Formal rulemaking (trial-type hearings)
Formal Rulemaking (Trial-Type Hearings)
What is Formal Rulemaking?
Formal rulemaking refers to a process where an administrative agency adopts rules or regulations through procedures resembling a judicial trial.
It involves:
Notice to interested parties.
Opportunity for a hearing with evidence presented.
Cross-examination.
A record of proceedings.
A decision based on the record.
This contrasts with informal rulemaking, which typically involves notice and comment but no trial-like hearings.
When is Formal Rulemaking Required?
The U.S. Administrative Procedure Act (APA) mandates formal rulemaking “on the record after opportunity for an agency hearing” when statutes require rules to be made after trial-type hearings.
It is usually required when rules affect private rights or entitlements.
Formal rulemaking ensures due process where agency decisions substantially affect legal rights.
Key Characteristics of Formal Rulemaking (Trial-Type Hearings)
Adjudicatory procedures similar to court trials.
Presentation and cross-examination of witnesses.
Evidence formally introduced.
Administrative law judges or hearing officers conduct proceedings.
Formal findings and rulings issued.
Case Law on Formal Rulemaking (Trial-Type Hearings)
1. Morgan v. United States (1938)
Facts: The Comptroller General issued a decision disallowing payment without a formal hearing.
Issue: Whether the agency was required to hold a trial-type hearing before making the ruling.
Judgment: The Supreme Court held that when statutes require a hearing “on the record,” agencies must provide a formal trial-type hearing, including evidence and cross-examination.
Significance:
Established the principle that formal hearings are necessary where statutes explicitly require “on the record” proceedings.
Distinguished formal from informal rulemaking.
Due process requires trial-like procedures when private rights are involved.
2. Goldberg v. Kelly (1970)
Facts: New York terminated welfare benefits without prior hearing.
Issue: Whether procedural due process requires a hearing before termination.
Judgment: The U.S. Supreme Court held that due process requires an evidentiary hearing before termination of welfare benefits.
Significance:
Although not strictly formal rulemaking, the case emphasized the need for trial-type procedural protections in agency decisions affecting individual rights.
Confirmed that when important interests are at stake, a formal hearing is necessary.
Set the stage for formal procedures in administrative decisions.
3. SEC v. Chenery Corp. (1947) (Chenery I)
Facts: The Securities and Exchange Commission issued an order without formal hearing.
Issue: Whether the SEC’s informal adjudication was sufficient.
Judgment: The Supreme Court emphasized that the agency’s decision must rest on proper administrative procedures, which could include formal hearings if required by statute.
Significance:
Reinforced the necessity of following proper procedures.
Distinguished between formal and informal adjudication and rulemaking.
Stressed procedural fairness and record-based decisions.
4. United States v. Florida East Coast Railway Co. (1973)
Facts: The Interstate Commerce Commission (ICC) adopted rules without trial-type hearings.
Issue: Whether formal hearings were required under the statute.
Judgment: The Supreme Court held that formal trial-type hearings are required only where Congress expressly mandates “on the record after opportunity for hearing.”
Significance:
Clarified that formal rulemaking is not the default.
Agencies can use informal procedures unless statute requires formal hearings.
Protects agencies’ flexibility while safeguarding procedural rights when necessary.
5. Bi-Metallic Investment Co. v. State Board of Equalization (1915)
Facts: State Board increased property tax assessment without hearings.
Issue: Whether formal hearings were required before rulemaking affecting many property owners.
Judgment: The Supreme Court held formal hearings are not required when rules apply generally to large groups.
Significance:
Distinguished between rulemaking and adjudication.
Formal rulemaking (trial-type hearings) is generally for decisions affecting specific parties’ rights.
Emphasized efficiency in rulemaking without individualized hearings.
Summary of Principles from Cases
| Case | Key Holding/Principle | Impact on Formal Rulemaking |
|---|---|---|
| Morgan v. United States | Statutory “on the record” hearings require trial-type hearings | Sets standard for formal rulemaking necessity |
| Goldberg v. Kelly | Due process requires hearings before terminating benefits | Extends formal hearing requirements for rights |
| SEC v. Chenery Corp. | Agency decisions must be based on proper procedures | Emphasizes procedural fairness and record |
| U.S. v. Florida East Coast | Formal hearings only if statute mandates | Clarifies when formal rulemaking is necessary |
| Bi-Metallic Investment | No hearings needed for general rulemaking affecting many | Distinguishes rulemaking from adjudication |
Conclusion
Formal rulemaking ensures agencies hold trial-type hearings when laws require them, protecting rights through evidentiary procedures and due process.
It is distinguished from informal rulemaking, which involves notice and comment but no formal hearing.
The Supreme Court has consistently upheld that formal hearings are mandatory when statutes demand “on the record” proceedings or when individual rights are at stake.
However, formal hearings are not always required, especially in general rulemaking affecting broad groups, balancing efficiency with fairness.
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