Association for Regulatory Reform v. Pierce

• Decision Date: 14 June 1988
• Docket Number: No. 87-5339,87-5339
• Citation: 849 F.2d 649
• Parties: ASSOCIATION FOR REGULATORY REFORM, Appellant, v. Samuel R. PIERCE, Jr., Secretary, U.S. Department of Housing & Urban Development, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 649

849 F.2d 649

270 U.S.App.D.C. 318

ASSOCIATION FOR REGULATORY REFORM, Appellant, v. Samuel R. PIERCE, Jr., Secretary, U.S. Department of Housing & Urban Development, et al.

No. 87-5339.

United States Court of Appeals District of Columbia Circuit.

Argued April 11, 1988.

Decided June 14, 1988.

Edward F. Canfield, Washington, D.C., for appellant.

Michael J. Ryan, Asst. U.S. Atty., with whom Timothy J. Reardon, III, Principal Asst. U.S. Atty., Gershon M. Ratner, Associate Gen. Counsel, U.S. Dept. of Housing and Urban Development, John D. Bates, R. Craig Lawrence and John C. Martin, Asst. U.S. Attys. and Carl A. Tibbetts, Atty., U.S. Dept. of Housing and Urban Development, Washington, D.C., were on the brief, for appellees. Joseph E. diGenova ^*, U.S. Atty. and Royce C. Lamberth ^*, Asst. U.S. Atty., Washington, D.C., also entered appearances for appellees.

Before WALD, Chief Judge, and ROBINSON and STARR, Circuit Judges.

Opinion for the Court filed by Circuit Judge STARR.

STARR, Circuit Judge:

T.S. Eliot wrote of what he called the permanent things of life. This case requires us to reflect on the concept of permanency in the distinctly non-literary setting of manufactured homes (known to the layman as mobile homes), which are regulated by the Department of Housing and Urban Development. More specifically, we will now be ushered into the world of such bedrock statutory concepts as "permanent chassis," which turns out to be a sine qua non of a "manufactured home" within the meaning of the pertinent federal statute. And it is federal law that is invoked by housing manufacturing firms seeking, by virtue of a broad preemption provision in the federal statute, to escape the tender mercies of housing inspectors enforcing the parochial demands of local law.

I

This lawsuit sounds in the familiar arena of administrative law, but it comes to us on appeal from the District Court rather than from the agency. An understanding of the case is best achieved by beginning with the operative event at the administrative level and permitting that event to lead us into the specific precincts of the pertinent statute and of the dispute that has since erupted within the manufactured home industry.

In 1986, a HUD official by the name of William Sorrentino sent a standard letter to manufactured housing design inspectors across the country. The letter informed the inspectors, known in the trade as DAPIAs, that their approval could not properly be granted to manufactured home designs permitting the removal of a structure's chassis, the definition of which we shall set forth presently. The letter specifically referred to the operative statutory provision, namely section 603(6) of the National Manufactured Housing Construction and Safety Standards Act of 1974, 42 U.S.C. Secs. 5401-5426 (1982). In pertinent part, that statute defines a "manufactured home," the pivotal concept for purposes of avoiding state regulation and remaining within the preemptive harbor of federal law, as one "built on a permanent chassis." 42 U.S.C. Sec. 5402(6). In Mr. Sorrentino's view, as expressed in the letter, certain DAPIAs had been approving as compatible with federal standards designs that permitted the removal of chassis. This, Mr. Sorrentino made clear in no uncertain terms, would not do:

[The] concept that a manufactured home is a structure built on a permanent chassis is central to the definition of a manufactured home. It is an essential distinction between modular housing and manufactured housing. * * * You are hereby directed to undertake an examination of each design package approved by your agency, and to withdraw your approval of any design elements that permit chassis removal.

Letter from William Sorrentino, Director, Manufactured Housing and Construction Standards Division, to William Kalker, DAPIA Administrator (Aug. 22, 1986), Joint Appendix (J.A.) at 32 (hereinafter "Sorrentino Letter").

The Sorrentino letter eventuated in the filing of this lawsuit. In the view of the Association for Regulatory Reform (a non-profit group composed of manufactured home producers), the directive constituted a legislative rule, effecting a substantive change in HUD's policy, but without the benefit of the notice-and-comment procedures ordained by the APA. To compound this asserted procedural error, the Association maintained, the directive ushered in an altogether new and statutorily improper regime, denying HUD approval to home designs that integrated the chassis into the home itself and thereby permitted the removal of transportation frames upon installation at the home site.

