Welcome back to Sixth Circuit Review. It’s been a while. Your humble host has been on extended parental leave. But “America’s Court” marches on. Time to recap.

First things first. What we won’t go over extensively here: net neutrality. Yes, the Sixth Circuit issued an opinion on that issue, but these pages have already covered that ruling. In short, the Sixth Circuit held that the FCC’s regulation was unlawful under the Telecommunications Act, thus putting an end to net neutrality (for now).

Still, America’s Court remained busy over the last few months, addressing all manner of administrative law issues: removal, “acting” officers, Clean Air Act plans, SEC regulations, immigration, deference in a post-Chevron world, and more. Where to begin?

We’ll split the latest Sixth Circuit happenings into two posts this time. In today’s edition, let’s start with removal at the National Labor Relations Board.

Rieth-Riley Construction Co. v. NLRB

Removal is top of mind for many in the admin law world—what with inspectors general, prosecutors, and, yes, NLRB commissioners getting axed recently. But before President Trump went on his firing spree, President Biden removed the NLRB’s General Counsel, an official with broad powers to investigate and prosecute alleged unfair labor practices.

The extent of the President’s removal power is far from clear—and at the center of vigorous academic debate. The Supreme Court has ruled that only two categories of officers may (but not must) enjoy removal protections: (1) members of bipartisan bodies that do not wield executive power (known as the Humphrey’s Executor exception), and (2) inferior officers with no policymaking or administrative authority.

Does the GC fall under either exception? Nope. The GC clearly is not a member of any bipartisan board (the position is independent from NLRB commissioners). And the office’s powers are mine-run “executive”: enforcing laws, investigating violations, bringing enforcement actions. So President Biden’s firing was well within his constitutional power, as the Sixth Circuit ruled.

Then there’s the fact that the statute establishing the General Counsel position, 29 U.S.C. § 153(d), contains no removal protections—such as limiting firing to cases of good cause or malfeasance. That matters. Just because Congress could pass removal protections for an officer doesn’t mean it must. Congress didn’t do so for the GC (and couldn’t have anyway). And without congressional removal protections, the General Counsel could be fired at will.

 One wonders what that means for SEC Commissioners, whose enabling statute similarly contains no express removal protections. In Free Enterprise Fund v. PCAOB, the Supreme Court assumed without deciding that SEC Commissioners were removable at will, but given recent case law, that seems up for debate. We’ll see.

Chamber of Commerce v. SEC

Speaking of the SEC, our next case, Chamber of Commerce v. SEC, centers on the Commission’s recission of a prior rule regulating companies—Proxy Voting Advice Businesses, or PVABs—that help large investors navigate proxy voting. The companies routinely sell proxy voting recommendations to investors.

As one can imagine, that business arrangement could lead to conflicts of interest. So pursuant to the Securities Exchange Act’s authority over “proxy solicitation[s],” the SEC issued a rule in 2020 that changed when PVABs could be exempt from certain requirements for solicitations.

Then the 2020 election occurred, and President Biden nominated Chair Gensler who sought to revisit the rule. And by July 2022, the Commission adopted amendments to the 2020 rule which eased some requirements for the exemption.

The Chamber of Commerce challenged the recission on two grounds: that the SEC (1) failed to adequately explain why it changed from the 2020 rule and (2) gave only 31 days for public comment despite providing 60 days when promulgating the original 2020 rule.

A 2-1 Sixth Circuit panel rejected the Chamber’s arguments. Courts have long viewed arbitrary and capricious review as deferential, requiring merely that agencies explain themselves well enough. Agencies can adopt second- or third-best choices so long as they say why they do so. And here the Sixth Circuit found the SEC had easily cleared that hurdle, noting that the SEC engaged in a “thoughtful and thorough explanation of” various considerations. The agency, the court explained, “may rescind a prior rule based solely on a change in the agency’s policy preference, so long as the change is reasonably explained.” And so the agency did.

But what about that shortened comment period? After all, when the SEC promulgated the original rule it gave individuals 60 days to comment. This time, commenters had only a month.

Noting that the APA has “no minimum duration over which executive agencies must solicit public comment,” the court rejected plaintiffs’ challenge. All that’s required in rulemaking is that the “opportunity to comment be a meaningful one.” And thirty-day comment periods have long been accepted as reasonable, the court said. On top of that, plaintiffs had failed to identify anyone who would have commented had the comment period been longer: “[H]ighlighting the SEC’s refusal to extend the comment window without identifying how an extended comment period could have enhanced the substantive record is an empty gesture.”

