Inside the agency class action.

• Author: Ambrogio, Michael Sant

ABSTRACT. Federal agencies in the United States hear almost twice as many cases each year as all the federal courts. But agencies routinely avoid using tools that courts rely on to efficiently resolve large groups of claims: class actions and other complex litigation procedures. As a result, across the administrative state, the number of claims languishing on agency dockets has produced crippling backlogs, arbitrary outcomes, and new barriers to justice.

A handful of federal administrative programs, however, have quietly bucked this trend. The Equal Employment Opportunity Commission has created an administrative class action procedure, modeled after Rule 23 of the Federal Rules of Civil Procedure, to resolve "pattern and practice" claims of discrimination by federal employees before administrative judges. Similarly, the National Vaccine Injury Compensation Program has used "Omnibus Proceedings" resembling federal multidistrict litigation to pool common claims regarding vaccine injuries. And the Office of Medicare Hearings and Appeals--facing a backlog of hundreds of thousands of claims--recently instituted a new "Statistical Sampling Initiative," which will resolve hundreds of common medical claims at a time by statistically extrapolating the results of a few hearing outcomes.

This Article is the first to map agencies' nascent efforts to use class actions and other complex procedures in their own hearings. Relying on unusual access to over forty agencies--including agency policymakers, staff, and adjudicators--we take a unique look "inside" administrative tribunals that use mass adjudication in areas as diverse as employment discrimination, mass torts, and health care. In so doing, we unearth broader lessons about what aggregation procedures mean for policymaking, enforcement, and adjudication. Even as some fear that collective procedures may stretch the limits of adjudication, our study supports a very different conclusion: group procedures can form an integral part of public regulation and the adjudicatory process itself.

ARTICLE CONTENTS INTRODUCTION 1637 I. AGGREGATION IN JUDICIAL AND ADMINISTRATIVE PROCEEDINGS 1645 A. The Costs and Benefits of Aggregate Adjudication in Court 1649 B. The Power of Agencies To Aggregate Cases and Claims 1652 II. THE EXTENT OF AGENCY AGGREGATION 1657 A. Identifying Agencies that Use Aggregation 1657 B. Most Agencies Do Not Aggregate Claims 1658 III. INSIDE THE AGENCY CLASS ACTION 1663 A. Class Actions in the Equal Employment Opportunity Commission 1665 1. EEOC Class Actions in Administrative Proceedings 1666 2. EEOC Class Action Procedures: Similarities to and Differences from Federal Rules 1667 B. Multiparty Consolidation in the National Vaccine Injury Compensation Program 1670 C. Consolidation, Statistical Sampling, and Group Settlement in the Office of Medicare Hearings and Appeals 1674 1. OMHA's Statistical Sampling Initiative 1676 2. OMHA's Settlement Conference Facilitation Initiative 1680 IV. BENEFITS AND CHALLENGES OF AGGREGATE AGENCY ADJUDICATION 1681 A. Promoting Efficiency While Avoiding Diseconomies of Scale 1682 B. Promoting Consistency While Ensuring the Accuracy of Agency Decisions 1686 C. Promoting Legal Access, Generating Information, and Enhancing Legitimacy 1687 V. THE FORMS AND LIMITS OF AGENCY ADJUDICATION 1691 A. Aggregation Complements Rulemaking 1691 B. Aggregation as an Enforcement Tool for Agencies 1695 C. Protecting the Legitimacy of Adjudication Through Active Management and Bargaining 1701 CONCLUSION 1705 APPENDIX 1706 INTRODUCTION

A crisis is brewing in Medicare. In 2003, Congress created the Office for Medicare Hearings and Appeals (OMHA)--a special administrative court designed to resolve billing disputes between the federal government and hospitals, nursing homes, medical providers, and others. (1) But after six years of relative normalcy, case filings at OMHA spiraled out of control. By 2014, OMHA's backlog had spiked to almost 500,000 cases. (2) Worse yet, average wait times for decisions mushroomed to almost two years in 2015. (3) OMHA's worldoad became so heavy that at one point it took five to six months just to enter new cases onto its docket. (4)

