Curing the blind spot in administrative law: a federal common law framework for state agencies implementing cooperative federalism statutes.

• Author: Bendor, Josh

NOTE CONTENTS INTRODUCTION I. LEGISLATIVE SILENCE AND JUDICIAL CHAOS A. Cooperative Federalism and Administrative Law B. The Law Today 1. The Hole in the Administrative Procedure Act 2. Why the Judicial Silence? 3. Courts' Discussion of the Doctrine i. Standard of Review for State Agency Actions ii. Statutory Interpretation iii. Other Doctrines iv. A Path Forward II. ESTABLISHING A FRAMEWORK FOR THE ADMINISTRATIVE LAW OF COOPERATIVE FEDERALISM A. The Kimbell Foods Presumption in Favor of State Law B. The Value of the Kimbell Foods Presumption in the Cooperative Federalism Context 1. Why Cooperative Federalism Should Lean Toward State Law 2. Why Not a Blanket Rule in Favor of State Law? C. How Kimbell Foods Should Work ill the Cooperative Federalism Context 1. Uniformity 2. Readily Applicable Analogous Statutes 3. Frustration of the Federal Scheme CONCLUSION INTRODUCTION

Administrative law scholarship focuses almost exclusively on federal agencies implementing federal laws. (1) Yet state agency implementation of federal statutes--cooperative federalism (2)--is an integral part of our administrative state in fields ranging from environmental law to health care to education. (3) When state agencies are sued for violating cooperative federalism statutes they administer, courts must decide what doctrines of administrative law should apply. Does federal or state law control? If federal, should these agencies be treated like their federal counterparts, or must new rules be developed to accommodate the unique issues posed by state agencies?

Surprisingly, courts and scholars alike have given scant attention to those fundamental questions.

The recent scholarship most on point is Abbe R. Gluck's article Intrastatutory Federalism and Statutory Interpretation: State Implementation of Federal Law in Health Reform and Beyond. (4) Gluck exposes the gap that has existed in current scholarship regarding the role of state agencies in statutory interpretation. Gluck, other scholars, and the federal courts have recently considered whether state agencies interpreting cooperative federalism statutes that they administer should receive Chevron deference. (5) But Chevron deference is only one of many doctrines that must be transposed to the context of cooperative federalism. Courts must also determine, for example, whether state or federal law should govern, which actions are reviewable, what standard of review to use, and who bears the burden of proof in agency proceedings.

When facing these questions, courts operate with very little guidance from statutory or common law. The federal Administrative Procedure Act (APA) does not include state agencies within its ambit. (6) And federal common law doctrines of administrative law have been developed with federal, not state, agencies in mind. Furthermore, state administrative law doctrines that usually apply to state agencies often diverge considerably from federal law. As we discuss infra Section I.B, in the face of this difficult and undertheorized issue, courts have acted reflexively, applying the law that is most familiar to them. Federal courts apply federal law while giving little, if any, consideration to state law. State courts, by contrast, often apply state law while giving inadequate consideration to federal law. In part, this chaotic situation exists because courts and commentators have not identified the issue.

By always applying one form of law, both state and federal courts treat the issue too simply. There is great diversity in cooperative federalism regimes and administrative law doctrines. In some cases, it will be wise to follow the distinctive rules that states have created to govern their own institutions. In other cases, it will be wise to ensure uniform policy across the nation. The diversity of circumstances demands a practical approach that considers what will happen when a given administrative law doctrine is applied to the statutory problem at hand. In this Note, we argue that the Supreme Court has already developed such a framework in United States v. Kimbell Foods, Inc. (7)

The question presented in Kimbell Foods was "whether contractual liens arising from certain federal loan programs take precedence over private liens." (8) The statute did not specify what the priority should be, so the Court had to use its federal common law powers to fill the statutory gap. To do so, it could either devise a uniform federal rule or apply state law. The Court concluded that "a national rule is unnecessary to protect the federal interests underlying the [federal] loan programs." (9) Instead, "absent a congressional directive" to the contrary, the lien priorities would be "determined under nondiscriminatory state laws." (10) The Court made clear that this sort of reasoning would apply more generally: barring "concrete reasons" to the contrary, "the prudent course is to adopt the readymade body of state law as the federal rule of decision until Congress strikes a different accommodation." (11)

