Arent v. Shalala, 94-5271

• Decision Date: 14 November 1995
• Docket Number: No. 94-5271,94-5271
• Parties: Shereen ARENT, The Center for Science in the Public Interest, and Public Citizen, Inc., Appellants, v. Donna E. SHALALA, Secretary of the United States Department of Health and Human Services, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 610

70 F.3d 610

315 U.S.App.D.C. 49

Shereen ARENT, The Center for Science in the Public Interest, and Public Citizen, Inc., Appellants, v. Donna E. SHALALA, Secretary of the United States Department of Health and Human Services, Appellee.

No. 94-5271.

United States Court of Appeals District of Columbia Circuit.

Argued Sept. 27, 1995.

Decided Nov. 14, 1995.

Appeal from the United States District Court for the District of Columbia (No. 92cv00148).

Allison M. Zieve argued the cause, for appellants, with whom Brian Wolfman and Alan B. Morrison, Washington, DC, were on the briefs.

Drake S. Cutini, Attorney, United States Department of Justice, argued the cause, for appellee, with whom Frank W. Hunger, Assistant Attorney General, and Deborah S. Smolover, Attorney, United States Department of Justice, were on the brief. Eric H. Holder, Jr., United States Attorney, and Douglas N. Letter, Litigation Counsel, United States Department of Justice, entered appearances, for appellee.

Before: EDWARDS, Chief Judge, WALD and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Chief Judge EDWARDS.

Concurring opinion filed by Circuit Judge WALD.

HARRY T. EDWARDS, Chief Judge:

Appellants Shereen Arent, the Center for Science in the Public Interest, and Public Citizen, Inc. brought suit in the District Court to challenge final regulations concerning nutritional labeling of raw produce and fish promulgated by the Food and Drug Administration ("FDA") pursuant to the Nutrition Labeling and Education Act of 1990, 21 U.S.C. Secs. 321, 337, 343, 343-1, 345, 371 (1994) ("NLEA" or "Act"). The Act establishes voluntary guidelines under which retail food stores provide to consumers nutritional information regarding raw produce and fish. If the FDA finds that food retail stores overall are not in "substantial compliance" with the guidelines, the NLEA requires the FDA to issue mandatory food labeling regulations. 21 U.S.C. Sec. 343(q)(4)(D)(i) (1994). Appellants assert that the FDA regulations defining "substantial compliance" set a standard so low as to be arbitrary and capricious and in violation of the NLEA.

The District Court granted appellee's ¹ motion to dismiss, finding that the determinations embodied in the FDA's regulations, although not immune from judicial review under the Administrative Procedure Act ("APA"), represent reasonable and permissible constructions of the NLEA. Arent v. Shalala, 866 F.Supp. 6 (D.D.C.1994). We agree that Congress provided judicially manageable standards for reviewing the FDA's determination of "substantial compliance" under the NLEA, and that the FDA's determination warrants no presumption of unreviewability. Further, we uphold the FDA's regulations defining "substantial compliance" because the record discloses that the FDA was guided by the proper statutory factors, provided a reasoned explanation demonstrating reliance upon those factors, and reached a determination in keeping with the statutory intent. We remand to the District Court, however, for consideration of the parties' discovery motions relating to the FDA's 1993 finding that food retailers overall were in fact in substantial compliance with the NLEA's voluntary guidelines.

I. BACKGROUND

A. Statutory Background

The NLEA was enacted, inter alia, to clarify and strengthen the FDA's legal authority to require nutrition labeling on food. H.R.REP. No. 538, 101st Cong., 2d Sess. 7 (1990), U.S.Code Cong. & Admin.News 1990, pp. 3336, 3337. The Act requires that food manufacturers provide nutritional labels that contain specified information for most foods sold in retail food stores. The NLEA also requires that the FDA promulgate voluntary guidelines pursuant to which retail food stores provide nutrition information for certain of the most frequently purchased varieties of raw fish and produce. 21 U.S.C. Sec. 343(q)(4)(B)(i) (1994). The nutrition labeling guidelines for raw produce and fish are to remain voluntary unless the FDA finds that food retailers are not in "substantial compliance" with the guidelines. Id. Sec. 343(q)(4)(D). The NLEA requires that the Secretary of Health and Human Services issue a regulation defining the circumstances that constitute food retailers' "substantial compliance" with the voluntary labeling guidelines. Id. Sec. 343(q)(4)(B)(ii). In that regard, the Act provides the FDA with the following guidance:

The regulation shall provide that there is not substantial compliance if a significant number of retailers have failed to comply with the guidelines. The size of the retailers and the portion of the market served by retailers in compliance with the guidelines shall be considered in determining whether the substantial-compliance standard has been met.

