Every administrative law student knows that a private litigant challenging an agency action must first establish an injury-in-fact. But in addition, the zone-of-interests test further requires that the litigant’s interest be “arguably within the zone of interests to be protected or regulated by the statute.” Association of Data Processing Serv. Orgs., Inc. v. Camp, 397 U.S. 150, 153 (1970).

Introduced over fifty years ago in the Supreme Court’s landmark case Data Processing, the zone-of-interests test remains one of the most puzzling doctrines in administrative law. To begin with, what purpose is served by the doctrine? Should it be viewed as a broadening doctrine or a narrowing one? The Supreme Court has repeatedly stated that “the test is not meant to be especially demanding.” Clarke v. Sec. Indus. Ass’n, 479 U.S. 388, 400 (1987). Then why have it at all, and why should it not be? And just how demanding is it supposed to be? What characteristics should separate those who “arguably” belong to the zone from those who “do not even arguably” belong to the zone, and why? How does or should this test interact with the constitutional standing doctrine? Why does Congress sometimes include citizen-suit provisions in certain statutes (thereby permitting anyone to belong to the zone) but not in others?

In a recently published article, I provide an economic analysis of the zone-of-interests test and try to shed light on some of these varied questions. In the model, Congress adopts a statute to promote a particular interest, and an administrative agency adopts a rule pursuant to the statute, which the agency interprets with some error. Potential plaintiffs come with divergent interests, and one is chosen randomly to challenge the rule. The plaintiff seeks to modify the rule in a direction that advances her own interest. But the court must first ensure that she has constitutional standing and passes the zone-of-interests test. If she fails either, another plaintiff is chosen the following year, and the game continues until the court ensure the rule is statutorily valid—either because the original rule is declared valid upon review or because the court modifies the rule to ensure its validity. In the base model, Congress is invested in the welfare of the statute’s intended beneficiaries (or an interest otherwise specified) based on the agency’s rule and the court administers the zone-of-interests test to maximize Congress’s objective function subject to time-discounting.

The model leads to the following main findings. First, a court intent on promoting the statutory interest should set the zone sufficiently narrowly in the following sense: groups whose interests are negatively correlated or positively but only marginally correlated with the statutory interest should be excluded. The intuition behind this result is straightforward. The narrower the zone—i.e., requiring a closer alignment with the statutory interest—the less likely it is that a randomly-drawn plaintiff will survive the test; however, conditional on the plaintiff passing the test, she can litigate more effectively to promote the statutory interest. Likewise, the broader the zone, the more likely that a potential plaintiff will survive the test initially, but the less efficiently the statutory interest will be promoted. These tradeoffs lead to an interior solution that defines the optimal zone of interests. This finding may justify, for example, the D.C. Circuit’s “suitable challenger” doctrine, according to which a plaintiff would belong to the zone if she could show “less than a congressional intent to benefit but more than a marginal relationship to the statutory purpose.” Hazardous Waste Treatment Council v. Thomas, 885 F.2d 918, 922-23 (D.C. Cir. 1985). It is also consistent with other case law that limits suits by plaintiffs (other than directly regulated entities) that have “antithetical” or “orthogonal” interests. See Am. Fed’n of Gov. Emps., Local 1668 v. Dunn, 561 F.2d 1310, 1313 (9th Cir. 1977); Grand Council of the Crees (of Quebec) v. FERC, 198 F.3d 950 (D.C. Cir. 2000). Nevertheless, given the opportunity cost of foregoing a challenge, the optimal zone will also depend on the discount factor, which will also vary in practice with the availability of a future plaintiff.

Second, the optimal zone (in theory) should also vary with the difficulty of establishing constitutional standing: the harder the court makes it for a plaintiff to establish constitutional standing, the broader the zone should be set. From this perspective, the court’s flexibility in defining the zone can be seen as a safeguard against a highly restrictive standing requirement—ensuring that some plaintiff with an injury-in-fact will be able to challenge the agency action. Thus, the court’s rational response to its tightening of the standing doctrine should be to broaden the zone of interests to include more potential plaintiffs. This is what we observe post-Data Processing, when the court began imposing greater burdens on plaintiffs to establish constitutional standing.

