Hurson Associates v. Glickman

Decision Date24 October 2000
Docket NumberNo. 99-5305,99-5305
Citation229 F.3d 277
Parties(D.C. Cir. 2000) James V. Hurson Associates, Incorporated, Appellant v. Dan Glickman, Secretary of the United States Department of Agriculture, and The United States Department of Agriculture Appellees
CourtU.S. Court of Appeals — District of Columbia Circuit

[Copyrighted Material Omitted] Appeal from the United States District Court for the District of Columbia(No. 98cv02120)

Robert J. Brooks argued the cause and filed the briefs for appellant.

Charles W. Scarborough, Attorney, U.S. Department of Justice, argued the cause for appellees. With him on the brief were David W. Ogden, Acting Assistant Attorney General, Barbara C. Biddle, Attorney, and Wilma A. Lewis, U.S. Attorney.

Before: Williams, Sentelle and Rogers, Circuit Judges.

Opinion for the Court filed by Circuit Judge Sentelle.

Sentelle, Circuit Judge:

James V. Hurson Associates appeals from a District Court judgment upholding a United States Department of Agriculture ("USDA") rule that controls the manner in which the agency receives requests for the approval of food labeling. Appellant contends that the USDA violated the Administrative Procedure Act ("APA"), 5 U.S.C. § 551 et seq. (1994), by promulgating that rule without first engaging in notice-and-comment rulemaking. It also claims that the District Court erred in denying its motion to amend its complaint to include claims that the USDA's new rule both is arbitrary and capricious and violates the Constitution's Interstate Commerce Clause.

We hold that the District Court properly concluded that USDA was not required to engage in notice-and-comment rulemaking, since its new rule falls within the APA's procedural-rules exception. We also conclude that the court erred in refusing to allow Appellant to amend its complaint to include an arbitrary-and-capricious claim and a Commerce Clause claim, as it had an absolute right to do so until the USDA filed a responsive pleading. We therefore remand with instructions that Appellant be permitted to amend its complaint to include its arbitrary-and-capricious claim. We do not, however, remand with respect to Appellant's Commerce-Clause claim, because we conclude that it would not be able to survive a motion to dismiss.

I. BACKGROUND

Appellee Daniel Glickman is the Secretary of the USDA, another appellee in this case (collectively, "USDA"). The USDA's Food Safety Inspection Service ("FSIS") is charged with reviewing the labels affixed to certain commercial food products to ensure that they are truthful, not misleading, and otherwise comply with relevant regulations. Until recently, a commercial food producer could seek approval of a proposed label in several ways: by mailing its application, by personally visiting the FSIS, or by hiring courier/expediter firms whose employees would meet with FSIS representatives during office hours. The latter method, colloquially known as "face-to-face," enabled producers to secure instant approval of their labels, whereas other methods could take days or even weeks. See Meat, Poultry, and Egg Products Labeling Review Process; Elimination of Appointments With Label Courier/Expediting Firms, 63 Fed. Reg. 40,010, 40,011 (1998) [hereinafter elimination of face-to-face].

On July 27, 1998, the USDA announced its intention to do away with "routine daily, time-set, face-to-face appointments with courier/expediting firms," although FSIS employees would be available for irregular meetings with industry representatives to discuss novel issues and provide regulatory guidance. Id. at 40,010. The USDA cited four reasons for its elimination of face-to-face review: (1) FSIS's need for more time to evaluate labeling involving complex issues; (2) FSIS's need for more time for consultation internally and with other agencies; (3) the food industry's declining need for immediate label approval; and (4) the unfairness of face-to face to food producers who submit by mail rather than through courier/expediter firms. See id. at 40,011.

On September 2, 1998, Hurson, a courier/expediter firm the livelihood of which was threatened by the USDA's new rule, filed a motion for a temporary restraining order against the agency in the United States District Court for the District of Columbia. In its initial complaint, Hurson alleged only that USDA had violated the APA by abolishing face-to-face without engaging in notice-and-comment rulemaking. That statute obliges agencies to publish in the Federal Register notice of a proposed rulemaking and to give interested parties the opportunity to submit comments. See 5 U.S.C. § 553(b), (c) (1994). USDA did not submit an answer, and simply moved to dismiss. With the consent of both parties, the District Court regarded Hurson's motion for injunctive relief and USDA's motion to dismiss as motions for summary judgment.

