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MEMORANDUM

TO: Center for Regulatory Effectiveness

FROM:

Multinational Legal Services

DATE:

September 11, 2000
RE: Judicial Review of Technology Transfer Act Violations in Connection with The SEC's Proposed Rule on Auditor Independence


I. QUESTION PRESENTED Leave a Comment

Did Congress bar traditional judicial review under the Administrative Procedure Act (5 U.S.C. 702-706) for alleged violations of the National Technology Transfer and Advancement Act of 1995, 15 U.S.C.A. 272 note ("NTTAA")?

II. SHORT ANSWER

No. Unless there is "clear and convincing" evidence that Congress intended to preclude judicial review under a statute, persons adversely affected or aggrieved are entitled to seek redress for federal agency violations of that statute under the APA. Based on the express language of the NTTAA, the statutory scheme, the legislative history, and the absence of any case law indicating that such review is precluded, there is no "clear and convincing" evidence that Congress intended to bar judicial review. Moreover, although there is some -- but not conclusive -- legislative history suggesting that Congress intended to limit judicial review of an agency's substantive decisions regarding use of voluntary standards, there is no support for the proposition that review of procedural violations of the NTTAA are precluded.

Accordingly, we believe that, as a matter of law, any action by the SEC that violates the voluntary standards-setting provisions of the NTTAA is subject to judicial review in a federal court of competent jurisdiction pursuant to the Administrative Procedure Act. As discussed further herein, the critical points demonstrating the availability of judicial review are as follows:

  • The APA strongly favors judicial review, and courts normally will review final agency action unless there is clear evidence of congressional intent to preclude such review.

  • No provision in the NTTAA or the statutes it modified (the NIST Act and the FTTA) expressly precludes judicial review.

  • The limited judicial review preclusion provision of OMB Circular A-119 has not been incorporated into any statute.

  • The legislative history of the NTTAA contains no evidence of an intent to preclude traditional APA review for an agency's violation of the NTTAA generally. While there is some evidence of an intent to preclude judicial review over the narrow issue of an agency's decision not to adopt voluntary standards, nothing in the legislative history suggests an intent to deny review of an agency's failure to meet the statutory notice and justification requirements, once such a decision has been made.

  • No case law addresses the specific question at issue in this memorandum, i.e., whether section 12(d) of the NTTAA is susceptible of judicial review in the face of the narrow judicial review restriction contained in Circular

    A-119. Only one case even mentions Circular A-119, for example, and it is not relevant.

  • OMB has never contended that the narrow judicial review preclusion in Circular A-119 bars judicial review under the NTTAA.(1)

II. STATUTORY FRAMEWORK AND BACKGROUND

A. The Tech Transfer Statutes

The National Technology Transfer and Advancement Act of 1995 ("NTTAA"), Pub. L. No. 104-113, 110 Stat. 775 (Mar.7, 1996), amended the National Institute of Standards and Technology Act ("NIST Act"), 15 U.S.C.A. 272(b). Section 12(d) of the NTTAA provides:

"(1) In General. -- Except as provided in paragraph (3) of this subsection, all Federal agencies and departments shall use technical standards that are developed or adopted by voluntary consensus standards bodies, using technical standards as a means to carry out policy objectives or activities determined by the agencies and departments.

* * *

"(3) Exception. -- If compliance with paragraph (1) of this subsection is inconsistent with applicable law or otherwise impractical, a Federal agency or department may elect to use technical standards that are not developed or adopted by voluntary consensus standards bodies if the head of each such agency or department transmits to the Office of Management and Budget an explanation of the reasons for using such standards.

15 U.S.C.A. 272 note.

There were two versions of the NTTAA, a House bill (H.R. 2196) and a Senate bill (S. 1164). 1996 U.S.C.C.A.N. 493. The standards-setting amendments to the NIST Act (what became section 12(d) of the NTTAA) were not part of the original Senate bill. S.1164, 104th Cong., 1st Sess. (Aug. 10, 1995). Nor were they mentioned in the accompanying Senate Report. S. Rep. No. 104-194 (Dec. 20, 1995). The act as adopted was the House version, containing the standards-setting provisions.(2)

The NTTAA does not contain any provisions relating to or otherwise limiting judicial review under the statute.

B. OMB Circular A-119

Both the House Report on the NTTAA and the floor remarks of Rep. Connie Morella(3) on the House bill demonstrate that Congress lifted the standards-setting provisions in the NTTAA from OMB Circular A-119. H. Rep. No. 104-390, pp. 510-12 (Dec. 7, 1995); 141 Cong. Rec. H14328, 14334-35 (Dec. 12, 1995), 1995 WL 735501. See also 104 Cong. Rec. S1078, S1080 (Feb. 7, 1996) (statement of Sen. Rockefeller).

