative Procedure Act. Certainly this power exists in many agencies, and by judicial interpretation that has been granted to other agencies. But I can see situations where a small agency, with perhaps only one administrative law judge involved, and a small bar that practices before it, might indeed come into serious confrontations when you have this new grant of power. I am a little cautious about that. Second, the subpena power, I think is generally a good idea. The grant of subpena power has been supported by the American Bar Association and the Administrative Conference. Certainly the bills, in particular S. 262, go further than those earlier suggestions, where, for example, they provide for civil penalty up to $5,000 a day. I don't see any great difficulty with that, since these penalties would be imposed in a district court. I do have some concern, however, about the ability of an agency to decide the judicial validity of a subpena by deciding not to issue a notice of default and instead proceeding directly into the administrative process and seeking remedies from the administrative law judge, along the lines of Federal Rules of Civil Procedure 37, which could lead to defaults of the administrative proceeding for failure to produce information called for by the subpena. My caution is if one is to go so far as to default a party because he has complied with the subpena, it may be that an interlocutory appeal of default would be justified if nothing else just to provide some insulation in district

court.

I think the idea of agency appeal boards is well stated.

The only other distinction I note between the two bills and one that troubles me is the difference between S. 262 and S. 755 in scope of review. S. 262 provides for substantial evidence review of expedited procedure cases, but S.755 does not. If this is so, I think that S.262 is the better of it, since many of these expedited cases are cases that have received substantial evidence review in the past. I think it should be retained for the cases that fall under the category of expedited.

Senator LEVIN. I am wondering if you could close now. We will be printing your full statement in the proceedings, and I will hold my questions for you until Professor Morgan has completed his statement.

Mr. VERKUIL. Yes. I am through now.

TESTIMONY OF THOMAS D. MORGAN, PROFESSOR, COLLEGE OF LAW, UNIVERSITY OF ILLINOIS

Mr. MORGAN. Thank you, Mr. Chairman. I, too, appreciate the invitation to appear before the committee to discuss these various bills. I will direct my opening remarks to title II of S. 262 and S. 755 as well, which deal with specific changes in the APA. In particular, I will focus my attention on the proposed changes in sections 202, 204 and 205 which deal with changes in adjudication and other formal hearing procedures.

I think it can be persuasively argued that agencies already have authority under the Administrative Procedure Act to do many of the things that are mandated by the proposed legislation. The ICC, for example, already makes extensive use of written evidence in its