Kimbell Foods set a new tone for federal common law. In subsequent cases, the Court has made clear that there is a "presumption that state law should be incorporated into federal common law" as the federal rule of decision (12) and that the ultimate question is "whether the relevant federal interest warrants displacement of state law." (13) Only in limited instances should courts "fill the interstices of federal remedial schemes with uniform federal rules." (14)

As in Kimbell Foods, the question here--what law to apply to state agencies carrying out cooperative federalism statutes--presents a situation where "Congress has not spoken 'in an area comprising issues substantially related to an established program of government operation.'" (15) Courts should approach the question in the same way they approach other questions of developing federal common law. As Kimbell Foods suggests, the presumption should be to adopt state law. Yet this presumption should be overcome "where there is a 'significant conflict between some federal policy or interest and the use of state law.'" (16)

In this Note, we begin by presenting background on the history of cooperative federalism statutes, the role of cooperative federalism today, and the sources of administrative law. We then argue that the APA never considered the role of state agencies in implementing federal law and examine the inconsistent and reflexive way in which courts have applied administrative law to state agencies implementing cooperative federalism statutes. Finally, we explain how these issues can be better resolved and understood through the Kimbell Foods framework.

1. LEGISLATIVE SILENCE AND JUDICIAL CHAOS

   1. Cooperative Federalism and Administrative Law

      The archetypal federal program involves federal agencies implementing federal statutory law. But federal statutes that delegate responsibility to state agencies make up a large and important part of the United States Code.

      Although some cooperative federalism statutes, such as the Pure Food and Drug Act of 1906, existed prior to the New Deal, (17) it was the New Deal that "put the concept of a cooperative federalism on the map." (18) Most cooperative federalism statutes passed during this period generally "involved the sharing of funding, as opposed to regulatory authority" between the federal and state governments. (19) By 1938, so-called grants-in-aid programs were already providing funding for such diverse projects as "agricultural extension work in the states, the training of teachers [of certain subjects], ... experiments in reforestation, the construction of highways, the equipment and training of the National Guard, and other matters falling normally under the reserved powers of the states." (20)

      In other programs, the federal government explicitly enlisted state agencies to carry out federal statutes. (21) Even prior to the New Deal, the federal government used state governmental actors to assist in the "apprehension of fugitives from justice, the enforcement of the National Prohibition Act, [and] public health administration." (22) The New Deal considerably expanded the reach of these types of programs. (23) Perhaps most significantly, the Motor Carrier Act of 1935 substantively involved state commissioners in much of the administration of motor carrier regulation. (24)

      Still, the dominant regulatory model of the New Deal involved "national bureaucracies directly regulat[ing] citizens and businesses in support of national policies." (25) Programs involving cooperative federalism were seen as "striking" experiments rather than the norm. (26) According to one commentator, the cooperative aspect of the Motor Carrier Act "would not have been feasible and could scarcely have commended itself to congressional approval had not the plan been solidly grounded on vital facts peculiar to the motor carrier industry." (27)

      This changed dramatically in the 1960S and 1970s, when the federal government passed an unprecedented number of regulatory statutes. In fact, "[b]etween 1968 and 1978 Congress passed more regulatory statutes than it had in the nation's previous 179 years." (28) This regulatory expansion was achieved without a "corresponding increase in national administration of regulatory and service-provision programs," because ground-level implementation of regulatory responsibilities under these statutes was generally left to the states. (29) In many of these areas, federal laws encroached on traditional areas of state regulation. (30) Thus, federal statutes frequently incorporated state regulators as a way of softening the increased role of the federal government. Other statutes regulated new areas, but used states as an efficient means of ensuring adequate and localized enforcement. (31)

      Congress continues to vigorously employ cooperative federalism structures. For example, the Telecommunications Act of 1996 requires state agencies to oversee interconnection agreements...