Medicare's problems are hardly unique. Across the administrative state, the number of claims languishing in bureaucratic limbo has become a new crisis--creating significant backlogs, arbitrary outcomes, and new barriers to justice. (5) The Department of Veterans Affairs recently admitted that veterans face average wait times of four years to obtain their disability benefits. (6) In July 2016, the Department of Education reported that, nearly eighteen months after the collapse of the Corinthian Colleges, over 20,000 students were anxiously waiting for the Department to hear their claims for loan forgiveness. (7) Even as Congress tries to create administrative programs to resolve claims more quickly than federal courts, agencies often meet the same Kafkaesque fate. (8)

But what made OMHA unusual was its response. Last year, OMHA adopted a new pilot program dubbed the Statistical Sampling Initiative (SSI) that allows hospitals, doctors, and other medical providers with large numbers of similar claims to conduct "trials by statistics." (9) Petitioners with more than 250 similar claims have the option to try a small sampling of those claims before an Administrative Law Judge (ALJ) and extrapolate the average result to the rest. (10) To do so, petitioners meet with one of Medicare's "trained and experienced statistical expert [s]" to develop the "appropriate sampling methodology" and randomly select the sample cases to be extrapolated to the whole. (11) All of the pending claims are consolidated in front of a single ALJ who hears the sample cases. The results of the sample cases are then applied to the thousands of remaining cases.

Although OMHA's SSI is still in its initial stages, it is notable for two reasons. First, it differs from the Supreme Court's approach to such "trials by formula" in federal courts. Six years ago, the Court warned that the "novel" use of statistical sampling could stretch hearing procedures too far under the Rules Enabling Act by "abridg[ing], enlarg[ing] or modify[ing]" the substantive rights of the parties in such a mass action. (12) To the extent statistical sampling remains a problem for federal courts, (13) the Supreme Court's words do not bind federal agencies. Federal agencies often enjoy discretion under their own statutes to craft procedures they deem "necessary and appropriate" to adjudicate the claims that come before them. (14) OMHA's program thus illustrates agencies' freedom relative to federal courts to create innovative procedures that respond to problems in mass adjudication.

Second, agencies rarely exercise this freedom. As we discussed five years ago in The Agency Class Action, (15) even though federal agencies hear far more cases each year than our federal court system, they have routinely avoided tools used by courts to efficiently resolve large groups of claims, like class actions and other complex litigation procedures. Unlike federal courts--where nearly forty percent of all cases now proceed in some form of organized litigation (16)--most agencies and specialized courts rarely use class actions or otherwise coordinate multiparty disputes. Consequently, in a wide variety of cases, such programs risk wasting resources in repetitive adjudication, reaching inconsistent outcomes for the same kinds of claims, and denying individuals access to the affordable representation that aggregate procedures promise.

Part of the reason for agencies' restrained, individualized approach stems from the perceived limits of adjudication. For years, the Supreme Court and scholars have said that legislative bodies are better than judges at responding to problems of mass harm. (17) Policymakers can resolve cases that raise the same complex factual and legal issues more openly and effectively through the legislative process. (18) Judges, by contrast, should avoid such disputes because they lack the capacity to hear and resolve diffuse claims among large groups of people. (19)

That same perceived line between the appropriate roles of adjudicative and legislative bodies also exists inside administrative agencies. Before the Administrative Procedure Act (APA), (20) agencies combined investigation, policymaking, and adjudication in the same department. (21) The APA, however, separated the practice of "adjudication" from the agencies' rulemaking and enforcement powers, establishing distinct rules for each type of agency activity. (22) Going forward, formal individualized adjudications would be conducted on a case-by-case basis by ALJs insulated from undue political influence.

A handful of federal administrative programs, however, have quietly bucked this trend--employing class action rules, collective claims handling, and even the kinds of "trials by statistics" embraced by innovative federal judges around the United States. (23) The Equal Employment Opportunity Commission (EEOC), for example, created an administrative class action procedure, modeled after Rule 23 of the Federal Rules of Civil Procedure, to resolve "pattern and practice" claims of discrimination by federal employees before federal administrative judges (AJs). (24) The National Vaccine Injury Compensation Program (NVICP) uses "Omnibus Proceedings," which resemble federal multidistrict litigation, to pool together common claims alleging a large group of vaccine-injured children. (25) And, as discussed above, OMHA recently began a "Statistical Sampling Initiative" that will use trained and experienced experts to resolve thousands of common medical claims at a time by statistically extrapolating the results of a few hearing outcomes. (26)

This Article presents the first look inside the ways that federal agencies have used class actions and other complex litigation techniques in their own hearings...