Unrules.

• Author: Coglianese, Cary

Table of Contents Introduction I. The Hidden World of Unrules A. A Unified Taxonomy of Unrules 1. Carveouts 2. Dispensations B. The Risks of Unrules 1. Negating regulatory benefits 2. Regulatory favoritism 3. The unrule of law II. The Ubiquity of Unrules A. Uncovering Unrules: Methods B. Unrules in the Federal Register C. Unrules in the Code of Federal Regulations D. Unrules in Economically Significant Regulations E. Unrules in the United States Code F. Summary and Implications III. Reorienting Administrative Law A. Administrative Law's Preoccupation with Obligation Imposition B. Procedural Manifestations of Administrative Law's Blind Spot 1. Making rules versus unrules 2. Tilted transparency 3. The lack of self-reinforcing incentives C. Lopsidedness in Judicial Oversight 1. Barriers to legal mobilization 2. Barriers to getting into court 3. Less searching judicial review D. Steps Toward Reorienting Administrative Law. Conclusion Appendix Introduction

Rules, as we all know, impose obligations. Federal law, for example, imposes an obligation on manufacturers of new drugs and medical devices to complete a rigorous safety and efficacy review process in accordance with requirements established by the U.S. Food and Drug Administration (FDA). (1) Yet nearly three-quarters of all new drugs approved by the FDA and introduced into the market never go through the full review process. (2) Likewise, the vast majority of new medical devices that have entered the marketplace in recent years have bypassed the FDA's premarket-approval process. (3) In a similar manner, although Federal Aviation Administration (FAA) regulations obligate commercial aircraft manufacturers to test every key component of any new line of airplanes, when the Boeing Company developed the initial, tragic version of its now-infamous 737 MAX airplanes, it followed only an abbreviated certification process that allowed the company to sell its planes to customers years earlier than usual. (4)

How could regulatory obligations on matters as vital as public health and safety be bypassed? Sociologists of law have long noted that rules on the books do not mirror rules in action. (5) Yet a key mechanism helping to explain such slippage--a mechanism we call an unrule--has so far escaped systematic empirical study. Government possesses a ubiquitous yet often hidden power to limit or alleviate otherwise applicable regulatory obligations. Sometimes this power to alleviate obligations leads regulatory agencies to grant individual waivers, exemptions, or variances--a type of unrule that we call dispensations. (6) At other times, unrules comprise what we call carveouts--exceptions and other limitations embedded within rules themselves, such as when a new regulation "grandfathers" existing businesses and exempts them from the coverage of its obligations. (7) Both types of unrules--carveouts and dispensations--can be found within every source and domain of law, including regulations governing health care, (8) securities, (9) environmental protection, (10) transportation, (11) and campaign finance. (12)

Unrules can be highly consequential. With medical devices linked to an estimated 1.7 million injuries and 80,000 deaths over the past decade, (13) it matters, for example, that 70% of all recalls of high-risk medical devices from 2005 to 2009 involved products approved through the FDA's special, fast-track approval process called the 510(k) program. (14) Ostensibly designed as an exception for devices deemed "substantially equivalent" to an already-approved device, (15) this 510(k) program helps explain why today most medical devices do not go through a government review process intended to demonstrate safety and effectiveness. (16) These devices escape review even though every year hundreds of them, including surgical mesh and joint replacements, are approved for implantation into patients' bodies and can lead to devastating health consequences if they malfunction. (17) Former FDA Commissioner David Kessler has characterized the 510(k) unrule as "an exception, in essence a little loophole, that ... became the rule." (18)

