On August 31, 2020, the Office of Management and Budget (“OMB”) issued Memorandum M-20-31 (the “Memo”), which implements directives from a prior executive order to improve and reform administrative enforcement and adjudication (Executive Order 13924, on “Regulatory Relief to Support Economic Recovery”). The Memo directs federal agencies to “consider [ten] principles of fairness in administrative enforcement and adjudication” and to “revise their procedures and practices in light of them.” It outlines a list of best practices for federal agencies to consider as they review and revise their existing investigation and enforcement procedures. Generally speaking, these best practices appear to be aimed at providing greater due process to entities targeted for investigations and enforcement actions and promoting transparency and accountability in the initiation and pursuit of enforcement actions.
While many of these recommendations reinforce current practice, some could result in significant changes. Many of the recommendations could reduce some of the risk regulated entities currently face when making good faith efforts to interpret and comply with regulations.
OMB requests that agencies develop internal rules by November 26, 2020. Given that timing, it is likely that election results will impact the implementation of the best practices in this Memo. If there is a second Trump term, agencies will likely follow the recommendations in the Memo. If Biden wins, it is likely that agencies will await direction from the new administration prior to implementing any program changes.
We evaluate the Memo in light of its potential impact on the Environmental Protection Agency (“EPA”) below.
Examples of OMB’s Recommended Best Practices
Burden of Proof
- Agencies should ensure that regulated parties are not required to prove a negative in order to prevent liability and enforcement consequences.
- Agencies should consider applying “the rule of lenity” to administrative investigations, enforcement actions, and adjudication.
It should be well settled that, as the plaintiff in an enforcement case, the government bears the burden of proving alleged violations, but in some instances, the agency investigation can require extensive and burdensome responses from the regulated entity. EPA, like many agencies, has inspection, information request, and, under some statutes, subpoena authority to gather information and develop an enforcement case. However, EPA’s information request authority has come under some scrutiny for being overly burdensome, and in 2018, the agency issued guidance with best practices for using its information-gathering tools that seem designed to respond to complaints that agency practices were burdensome. It is possible that this guidance may fulfill EPA’s obligation under this Memo.
The rule of lenity is a statutory construction principle found in criminal law that OMB is applying to civil cases here. Generally, this rule requires that ambiguities in the law be read in favor of the defendant (respondent in administrative cases). Since many regulations are not clearly written or leave room for ambiguity, this could shift some of the risk back to the agency. It remains to be seen how EPA and other agencies will square this principle with traditional Chevron deference to their interpretation of ambiguous laws.
Tolling Agreements
- Agencies should seek approval from an “Officer of the United States” prior to entering into tolling agreements that would extend the statute of limitations for an alleged violation.
This recommendation could modify current EPA practice, depending on the management level at which this approval is delegated. EPA regularly enters into tolling agreements in both administrative and judicial cases and requires some, but not senior-level, management approval. If a senior executive or political level approval is required, this could delay the signature of tolling agreements, which could cut against the regulated industry as tolling agreements are often an integral part of settlement negotiations for alleged violations.
Initiation and Closure of Enforcement Matters
- Agencies should apply “limiting principles” to the duration of investigations by creating regulations that will require an investigation to end with either a staff recommendation to commence an enforcement action or by closing the investigation within a defined time period.
- Agencies should streamline actions through the adoption of estoppel and res judicata principles to eliminate multiple enforcement actions for a single body of operative facts.
- Consent orders and settlement agreements should contain expiration dates and/or termination criteria that are proportional to the violation being remedied.
These recommendations encourage agencies to timely close or commence actions and to reduce multiple enforcement matters based on the same set of facts. With respect to duplicative actions, EPA has already initiated policies to reduce or eliminate multiple enforcement actions and to defer when states are bringing actions based on the same factual circumstances. These recommendations could bring more transparency to the enforcement process. Currently, some matters stay open for significant periods of time, and some consent orders and settlement agreements do not contain termination provisions.
Enforcement Metrics
- Agencies should not maintain performance evaluation metrics for enforcement employees to incentivize the initiation and pursuit of “meritless or unwarranted” actions.
- Agencies are discouraged from selecting investigation or enforcement targets based on retaliatory or punitive motives.
Much is made of EPA “bean counting” in which the agency counts the number of enforcement actions in any given year and provides that in a report to Congress. While the agency is required to show the results of its enforcement program, the metrics don’t typically drive the decision making on whether to bring a certain case. In particular, with respect to judicial cases, the U.S. Department of Justice (“DOJ”), which is not impacted by any EPA metrics, must also agree that a case merits prosecution.
Evidentiary Requirements
- Agencies should conform civil adjudicatory evidence disclosures to the requirements of Brady v. Maryland, 373 U.S. 83 (1963). This would require agencies to adhere to the DOJ’s policy of timely disclosing exculpatory evidence and evidence material to mitigating damages or penalties.
- Agencies should more closely track the Federal Rules of Evidence in administrative adjudication, including reducing the use of hearsay evidence and applying the Daubert framework to determine the veracity of scientific evidence.
These best practices applying to the use of evidence in civil cases would modify EPA’s current administrative practice, which allows hearsay and other evidence not allowed by the Federal Rules of Evidence. DOJ civil practice would also be modified with respect to exculpatory evidence since Brady v. Maryland is an evidentiary rule required in criminal cases, but not in civil matters.
Next Steps
These best practices will need to be formally incorporated through agency rulemaking before they are applied. The Memo requires that agencies coordinate with the Office of Information and Regulatory Affairs staff to formulate and issue any final rules by November 26, 2020. These rules appear meant to be interpretive rules used for internal agency purposes since agencies are directed to finalize rules first and take public comment after the final rule is published. Thus, interested parties should stay tuned for rule announcements and should be prepared to submit public comments on any such rules.
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