Directives. On January 20, 2009, shortly after President Obama was sworn into office, Chief of Staff Emanuel issued a Memorandum For the Heads of All Executive Department and Agencies that directed his new appointees to:
(1) Send no new proposed or final rule to the Federal Register for publication, until it has been reviewed by the Obama Administration;
(2) Withdraw from the Federal Register all proposed or final rules that have not yet been published so that they may be reviewed by the new Administration; and
(3) Consider extending for 60 days the effective day of any rule that has been published in the Federal Register but has not yet taken effect, for the purpose of reviewing questions of law and policy it may present.
Where such an extension is adopted, the agency is directed to reopen the comment period for 30 days to allow further comments on these issues of law and policy.
These directives are subject to exceptions that may be granted by the Director of the Office of Management and Budget in emergency situations or other urgent circumstances relating to health, safety, environmental, financial, or national security matters.
While the Memorandum is framed in terms of agency heads' "considering" whether to suspend a rule, senior White House staff already identified the midnight regulations of greatest concern during the transition and will inform the agency heads that the effectiveness of these rules should be suspending pending further review.
Implementation Guidance. On January 21, 2009, the Director of the Office of Management and Budget issued guidance concerning implementation of the Memorandum. The Guidance articulates eight basic good government principles, drawn from the case law applying the Administrative Procedure Act, which agency heads should use in determining whether a midnight rule warrants suspension:
(1) whether the rulemaking process was procedurally adequate; (2) whether the rule reflected proper consideration of all relevant facts; (3) whether the rule reflected due consideration of the agency's statutory or other legal obligations; (4) whether the rule is based on a reasonable judgment about the legally relevant policy considerations; (5) whether the rulemaking process was open and transparent; (6) whether objections to the rule were adequately considered, including whether interested parties had fair opportunities to present contrary facts and arguments; (7) whether interested parties had the benefit of access to the facts, data, or other analyses on which the agency relied; and (8) whether the final rule found adequate support in the record.
Governing Law. Beginning with President Reagan, when the White House changes parties, incoming Presidents have ordered their appointees to suspend, where possible, midnight regulations issued by the prior Administration in the weeks after the election. The process has become standardized. The provisions of the Emanuel Memorandum are, with minor differences, nearly identical to those in a Memorandum issued by Chief of Staff Card in the Bush Administration. 66 Fed. Reg. 7,702 (Jan. 24, 2001).
The suspension of the effective date of a published rule is itself a regulatory action that must comply with the notice and comment requirements of the Administrative Procedure Act. Natural Resources Defense Council, Inc. v. EPA, 683 F.2d 752 (3rd Cir. 1983). The APA provides that a regulatory action may be made effective immediately when the agency finds that "good cause" exists to find that providing notice and opportunity to comment on the rule would be "impracticable, unnecessary, or contrary to the public interest."
No decision squarely establishes that the desire of a new Administration to review the policy choices of its predecessor gives the agency head good cause to issue a direct, final rule suspending the effective date of a published rule. Incoming appointees, however, have strong incentives to comply with the new President's wishes and can be expected to announce suspensions. These actions may evade judicial review, because they typically will be in effect for only the short period of time necessary for the incoming White House to identify the small number of critical rules that are of interest.
The eight criteria articulated in the OMB Guidance provide a template for agency heads to follow to cast their policy concerns in a form that will best accommodate the approach that a reviewing court would take in assessing the legality of a suspension.
The Practical Effects of the Emanuel Memorandum. The mere fact that the effective date of a rule is subject to suspension under the Emanuel Memorandum tells us little as to whether the Obama Administration ultimately will seek to change the policy decisions incorporated in the rule.
The critical factor is the limited capacity of the White House officials to take on new issues in the first days of an Administration.
An enormous number of issues from all parts of the federal government compete for White House attention. The review of midnight regulations occurs at a time when the Administration is beginning to appoint political officials and the senior staff who are in place are still learning the policy formulation and dispute resolution processes.
The White House will be forced to conduct a ruthless triage within the regulatory sphere to identify critical issues that warrant further review. Senior staff will review the midnight regulations to determine if any are related to the President's campaign commitments or policy priorities. If there is no obvious connection to the Administration's core principles, then the regulation will have to compete with every other pressing issue in order to warrant the investment of time by senior officials.
The net outcome of this winnowing process is that White House officials charged with supervising the regulatory process will be able to pay meaningful attention only to a small number of the most economically significant or most politically sensitive rules. Further, much of their review capacity will be consumer by midnight rules that were identified as problematic during the transition.
The internal dynamic of the White House policy review process define clear courses of action for groups with an interest in midnight rules:
-- Those who are dissatisfied with the regulation should seek to make the best case possible to the agency head and to senior White House officials why the rule violates the eight good government principles in the Guidance and why it is so closely related to the Administration's priorities as to warrant investment of their time and attention in the first few critical weeks. The force of these arguments will be strengthened if the Administration's principal supporters in Congress can be persuaded to contact senior Executive Branch officials in support of further review. Further, to make certain that a revision of the rule can survive the inevitable legal challenge, opponents must submit the strongest substantive case possible to the agency during the second comment period.
-- Those who support a midnight regulation should not assume that its effective date will automatically be suspended simply because it falls within the scope of the Emanuel Memorandum. Rather, they should seek to engage the new appointees in the agency and make the best case possible that the rulemaking process was fair; that the resulting rule does not conflict with Administration priorities; and that in any event, the policy issues presented by the rule are not so significant as to warrant taking up the scarce decisionmaking capacity of the senior agency and White House officials at this critical time in the development of the Administration's program. Supporters also need to be prepared to make their case to the White House and to Congress if their initial contacts with the agency suggest that it will recommend that the rule warrants inclusion in the White House's short list of major rules to be reviewed.
Interim-Final Rules. Rules that were issued on an interim-final basis tend to be treated somewhat differently from other rules. The interim-final process commits an agency to conducting a notice and comment period after the rule has been published. Thus, the path of least resistance for the White House staff is not to act at this time, but to incorporate its policy preferences in the permanent rule that will be issued later. This process permits the White House to defer substantive consideration of the policy issues to a later date, when the Administration will be more fully staffed and the White House's decisionmaking capacity will be greater.