Circular A-119, entitled "Federal Participation in the Development and Use of Voluntary Standards", was first issued November 1, 1982. Paragraph 7 of the original 1982 circular contained the following provision on judicial review:

It should also be noted, however, that the provisions of this Circular are intended for internal management purposes only and are not intended to (1) create delay in the administrative process, (2) provide new grounds for judicial review, or (3) create legal rights enforceable against agencies or their officers.

47 Fed. Reg. 49496, 49498 (Nov. 1, 1982). In 1993 the circular was revised, but the revision contained a judicial review limitation substantially identical to the 1982 provision above. 58 Fed. Reg. 57643, 57645 (Oct. 26, 1993).(4)

OMB issued Circular A-119 under statutory authority codified at 31 U.S.C. 1111, Pub. L. No. 97-258, 96 Stat. 913 (Sept. 13, 1982). That statute grants the President broad authority and responsibility to "improve economy and efficiency in the United States Government" and directs the President, inter alia, to "evaluate and develop improved plans for the organization, coordination, and management of the executive branch." Courts have reviewed this statute and have generally upheld OMB's authority to issue related circulars. See, e.g., State of New York v. Shalala, 959 F. Supp. 614, 617 (S.D.N.Y. 1997) (upholding OMB authority to issue Circular A-87 setting forth cost principles for federal grants to state and local governments).

C. Floor Statements and Other Legislative History

As stated, the NTTAA does not contain judicial review provision, either the provision from Circular A-119 above or any similar language. A court therefore should not even reach the legislative history of the Act unless it finds that this statutory silence somehow raises ambiguity as to whether Congress intended to preclude traditional APA review.

The narrow preclusion provision contained in Circular A-119 is not mentioned in the House Report for H.R. 2196, the House bill that included the standards-setting amendments to the NIST Act. Rep. Morella, the original cosponsor of the House bill, did not mention the judicial review issue during debate on the House bill.

However, Senator Jay Rockefeller (D-WV) included the following remarks as part of his floor statement during Senate consideration of the House bill, which the Senate voted on in lieu of the original Senate bill:

[T]he House version of the legislation also contains a set of nonspending amendments regarding NIST operations and voluntary industry standards. While these amendments are not currently in S. 1164 [the senate bill], they did not lead to controversy on the House Floor.

* * *

Fourth, we intend that the determination of what is or is not "inconsistent with applicable law or otherwise impractical" is solely the decision of the agency department involved. We do require that if an agency or department does elect to use other technical standards, they notify the Office of Management and Budget (OMB). But if an Agency decides that no product or process based on voluntary consensus standards meets its requirements, it does not have to get approval from anyone else before it sets its own specifications. It most certainly does not need approval from any private sector standards organization. Moreover, the provision neither provides nor implies any private sector veto or review of the agency's decision. Nor does it provide, nor do we intend to provide, any legal test or legal standard or decisionmaking requirement that an agency must meet before it decides which types of technical standards to choose. As a result, section 12(d) provides no new or additional basis for either administrative or judicial review.

In other words, the intent of section 12(d) is exactly that of the following provision of OMB Circular A-119: It should also be noted, however, that the provisions of this circular are intended for internal management purposes only and are not intended to: First, create delay in the administrative process; second, provide new grounds for judicial review; or third, create legal rights enforceable against agencies or their officers.

104 Cong. Rec. S1078, S1081 (Feb. 7, 1996) (emphasis added).

Importantly, Senator Rockefeller stressed that Congress was not intending to allow agencies to be second-guessed on their decision not to adopt voluntary standards. His discussion of the judicial review prohibition was strictly limited to this narrow issue. Nothing in his remarks suggests that even he, let alone "Congress", broadly intended to bar traditional APA judicial review of procedural violations of the NTTAA. Nothing in his statement would prohibit review of an agency's failure to follow the notification and justification requirement under section 12(d) (allowing exception to mandatory use of voluntary standards "if the head of each such agency or department transmits to the Office of Management and Budget an explanation of the reasons for using such standards"). Indeed, Sen. Rockefeller himself contrasted the agencies' discretion whether to use voluntary consensus standards with the agencies's duty to notify OMB of that decision.

The bill that Sen. Rockefeller originally sponsored, S. 1164, did not mention either judicial review or OMB Circular A-119, nor did the accompanying Senate Report, S. Rep. No. 104-194.

