US Department of Justice litigators may no longer rely on guidance documents issued by federal agencies as binding on regulated entities for the purposes of affirmative civil enforcement litigation. The Department also specifies in a memorandum that such guidance documents cannot create any legal obligations for regulated entities.
The US Associate Attorney General, the third-ranking official within the Department of Justice (DOJ or Department), issued a memorandum on January 25 that prohibits DOJ litigators from treating any agency guidance document as “presumptively or conclusively establishing that a party violated [an] applicable statute or regulation.”[1] Given DOJ’s wide-ranging role in bringing civil enforcement matters, including but not limited to healthcare, environmental, tax, civil rights, and labor matters, this directive could have far-reaching implications.
Federal agencies routinely issue “guidance documents,” which the issuing agency then later suggests should be regarded as binding on the entities those agencies regulate. Agencies will often claim a regulated entity violated a regulation or statute because it violated a guidance document, even though the underlying regulation may be highly ambiguous or silent on the particular regulatory question at issue. In turn, many regulated parties have long felt that this practice of relying on guidance documents produces de facto expansion of regulatory burdens without the accountability of notice and comment rulemaking, an impact felt across a multitude of industries: energy, healthcare, finance, tax, and many others. Regulated entities have had to fear litigation for violating these documents, not simply for violating the actual regulatory and statutory texts.[2]
But the DOJ memorandum now clearly forbids Department litigators from relying on these guidance documents as binding rules for purposes of civil enforcement litigation. Noncompliance with a guidance document—short of independent proof of noncompliance with the underlying lawful regulation or statute itself—will no longer be relied upon as supporting an enforcement action. The memorandum is especially clear on this point: agency guidance documents cannot create any additional legal obligations.
IMPORTANT IMPLICATION OF DOJ MEMORANDUM
The memorandum provides needed relief for the regulated community. First and foremost, for affirmative civil enforcement cases brought in federal court—where DOJ and not the administrative agency itself brings the enforcement action—DOJ will assess, and will force the regulating agency to assess as part of enlisting DOJ to bring the case, whether the case can stand on its own without the benefit of guidance documents. In turn, that assessment will provide new arguments and leverage to those facing threatened actions or actually involved in litigation, and will remove a potential source of evidence and argument for DOJ regarding what a law or regulation requires.[3]
FURTHER CONSIDERATIONS
Strictly speaking the memorandum does not apply to administrative cases that an agency handles through its internal administrative law courts and where DOJ is not involved, or to cases involving independent agencies with federal court litigating authority independent of DOJ. When an agency brings a lawsuit in an administrative law court, or an independent agency (such as the Securities and Exchange Commission, Federal Energy Regulatory Commission, or Nuclear Regulatory Commission) brings enforcement litigation itself, DOJ litigators may not be involved. Thus, it is at least possible such other agencies may continue to accept that the violation of a guidance document necessarily indicates the underlying regulation or statute has also been violated.
On the other hand, while not formally restricting such agencies, the memorandum still may have effects on independent agency litigation by, for example, pressuring the agency litigators to treat guidance documents the same way the DOJ treats them. It would be odd indeed if administrative agency litigators in front of an administrative law judge treated a guidance document as binding, only to have DOJ litigators treat the same document as representing no binding or even presumptive legal obligation on appeal to a federal district court if the agency’s administrative judgment were later challenged. More broadly, DOJ’s leading role in formulating and announcing executive branch legal positions may pressure other agencies with independent litigating authority to take a similar step. Any and all such developments should prove useful in negotiations between regulated entities and independent agencies regarding potential enforcement actions.
Finally, the memorandum does not on its face prohibit a regulated entity from relying on guidance documents that may be favorable to the regulated entity and on which it has relied to shape its actions. Thus, regulated entities may be able to continue using guidance documents for legal defense, even where DOJ cannot use the documents offensively to establish a legal violation.
PART OF A PATTERN
DOJ’s January 25 memorandum fits within a broader Trump administration initiative to scale back what many argue is an economically oppressive and intolerably wasteful regulatory regime.
On January 30, 2017, less than a month into office, President Donald Trump issued Executive Order 13771, or what is now commonly known as the “One-in, Two-out” rule, which requires an agency to eliminate at least two existing regulations for every new regulation or significant regulatory action that must be submitted for review to the Office of Information and Regulatory Affairs within the Office of Management and Budget. In addition, the net incremental cost of the aggregate regulatory action must be neutral for 2017 and for some fixed amount annually thereafter. Executive Order 13777, issued February 24, 2017, went a step further, requiring agencies to establish “Regulatory Reform Task Forces” dedicated to evaluating existing regulations to make recommendations “regarding their repeal, replacement, or modification.” The Trump administration has called the first year of this initiative to deregulate a great success, noting a promulgation-to-elimination ratio of 22–1, or 67 deregulatory actions and only three regulatory actions. Those agencies claiming to have been most active include the Environmental Protection Agency and the Departments of Interior, Commerce, Health and Human Services, and Labor.
CONCLUSION
This development changes the playing field for regulated parties, giving them greater opportunity to push back against enforcement theories that largely rely on a “clear” guidance document regarding an underlying ambiguous or silent regulation or statute.
[1] Memorandum from the Associate Attorney General to the Heads of Civil Litigating Components, United States Attorneys, Regarding Limiting Use of Agency Guidance Documents in Affirmative Civil Enforcement Cases (Jan. 25, 2018).
[2] Id.
[3] DOJ attorneys may continue to use these documents, however, as evidence that a party read a document that merely explains legal mandates existing in statutes or regulations to prove the party had knowledge of the mandates.