Or consider another example: a loophole established by the U.S. Environmental Protection Agency (EPA) allowing international tankers and other ships to escape from complying with otherwise applicable water-pollution requirements when they enter the Great Lakes and other major inland bodies of water. (19) According to one EPA official, the agency adopted a regulatory exemption for ships in 1973 simply because "[a]t the time we thought that was not an important area to deal with." (20) But as a result of the agency's unrule, ships coming from the Saint Lawrence Seaway discharged ballast water into the Great Lakes for decades, creating a runaway invasion of zebra mussels and other nonnative species. (21) The invasive mussels clog municipal drainage pipes throughout the Great Lakes and cause millions of dollars in annual property damage. (22) Similar problems from contaminated-water discharges from ships have plagued other rivers and lakes throughout the United States, damaging fisheries and creating up to an estimated S17 billion in annual economic costs as of 1995--not to mention an unquantified risk to human health from the pathogens and other pollutants contained in such discharges. (23)

Yet today, debate over government regulation too often overlooks the consequences of government's power to alleviate obligations and instead focuses almost exclusively on a single dimension of regulatory power: the power to impose obligations. (24) Prominent members of the academy, government, and the courts routinely rail against crippling overregulation and clamor that a tangle of red tape is suffocating private enterprise and hindering economic growth. (25) Critics frequently cite the sheer volume of agency regulations as evidence that regulatory burdens have run amok. (26) These concerns have contributed to both a political dialogue and a set of administrative law principles that today disproportionately aim to protect individuals and businesses from the imposition of regulatory obligations. (27)

We seek with this Article to correct the prevailing, myopic understanding of regulatory power and discretion in the United States. Obligation imposition is only one side of the coin. Governmental authorities also exert significant power to alleviate obligations--power that can also be misused and create dramatic consequences for public welfare. A failure to appreciate the significance of unrules thus contributes both to an inflated sense of the onerousness of the U.S. regulatory system and to a cramped view of the kind of government discretion that administrative law has long sought to govern.

In this Article, we offer a unified framework for understanding governmental power to alleviate obligations. We also offer, for the first time, systematic evidence of this less visible aspect of power and show how our findings call into question prevailing accounts that have relied exclusively on the quantification of regulatory obligations (28) Our analysis implies that government regulation is far less onerous--and far more flexible--than previously imagined. By showing the ubiquity of government's power to alleviate obligations, we reveal how previous critiques of regulatory burdens overstate the true size, scope, and intrusiveness of regulation. We demonstrate through empirical analysis that an "unrulemaking" authority is omnipresent in the federal regulatory corpus. (29) Our empirical analysis leads to a simple but powerful truth: A regulatory system can be understood only as the net effects of both its rules and its unrules.

That understanding also makes apparent that administrative law can never fully ensure the responsible, public-interested use of governmental power if it neglects one side of that power. Through its requirements for transparency, benefit-cost analysis, and judicial review of new agency regulations, for example, current administrative law tends to impose greater constraints on government agencies' ability to impose obligations than on their ability to alleviate them. (30) Swaths of administrative discretion to alleviate or eliminate obligations remain effectively unchecked. This bias inhibits administrative law's ability to ensure that agencies make well-considered alleviating decisions. When it comes to doling out waivers, for example, the absence of sufficient process and transparency requirements opens the door to a type of "unregulatory" capture. The comparative lack of judicial oversight of many unrules risks leaving certain alleviating decisions untested and poorly justified. (31) The result is a regulatory ship with a pronounced list.

Our goal here is to bring unrules to the fore and to reorient debate over the U.S. regulatory state. To be sure, we are not the first ones to call attention to the existence of actions that governments can take to alleviate obligations, such as by issuing waivers and exemptions. Previous scholarship has identified and discussed certain types of unrules, and we acknowledge and build on this work in the Parts that follow. (32) Yet the predominant focus of the work of regulatory and administrative law scholars has been on agency discretion to impose legal obligations, too often overlooking the pervasive power that government possesses to alleviate obligations. (33)

In Part I, we present a unified taxonomy of unrules comprising the two main types of unrules: carveouts and dispensations. Although, as we explain below, important differences exist between carveouts and dispensations, both share the effect of limiting or alleviating obligations. Only by considering both types of unrules together, under a unified framework, is it possible to see the full extent to which the U.S. regulatory system comprises the alleviation of obligations as well as their imposition. (34) Indeed, we know of no previous work that has...