After the parties had fully briefed the notice-and-comment issue, but before the court had ruled on their cross-motions for summary judgment, Hurson submitted an amended complaint (or, in the alternative, a motion seeking leave to amend its complaint). Hurson proposed to add new allegations that the USDA's elimination of face-to-face both was "arbitrary and capricious" in violation of the APA and violated the Constitution's Commerce Clause. The District Court denied Hurson's motion as untimely, citing "the fact that Plaintiff waited to amend his [sic] complaint until after full briefing of dispositive motions." Having disposed of Hurson's substantive objections to USDA's elimination of face-to-face, the District Court concluded that the agency's new rule was a procedural one. It was, therefore, exempt from the APA's notice-and-comment requirement.

This appeal followed.

II. DISCUSSION
A. Notice and Comment

Although federal agencies ordinarily must provide the public with notice of a proposed rule and the opportunity to submit comments on it, see 5 U.S.C. § 553, the APA makes an exception for, among others, "rules of agency organization, procedure, or practice." Id. § 553(b)(A). This Court has stressed that the " 'critical feature' " of a rule that satisfies the so-called "procedural exception 'is that it covers agency actions that do not themselves alter the rights or interests of parties, although it may alter the manner in which the parties present themselves or their viewpoints to the agency.' "JEM Broad. Co. v. FCC, 22 F.3d 320, 326 (D.C. Cir. 1994) (quoting Batterton v. Marshall, 648 F.2d 694, 707 (D.C. Cir. 1980)).

Hence in JEM, we concluded that the Federal Communication Commission's new "hard look" rules--under which the Commission summarily would dismiss any flawed license application without allowing the applicant to correct its error, see id. at 322-23--were procedural ones. "The critical fact here," we emphasized, "is that the 'hard look' rules did not change the substantive standards by which the FCC evaluates license applications, e.g., financial qualifications, proposed programming, and transmitter location." Id. at 327.That the hard-look rules employed the same substantive criteria as their predecessors, we concluded, was "fatal to JEM's claim." Id.; accord National Whistle blower Ctr. v. Nuclear Regulatory Comm'n, 208 F.3d 256 262 (D.C. Cir. 2000) ("The disputed agency action in this case merely altered a standard for the enforcement of filing deadlines; it did not purport to regulate or limit the Center's substantive rights."), petition for cert. filed, 69 U.S.L.W. 3234 (U.S. Sept. 13, 2000) (No. 00-422).

The USDA's decision to eliminate face-to-face review is the very sort of procedural measure the JEM Court had in mind, for, by its very terms, the rule "will not change the present system of labeling review," even though the "new procedure will eliminate routine, daily, time-set, face-to-face appointments with courier/expediting firms." Elimination of Faceto-Face, 63 Fed. Reg. at 40,010. The agency's abolition of face-to-face did not alter the substantive criteria by which it would approve or deny proposed labels; it simply changed the procedures it would follow in applying those substantive standards.

Because the rule is procedural on its face--which Hurson concedes, see Appellant's Reply Brief at 1 ("USDA devotes the argument to showing that the challenged rule does not change the substantive criteria for evaluating labels. But appellant Hurson does not contend otherwise.")--appellant attempts to characterize it as effectively substantive by pointing to its putatively severe consequences and its origins in a "substantive value judgment." Neither effort is persuasive.

Hurson introduces some evidence that the elimination of face-to-face approvals will burden food producers. (It also introduces evidence suggesting that the rule would devastate the courier/expediter industry, but the burden to couriers/expediters--which are not regulated parties under the rules--is irrelevant.) Hurson repeatedly argues that food producers need to have their labels approved in "minutes and hours," not, as it suspects will be the case under the USDA's new rule, after waiting for "days, weeks, even months." Appellant's Brief at 24. It also cites the 180 objections to the new rule lodged by entities representing the food industry, which, it proposes, illustrate that food processors regard speedy approval as "an essential cog in their output mechanism." Id. at 25.

Hurson's allegation that the elimination of face-to-face will produce a significant burden may or may not be empirically true. As an initial matter, we question whether the food processing industry truly regards the USDA's new rule as especially burdensome. After all, this challenge is brought not by a food processor, but by a courier/expediter firm. Still, the District Court, as it was required to do on a motion for summary judgment, properly viewed all factual inferences in favor of Hurson. Cf. Fed. R. Civ. P. 56(c); Taylor v....

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