Id. In addition, under the Act, the FDA was given until May 1993 to analyze and publish the results of a survey of grocery stores determining whether there was substantial compliance with the voluntary guidelines. Id. Sec. 343(q)(4)(C)(i).

The Secretary issued regulations stating that the FDA would find industry-wide substantial compliance with the voluntary guidelines if "at least 60 percent of all stores that are evaluated are in compliance." 21 C.F.R Sec. 101.43(c) (1995). In addition, the FDA determined that, for the purpose of conducting its survey, a retailer would be deemed in compliance with the voluntary guidelines if the retailer provided nutritional information for "at least 90 percent" of the relevant produce and "at least 90 percent" of the relevant fish. Id. Sec. 101.43(a). The methodology of the FDA's first survey included four demographic factors: store sales volume (stores were divided into two categories based on average annual sales); store type (i.e., independently operated stores vs. chains); geographic location (all states and the District of Columbia were included in the survey); and county size (counties were divided into four size categories to ensure that retailers from both urbanized and rural areas were represented in the survey sample). In all, roughly 2,000 food retailers were surveyed, and the FDA determined that the food retail industry as a whole was in substantial compliance with the voluntary food labeling guidelines because 75.7% of the retailers surveyed had complied with the guidelines for raw produce, and 73.2% had complied for raw fish. CENTER FOR FOOD SAFETY AND APPLIED NUTRITION, FDA, REPORT ON VOLUNTARY COMPLIANCE BY FOOD RETAILERS IN PROVIDING NUTRITION LABELING INFORMATION FOR RAW FRUIT AND VEGETABLES AND FOR RAW FISH 4, 8 (1993) ("Report"), reprinted in Joint Appendix ("J.A.") 101, 105.

B. The Proceedings in District Court

The FDA issued the 1993 Report of its survey findings during the pendency of the parties' cross-motions for dismissal and summary judgment. Appellants' initial complaint challenged only the definition of "substantial compliance" contained in the FDA's regulations; but, in view of the Report, appellants moved to amend their complaint to add an allegation challenging the Report's finding that food retailers were in fact in substantial compliance with the voluntary NLEA guidelines. ² Concerned about the validity and accuracy of the Report's findings, appellants also sought discovery on specific information about the survey results and methodology. Appellants then requested that the trial court not rule on the pending motions for dismissal and summary judgment until the completion of discovery and the filing of supplemental briefs. Appellants argued that the parties had only briefed the issue of the FDA's definition of "substantial compliance," and that, even if the District Court upheld the FDA's sixty-percent definition, discovery would still be necessary to determine whether retailer compliance was in fact lower than sixty percent. ³ In response, the Secretary opposed appellants' motion to amend their complaint, and moved for a protective order or, in the alternative, a stay of discovery on the ground that the pending dispositive motions rendered the discovery premature.

In its memorandum decision, the District Court determined that appellants have standing to challenge the FDA's regulations and found that the agency action at issue is subject to judicial review. On the merits, the trial court characterized its task as "review[ing] an agency's construction of a statute" and applied the analytical framework of Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Arent, 866 F.Supp. at 13. Finding that Congress did not address specifically the level of compliance necessary to establish "substantial compliance," the court moved on to the second prong of the Chevron analysis and found that the challenged regulations embody a permissible construction of the NLEA. Given the demographics of the retail food industry, in which large chain stores are relatively few in number but serve a majority of shoppers, the District Court held that the FDA's regulation regarding industry-wide compliance "struck a reasonable balance among extreme scenarios that could develop from the statutory scheme." Id. at 15. The court also upheld the FDA's individual-compliance regulation, accepting as plausible the Secretary's explanation that a ninety-percent individual-compliance standard was appropriate to account for minor instances of noncompliance caused by placards falling down or pages falling out of books or binders. On these grounds, the District Court granted the Secretary's motion to dismiss and declared moot the parties' discovery-related motions.

II. ANALYSIS

A. Availability of Judicial Review

As an initial matter, we reject the FDA's contention that there is no law to apply in reviewing its definition of food retailers' "substantial compliance" with the NLEA's voluntary guidelines. The APA embodies a general presumption of reviewability, see Abbott Laboratories v. Gardner, 387 U.S. 136, 140, 87 S.Ct. 1507, 1510, 18 L.Ed.2d 681 (196...