September 23, 2019

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Going Beyond: When Can Courts Look Past the Record in an APA Review?

Regulated companies need to understand what material courts can consider when they review administrative decisions. The Administrative Procedure Act generally allows courts to consider only the existing administrative record when reviewing agency decision-making to determine whether agency decisions are arbitrary and capricious. But the Supreme Court recently reminded us that this rule is not absolute by looking beyond the record in Dep’t of Commerce v. New York to block an agency decision that it found to be based on a “contrived,” pretextual rationale.

Regulated companies may be able to ask courts to consider information beyond the administrative record if they can show that the agency acted in bad faith or exhibited improper behavior. A company’s ability to present the court with information beyond a record carefully constructed by an agency can be a powerful tool.

The following cases illustrate that a movant may not need to conclusively prove that the agency behaved improperly to convince a court to review evidence beyond the administrative record. But the evidence must form a picture that gives the court reason to believe there was bad faith or improper behavior. Here’s a breakdown of several case examples:

Dep’t of Commerce v. New York Goes Beyond the Record

Dep’t of Commerce v. New York presented the Court with a challenge to Secretary of Commerce Ross’s decision to add a citizenship question to the 2020 census. In defense of his decision, the Secretary presented a record showing that the Department of Justice had asked that the question be added so it could more effectively enforce the Voting Rights Act. But extra-record discovery revealed that the DOJ’s request was not the real reason that Secretary Ross had added the question. Rather, extra-record discovery showed that the Secretary had planned to add the question all along and had, in fact, solicited the request for the question from the DOJ. Viewed in that light, the Supreme Court determined that the Voting Rights Act rationale was “contrived” and affirmed the lower court’s decision to bar the Department of Commerce from asking the question.

Writing for the majority of a fractured Court, the Chief Justice acknowledged that while “[i]t is hardly improper for an agency head to come into office with policy preferences and ideas . . . and work with staff attorneys to substantiate the legal basis for a preferred policy,” the Court “cannot ignore the disconnect between the decision made and the explanation given.” The Court noted that to confine itself to the administrative record and ignore the Secretary’s extra-record actions would be “to exhibit a naiveté from which ordinary citizens are free.”

To understand why this decision is important, observers need to take a deep-dive into the Court’s decision. Why could the courts look beyond the administrative record here? Because the district court invoked—maybe prematurely in this case—an exception to the rule against extra-record discovery from Citizens to Preserve Overton Park, Inc. v. Volpe. This exception gives courts discretion to go beyond the existing administrative record if the party challenging the agency action makes “a strong showing of bad faith or improper behavior” underlying the agency decision.

When Do Courts Use Overton Park to Look Beyond the Record?

While every circuit has recognized the Overton Park exception—and most also recognize other, circuit-specific exceptions that allow for a party challenging an agency decision to supplement the record—the overwhelming majority of courts have declined to use Overton Park’s exception to look beyond the administrative record. In his Dep’t of Commerce v. New York dissent, Justice Thomas followed this school of thought. He disagreed that plaintiffs had made a sufficiently “strong showing” of bad faith or improper behavior by Secretary Ross and noted that the Supreme Court “ha[s] never before found Overton Park’s exception satisfied.”

Given the fact that the APA requires courts to defer to agency decision-making, the courts’ reluctance to embrace Overton Park is unsurprising. Nonetheless, some have looked beyond the record.

In Sokaogon Chippewa Cmty. v. Babbitt, for example, the district court allowed the party challenging the agency decision to supplement the record after it made a strong showing of improper behavior behind a decision of the Department of the Interior. There, three Indian tribes had applied to the United States to convert a greyhound racing facility into an off-reservation casino. When the Department denied the application, citing the “strong opposition of the surrounding communities,” the tribes challenged the decision. The tribes argued that the Department’s reason was pretextual and pointed to unexplained procedural delays; suspicious communications between opposition tribes, senators, lobbyists, and White House staff; and a draft report from the Indian Gaming Management Staff, which had recommended that the application be approved.

The court initially limited its review to the record because plaintiffs had not proven improper behavior. But it then reversed course and granted the plaintiffs’ motion for reconsideration, noting that Overton Park’s “strong showing” requirement did not—and, logically, could not—require conclusive evidence of improper behavior. Instead, the court was satisfied that the plaintiff had “suppl[ied] sufficient evidence . . . as to raise suspicions that defy easy explanations.”

Following Babbitt’s lead, the district court in United States v. Sanitary Dist. of Hammond also allowed extra-record discovery, there after the party challenging an EPA decision had made a sufficient showing of bad faith. In that case, an EPA official recused herself from a dispute to avoid the appearance of partiality. But suspicions were later raised when she, without explanation, reinstated herself after receiving poignant, critical questions from her chosen successor’s counsel. The court allowed extra-record discovery to reveal any potential impropriety behind her decisions. The court noted that while it had “not f[ound] that bad faith or improprieties in fact influenced the [decision],” the defendant had made “a ‘strong showing’ that the evidence of record ‘suggests’ that bad faith or improprieties ‘may have influenced the decision maker.’”

Key Takeaways

A court’s decision to go beyond the record—as explained by the lower court in Dep’t of Commerce v. New York—is most often “based on a combination of circumstances that [when] taken together, [are] most exceptional.” Observers may note that the Court’s decision to go beyond the record in Dep’t of Commerce v. New York seems to conflict with last term’s decision in Trump v. Hawaii. But maybe they can be reconciled. There, the state of Hawaii and three U.S. citizens challenged Presidential Proclamation No. 9645—colloquially referred to as the “travel ban”—which placed elevated immigration restrictions on eight countries, six of which were predominantly Muslim. The plaintiffs argued that the President’s extra-record statements showed that the national security justifications behind the ban were, in fact, pretext for the Proclamation’s true animus: religious discrimination. Given the nature of then-Candidate Trump’s public statements, the case seemed to present the Court with the opportunity to consider evidence of pretext that went beyond the record.

But of course Trump v. Hawaii, unlike Dep’t of Commerce v. New York, did not involve any agency decision-making. It instead involved a challenge leveled directly at the Executive itself on a matter squarely within its traditional province: national security. This distinction compelled the Court to defer to the Executive and limited the Court’s consideration of extra-record material. Thus, the Court applied a rational basis review and found that even if the challenging party could demonstrate pretext, the President’s non-religious justifications rationally supported the entry restrictions.

Ultimately, Dep’t of Commerce v. New York reminds us that an administrative record may be permeable under the right circumstances. And although the “substantial showing” bar remains high, perhaps courts will now be more apt to allow extra-record discovery when reviewing agency decision-making. That willingness could enable companies to more effectively challenge agency decisions based on pretextual reasoning—reasoning that would not be reflected in the administrative record.

Co-author: James Cromley

© 2019 Schiff Hardin LLP

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About this Author

J. Michael Showalter, Litigator, Schiff Hardin LLP
Associate

Mike Showalter is a litigator whose practice is focused on resolving complex disputes. Mr. Showalter's past clients span diverse industries including manufacturing, mining, power generation and transmission, oil and gas, the financial and insurance sectors, and process outsourcing.

Mr. Showalter's practice has focused on distilling complicated technical information into a format where it can be understood by decision makers. He has worked with experts in fields including medicine, economics, history, physical sciences, industrial hygiene, toxicology, environmental engineering and...

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