One additional floor statement, offered by the late Rep. George Brown (D-CA) after the Senate passed the House version of the bill, also noted that Congress did not intend to make agencies' decisions not to adopt voluntary standards subject to judicial review. Rep. Brown stated: "While agencies are expected to keep good records of this [sic] reasons for not using the standards, such a decision is not to be subject to administrative or judicial review." 142 Cong. Rec. H1266 (Feb. 27, 1996). As noted, the bill containing the standards-setting provision originated in the House. Thus, while Rep. Brown's remarks suggesting a limitation on judicial review do not go beyond those of Sen. Rockefeller, his statement is perhaps somewhat more noteworthy as the lone voice on the issue from the Chamber where the bill originated.(5)

D. Examples of Judicial Review Under Prior and Related Statutes

As mentioned above, there are no cases addressing the specific question at issue, i.e., the reviewability of the standards-setting provisions in section 12(d) of the NTTAA. The following discussion therefore may be of limited value to a court considering the reviewability of that section, or the effect of Circular A-119's judicial review carve-out.

Courts have allowed APA review of agency action under the FTTA, a statute the NTTAA amended. See, e.g., Chem Serv., Inc. v. Environmental Monitoring Sys. Lab., 12 F. 3d 1256 (3d Cir. 1993); Edmonds Inst. v. Babbitt, 93 F. Supp. 2d 63 (D.D.C. 2000). These cases and the FTTA itself, however, are irrelevant to the judicial review issue discussed in this memorandum, as well as to the standards-setting requirements. The standards-setting requirements and the judicial review issue pertain only to alleged violations of the NIST Act, 15 U.S.C.A. 272 note.

We have found one case allowing APA judicial review of agency action under the NIST Act, Raitport v. National Bureau of Standards, 385 F. Supp. 1221 (E.D. Pa. 1974). That case, however, was decided before the 1996 amendments that added Circular

A-119's standards-setting provisions to the NIST Act (and any attending limitation on judicial review), and it has nothing to do with standards-setting. Thus, even if the 1996 legislation impliedly adopted the narrow judicial review limitation contained in Circular A-119, the fact that a court reviewed the NIST Act prior to that adoption is irrelevant.

Only one case even mentions OMB Circular A-119, and that reference is wholly irrelevant. See Practice Management Info. Corp. v. American Med. Ass'n, 877 F. Supp. 1386, 1391 (C.D.Cal. 1994) (noting Circular A-119 reflects federal policy of utilizing private copyrighted works), aff'd in part, rev'd in part on other grounds, 121 F.3d 516 (9th Cir. 1997). Neither judicial review nor standard-setting issues were addressed in that case.

IV. THE LEGAL STANDARDS GOVERNING JUDICIAL REVIEW

While there is no case law on the reviewability of section 12(d), the legal analysis for determining the effect of asserted bars to judicial review is clear and well established.

The APA provides in relevant part, "Agency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review," 5 U.S.C. 704. This rule applies "except to the extent that - statutes preclude judicial review...." 5 U.S.C. 701(a)(1). The APA's legislative history explains congressional intent that:

[t]o preclude judicial review under this bill [the APA] a statute, if not specific in withholding such review, must upon its face give clear and convincing evidence of an intent to withhold it.

H.R. Rep. No. 1980, 79th Cong., 2d Sess., 41 (1946), quoted in Bowen v. Michigan Academy of Family Services, 476 U.S. 667, 671 (1986) (emphasis added).

Thus, there is a "strong presumption that Congress intends judicial review of administrative action." Bowen, 476 U.S. at 670. Judicial review of administrative action taken pursuant to a statute or regulation "is the rule." Barlow v. Collins, 397 U.S. 159, 166 (1970). "[O]nly upon a showing of 'clear and convincing evidence' of a contrary legislative intent should the courts restrict access to judicial review." Abbott Labs. v. Gardner, 387 U.S. 136, 141 (1967) (citation omitted).

Where the statute itself does not expressly bar judicial review, the party asserting a bar has "the heavy burden of overcoming the strong presumption that Congress did not mean to prohibit all judicial review." Dunlop v. Bachowski, 421 U.S. 560, 567 (1975). In order to carry this "heavy burden," the party asserting the bar must demonstrate that the statute's text, its structure, or its legislative history provide "clear and convincing evidence" that Congress barred review. Abbott Labs., 387 U.S. at 141; see also Traynor v. Turnage, 485 U.S. 535, 542 (1988).

V. THERE IS NO "CLEAR AND CONVINCING EVIDENCE" THAT CONGRESS BARRED JUDICIAL REVIEW UNDER THE NTTAA.

There is no "clear and convincing evidence" rebutting the presumption of judicial review under the APA for alleged violations of 15 U.S.C.A. 272 note. Of paramount importance here, no statutory provision expressly bars review. In 1996 Congress codified the OMB Circular's standards-setting requirements as part of the NIST Act. The judicial preclusion language was present in the circular at that time, yet it was not incorporated into the statute. Neither then nor at any other time did Congress codify any review bars in OMB Circular A-119 as part of the NIST Act or any other statute.