Together, these two findings provide a sensible interpretation of the court’s disparate treatment between competitor interests and other interests. One of the more established maxims concerning the zone-of-interests test is that competitors will be granted standing, while other constituents (e.g., employers, contractors, vendors or suppliers) will not be. Compare Data Processing, Clarke, and Nat’l Credit Union Admin. v. First Nat’l Bank & Trust Co., 522 U.S. 479 (1998) with Air Courier Conf. of Am. v. Amer. Postal Workers Union, 498 U.S. 517 (1991), and Dismas Charities, Inc. v. DOJ, 401 F.3d 666 (6th Cir. 2005). On what grounds can we justify this distinction? There are potentially two explanations according to the model.

First, according to the first finding, the zone should be set sufficiently narrowly to maximize the expected regulatory outcome. From this perspective one can understand how competitor interests may differ from vendor interests or employee interests. For example, with a statute like the one in Data Processing—one that seeks to protect consumer welfare by regulating entities with market power—it is plausible that competitor interests are closely aligned with consumer welfare: as competitors seek to protect their profits, the more robust the competition will be in this market, and the greater will be the resulting consumer welfare. Meanwhile, for vendors or employees, their interests will primarily be in securing greater profits for themselves, which would align better with the interests of the entities wielding market power. For instance, vendors of a regulated entity may prefer their client company to be highly profitable so that they can continue to earn business from it. Likewise, employees of the regulated entity have an interest in ensuring that their employer continues to succeed and earn profits. From this perspective, vendor interests and employee interests are likely to diverge more from consumer welfare than competitor interests.^[1] The first finding therefore suggests that the contour of the zone should be set narrowly enough to exclude employee interests and vendor interests.

According to the second finding, however, the zone should be sufficiently broad to ensure that constitutional standing does not end up foreclosing all potential plaintiffs. From this perspective, note that it may at times be easier for competitors to establish demonstrated economic harms than consumers. Competitors will likely have empirical evidence that can predict their losses in sales figures and revenues. Consumers, meanwhile, may be less well-positioned to challenge a regulation (at the time of adoption) until the entity with market power raises price or lowers quality. It is also possible that consumers may initially reap some benefits from the entity’s branching out activities. In other words, at the time of the agency’s rule adoption, the harm to consumer welfare may be more speculative and less imminent than the economic harms that competitors may be able to establish. According to the second result, this argument may explain why competitor interests are generously included in the zone of interests.

These rationales are in fact echoed by the Dismas Charities court:

Two aspects of competitor suits may form the basis for treating them with particular generosity. First, when the government enters the market by chartering specially favored or subsidized market actors, any limit on the activity of such institutions may arguably have, as an implicit purpose, the goal of not distorting the market more than necessary. Competitors would arguably be within the zone of such an interest. Second, although not formally relevant, the absence of competitor standing may render some agency actions effectively immune from judicial review. When a regulatory agency permits a regulated party to do something previously prohibited, the only party with Article III standing to challenge the government action may be the competitor. 

401 F.3d 666, 677-78 (6th Cir. 2005).

The model also considers three extensions. One extension considers the possibility of court errors. The result is that imposing the zone-of-interests requirement is efficient (i.e., leads to a better expected regulatory outcome as compared to not imposing it) as long as the probability of erroneous application is reasonably small. But when the court can also err in its statutory review, the zone-of-interests test becomes more efficient as the court tends to err more in its statutory review. Thus, the zone-of-interests test can be seen as a safeguard against the possibility of judicial errors. This, too, is consistent with the rhetoric offered by the courts.

For example, the Clarke Court offered one rationale for the test: it “seeks to exclude those plaintiffs whose suits are more likely to frustrate than to further statutory objectives.” 479 U.S. 388, note 12 (emphasis added). But this rationale raises a question worth pondering: if a plaintiff is merely requesting the court to review whether an agency’s action is statutorily valid, why exactly would such litigation “frustrate” rather than “further” statutory objectives just because the plaintiff has a private interest? Wouldn’t the court in any case be reviewing the agency action to ensure that it is consistent with the statute? On this point, the D.C. Circuit offered two responses:

[J]udicial intervention may defeat statutory goals if it proceeds at the behest of interests that coincide only accidentally with those goals. . . . When we grant standing to a party with only an oblique relation to the statutory goal, we run the risk that the outcome could, even assuming technical fidelity to law, in fact thwart the congressional goal. Further, of course, technical fidelity to law cannot be assumed; judges err. 