HUD disagreed with the Association in both respects. In the first instance, HUD viewed the Sorrentino missive as a reminder and directive to the field, nothing more, nothing less. That directive, moreover, was merely a restatement of federal statutory requirements which the DAPIAs were already duty bound to apply. As such, HUD maintained, the letter was not a "rule" for purposes of the APA; however, even if the directive were deemed to constitute a "rule," it was nonetheless an interpretative rule exempt from the APA's notice-and-comment requirements. As to the substance of the unfolding dispute, HUD maintained that there was no real controversy between the parties. As HUD saw it, the letter constituted, again, only a modest, unexceptional restatement of what the literal terms of federal law demanded.

HUD's position was not without force. Upon analysis, it did not appear that the Association was in any sense disputing the literal terms of the Sorrentino directive. To the contrary, the Association readily admitted that the statute did indeed require that a structure's chassis be "permanent" to qualify for the "manufactured home" appellation. As we have just seen, the Sorrentino letter, on its face, simply reasserted that fundamental requirement. Nonetheless, the Association voiced fears as to what the letter portended for the future. Although the specific language of the letter might be unexceptionable, the Association's concern was that, in the guise of the Sorrentino letter's "reminder," HUD was in actuality effecting a dramatic shift in regulatory policy which would stifle private-sector innovation. The essence of this fear is captured in the following passage from the Association's brief:

The intended effect of this directive is not facially apparent because of the Director's overly simplistic use of the term "removable chassis." [The Association] believes that the policy implied in the letters severely and illegally limits the future growth and innovation in the industry.

Appellant's Brief at 9.

Given the rather amorphous nature of the Association's concerns, HUD viewed the case as a non-case. It was, as the agency saw it, a litigation analogue to Gertrude Stein's unflattering description of Oakland. There was no there there. That is, the warring litigants were in happy accord (but curiously so for litigants) that the governing statute required a structure's chassis to be "permanent." More specifically, the Association did not quarrel with HUD's long-standing regulations implementing the statute and giving definition to the pivotal term, "permanent chassis." Those regulations, codified at 24 C.F.R. Part 3280, define "chassis" for purposes of applicable construction and safety standards as "the entire transportation system comprising the following subsystems: drawbar and coupling mechanism, frame, running gear assembly, and lights." Id. Sec. 3280.902(a). "Frame," in turn, is defined as "the fabricated rigid structure which provides considerable support to the affixed manufactured home structure both during transport and onsite." Id. Sec. 3280.902(c). What is more, the regulations, eschewing the creation of Procrustean regulatory beds, contain a special provision encouraging innovation. A regulatory "Note," much beloved by the Association, states that while a majority of manufactured homes utilize a fabricated steel frame assembly upon which the home is constructed, the federal standard is not intended to curb innovation, such as integrating a frame into the housing structure, as long as the "design meets the intent and requirements of this part." Id. Sec. 3280.904(a) Note.

Despite the litigants' consensus on what the law required, the parties fell into disaccord over the status of specific, less traditional housing designs. What had started off as a straightforward and relatively manageable legal dispute over the Sorrentino letter soon escalated into a pitched battle over the agency's intentions, with industry accusing HUD of covertly assaulting various newer manufactured home designs. Industry's survey of the regulatory front found the agency shifting course, suddenly expelling from the much-desired ranks of "manufactured housing" designs which had previously enjoyed HUD approbation. The original HUD policy, as embodied in the regulations, is articulated in the following portion of the Association's brief, which will have a more self-evident meaning to construction designers than to generalist lawyers (and judges):

Traditionally, manufactured homes have utilized a frame consisting principally of two steel I-beams. In a conventional setting, these beams support the home both during the transportation phase and after installation at the homesite. The HUD manufactured housing code, however, expressly permits the frame to be integrated into the manufactured home structure. When this alternative design is utilized, the "frame" is built with wood rather than steel I-beams.... Nevertheless, a steel transportation "frame" is used in those cases to transport the home to the purchaser's property. The transportation system is then discarded upon permanent installation of the home. In this manner, the home, as installed, has a permanent wood frame, but the steel transportation "frame" may be reused. In any event, the home remains "transportable" within the meaning of ...