A textualist's reading of the statute therefore will find that judicial review for any violation of section 12(d) is not precluded. Had Congress intended to bar judicial review, it could easily have done so expressly. Instead, Congress codified only a portion of the circular and left the judicial review preclusion out of the NTTAA.

Likewise, nothing in the statutory scheme, on its face, supports a congressional intent to bar review. For example, the statutes do not establish an administrative review process that might be construed as an alternative to traditional judicial review. Nor do the statutes provide review for one class of parties that might be construed as barring review by other parties. See Block v. Community Nutrition Institute, 467 U.S. 340, 345-50 (1984). Moreover, no contemporaneous case law barred review in this context, and thus there is no basis for inferring congressional acquiescence in a judicially interpreted review preclusion. Id.

Senator Rockefeller's and Congressman Brown's floor remarks are the only evidence supporting an argument for barring review. These remarks, however, are not the "clear and convincing evidence" necessary to carry "the heavy burden" of proving a bar to review where, as here, the statute itself does not preclude review. Furthermore, the precedential effect of Sen. Rockefeller's statement is limited, because, although Senator Rockefeller was one of the sponsors of the Senate bill, the bill he sponsored did not contain any provisions on standards setting, judicial review, or OMB Circular A-119.

Likewise, while the House bill clearly did codify the substantive requirements of OMB Circular A-119, neither the bill itself nor its accompanying report mention any intent to codify the circular's judicial review provisions or to limit judicial review generally. As far as indicated in the public record, Congressman Brown's remarks on the issue represent the views of only one House member. If the judicial bar in Circular A-119 was so essential, why was it not included in the new law?

Moreover, even if judicial review is precluded for agency decisions regarding the use of voluntary standards, there is no basis either statutory, in the legislative history, or otherwise, to counteract the APA's strong presumption of judicial review of procedural violations of the NTTAA.

VI. CONCLUSION

At bottom, the NTTAA does not expressly bar judicial review of the standards-setting provisions or "upon its face give clear and convincing evidence of an intent to withhold it." Bowen, 476 U.S. at 671 (quoting APA legislative history). In the absence of case law holding the statute is not reviewable, a court is likely to give great deference to the presumption in favor of APA reviewability. The court would be unlikely reach or give significant deference to the limited legislative history suggesting that statute is partially non-reviewable. Even if the court did give deference to the statements of two lawmakers who spoke to the issue, the court would certainly find that the SEC's violations of the notice and justification requirements under section 12(d) are not barred.

We therefore believe that an action could lie for violations of the standards-setting requirements codified at 15 U.S.C.A. 272 note.


Notes:

1. One seemingly supportive point not mentioned above should be clarified. There are cases that demonstrate clearly that two of the statutes the NTTAA amended (the NIST Act and the FTTA) are judicially reviewable. This would seem to suggest that the narrow review preclusion in Circular A-119 was given no effect by at least some reviewing courts. The fact that these "predecessor" statutes were reviewed in court, however, has no legal bearing on the preclusive effect of the carve-out provision in Circular A-119. Although Circular A-119 was in existence at the time these cases were brought, and although the circular contained essentially the same judicial review preclusion language it does now, the effect of that provision was never tested, because A-119 had not been codified into the "predecessor" statutes at the time, and the preclusion therefore was not an issue in those cases.

2. In addition to amending the NIST Act, the NTTAA also amended the Federal Technology Transfer Act of 1986 ("FTTA"), Pub. L. No. 99-502, 100 Stat. 1785. The FTTA had previously superseded the Stevenson-Wydler Technology Innovation Act of 1980 ("Stevenson Act"), Pub. L. No. 96-480, 94 Stat. 2311. Before it was amended by the NTTAA, the FTTA was amended by the Defense Authorization Act, Pub. L. No. 101-189, 93 Stat. 1352.

3. Rep. Morella was one of the original sponsors of the House bill. 141 Cong. Rec. H14328, H14334 (Dec. 12, 1995), 1995 WL 735501.

4. Both the 1982 and the 1993 versions of the circular also contained language similar to the standards-setting provisions now codified at 15 U.S.C.A. 272 note.

5. Nothing in the text or legislative history of related statutes prior to the NTTAA suggests Congress had intended any limitation on judicial review in earlier legislation. The FTTA and its predecessor, the Stevenson Act, did not contain any special provisions on judicial review, nor did the legislative history of these statutes. See, e.g., National Defense Authorization Act for Fiscal Years 1990 and 1991, 1989 U.S.C.C.A.N. 838, et seq. (House and Senate Reports); Federal Technology Transfer Act of 1986, 1986 U.S.C.C.A.N. 3442, et seq. (House and Senate Reports); Stevenson-Wydler Technology Innovation Act of 1980, 1980 U.S.C.C.A.N. 4892, et seq., (House and Senate Reports).