October 23, 2021

Volume XI, Number 296

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Agency Cannot Avoid Rulemaking By Contract

As has been noted over the years in this space, California strictly prohibits "underground regulations".   These are regulations adopted and enforced by state agencies without complying with the public notice and comment requirements of the California Administrative Procedure Act.  Cal. Gov. Code § 11340.5(a).   The APA defines a "regulation" as:

every rule, regulation, order, or standard of general application or the amendment, supplement, or revision of any rule, regulation, order, or standard adopted by any state agency to implement, interpret, or make specific the law enforced or administered by it, or to govern its procedure.

Cal. Gov. Code § 11342.600.  In a case published yesterday, the Court of Appeal considered whether a memorandum of understanding entered into between a state agency and a regulated entity was a "regulation" under the APA.  The Court agreed with the trial court that “a state regulation that is implemented through a private intermediary is still a regulation".   Vasquez v. Dept. of Pesticide Regulation, Cal. Ct. Appeal Case No. A154922 (Sept. 8, 2021).

The case is important because agencies should not be able to implement a rule without complying with the APA through the simple expedient of entering into a contract.  

© 2010-2021 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XI, Number 252
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
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Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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