Hazardous Waste Treatment Council v. EPA, 861 F.2d 277, 283-84 (D.C. Cir. 1988). In short, the court views the zone-of-interests test as a screening test intended to (i) prevent marginally interested plaintiffs from seeking to modify the rule in an inefficient direction and/or (ii) foreclose judges from rendering erroneous outcomes at the behest of such plaintiffs’ interests.

A second extension considers costs associated with judicial review including lawyers’ fees, filing costs, and the court’s resources. The result is that when the laws concerning the zone-of-interests test and constitutional standing are clear, considerations based on resources would tend to narrow the optimal zone for docket-management purposes. On the other hand, when such laws are unclear, a potential plaintiff may incur the cost of filing a claim without realizing that she would fail to clear either of those hurdles. Considerations based on these potentially wasted costs would tend to counsel against narrowing the zone. This latter concern, however, may also be addressed by having Congress or the Supreme Court clarify the laws.

Finally, a third extension considers a variation in which Congress is not invested in any particular substantive outcome but cares simply about having the agency comply with the statutory mandate. Examples include certain procedural requirements, such as those required under the Administrative Procedure Act. In this extension, the optimal zone should include all groups whose interests are positively correlated with the statutory interest (and only those groups). This result may be interpreted to explain why Congress would include citizen-suit provisions in some statutes but not in others. In other words, citizen-suit provisions make sense when all citizens’ interests are largely aligned or when Congress is not biased toward any substantive regulatory outcome. A similar reasoning would also explain why environmental statutes, for example, tend to come with citizen-suit provisions. In Bennett v. Spear, the Supreme Court specifically held that the Endangered Species Act’s citizen-suit provision, which specifies that any person may commence a civil suit, “negated the zone-of-interests test (or, perhaps more accurately, expands the zone of interests).” 520 U.S. 154, 164 (1997). The Court justified its reading as follows:

Our readiness to take the term “any person” at face value is greatly augmented by two interrelated considerations: that the overall subject matter of this legislation is the environment (a matter in which it is common to think all persons have an interest) and that the obvious purpose of the particular provision in question is to encourage enforcement by so-called “private attorneys general.” 

Id. at 165.

In the Appendix, this article also includes an analysis of the comprehensive hand-coded data set of all zone-of-interests test cases at the Circuit Court level between 1971 and 2021. One surprising result is how difficult it is for the plaintiff to satisfy the zone-of-interests test at the Circuit Court level (as compared to the Supreme Court level): we observe that nearly 31% of cases applying the zone-of-interests test are ruled against the plaintiffs at the Circuit Court level. The main takeaway is that the zone-of-interests test is a nontrivial hurdle for plaintiffs seeking to challenge agency actions.

Overall, the results of the model and its extensions suggest that the zone-of-interests test can be understood as Congress’s attempt to cabin judicial review to ensure that judicial resources are not wasted and that litigation based on rule challenges would lead to outcomes that are timely and consistent with Congress’s intent behind the subject statute. To be sure, the model is a depiction of what courts claim to be doing in administering or justifying the test. The model is built on the rationales courts offer—and the implicit assumptions they make—in applying the test. As such, the article makes no claims about whether courts in fact specify the zone of interests optimally or whether the test, as applied, promotes efficiency. Nevertheless, the model offers a framework for critically assessing the validity of the assumptions that lie behind the courts’ rationales.

Yoon-Ho Alex Lee is Professor of Law at Northwestern Pritzker School of Law and Director of Northwestern University Center on Law, Business, and Economics. This post draws substantially from the author’s recently published article titled “A Model of the Zone-of-Interests Test.”

---

^[1] This is a short-term assessment only. In the long run, of course, employees as well as vendors may benefit from having consumers who continue to enjoy the entity’s services or products at the offered price.