Judge Bush dissented, arguing that the condensed comment period was inadequate and that the SEC failed to reasonably explain its recission. As Judge Bush saw things, the SEC’s “short-changing the time for comment” indicated “its mind was already made up and that the comment period was just for show.” Even so, the SEC’s rule survived—something not all rules at the Sixth Circuit can say recently, which brings us to our next case.

Kentucky v. EPA

Agency delay, statutory interpretation, arbitrary and capricious review, debate over vacatur, and forum selection—Kentucky has a bit of everything for administrative law aficionados.

The unanimous opinion—authored by Judge Murphy (who also wrote a separate concurrence)—dealt with the EPA’s disapproval of Kentucky’s plans to implement national air-quality standards under the Clean Air Act. The law tasks the EPA with creating air standards that states must meet. This case addressed air quality for ozone. States, like Kentucky, must develop implementation plans to meet the standard within their borders. And state plans must also address emissions that affect compliance in other states—the so-called “good neighbor provision.” Ultimately, the EPA must approve or reject a state’s plan.

To assist states, the EPA drafted two guidance memoranda in 2018 explaining what modeling to use and informing states that they need not “worry about any interstate emissions that fall below a specific minimum threshold.” Relying on those documents, Kentucky submitted its plan in 2019. Under the Clean Air Act, the EPA was required to approve or disapprove of Kentucky’s plan within 18 months. But the EPA didn’t do anything until February 2022—20 months after the deadline. And a final rule—rejecting Kentucky’s plan—wasn’t issued until February 2023.

The case centers on whether the EPA’s disapproval was arbitrary and capricious under the APA because the EPA departed from the 2018 guidance memoranda designed to assist states in implementing plans.

Proper forum? But before even reaching that issue, the court had to determine whether it could even hear the case. The EPA argued forum lay only in the D.C. Circuit because the Clean Air Act says that any “nationally applicable . . . final action” or anything “based on a determination of nationwide scope or effect” must be heard in the nation’s capital.

The Sixth Circuit didn’t buy it. After all, it ruled, a plan for Kentucky was quintessentially a local action: “Would anyone say that Congress passed a ‘nationally applicable’ law if the law formally applied to only 40% of the country?” Hardly. So thought Judge Murphy.

The EPA, though, argued that its rule had national effect because it included 21 state denials, all based on a common national policy judgment. Invoking a Dictionary of American Idioms and Phrasal Verbs, Judge Murphy rejected EPA’s argument. The “determination” at issue must “refer[] to the agency’s ultimate decision—not each preliminary step on the road to that decision” (emphasis in original). So only the actual denial of the plan—not the policy underlying that denial—counted as the agency’s “determination.”

All told, then, the case could stay in the Sixth Circuit (which deepened a circuit split; the Tenth Circuit sent such a challenge based on Oklahoma’s plan to the D.C. Circuit). On to APA review.

Arbitrary and Capricious Review. With that settled, the court moved to the APA. And it quickly made clear that the EPA’s say-one-thing-but-do-another approach amounted to arbitrary and capricious action. Why? Recall the 2018 memoranda. In those documents, the EPA told states what modeling they could use and stated that ozone at a one part per billion threshold would be acceptable. But in rejecting Kentucky’s plan, the EPA backtracked, using different modeling and discarding the one part per billion threshold it previously announced.

That about-face doomed the EPA’s rule. The reason, according to the Sixth Circuit: The EPA failed to address reliance interests of states that counted on the EPA following the memoranda. And the “mandate to address reliance interests applies just as much to an agency’s departure from informal guidance as it does to its departure from formal regulations.” When it “threw out all this guidance,” the EPA violated the APA by failing to explain why it changed course.

Proper Remedy? So what happens to the EPA’s rule rejecting Kentucky’s plan to implement air-quality standards? More fundamentally, what does the APA allow the court to order?

Usually, vacatur. And the rule is wiped away. But that remedy is subject to much debate—including in these pages. The panel noted that in some unusual circumstances, a court can order remand without vacatur, but courts must consider two factors first: (1) the seriousness of the agency’s error and (2) how disruptive vacatur would be. Vacatur is the default, and agencies bear the burden of showing remand-without-vacatur is appropriate.

The EPA didn’t come close to avoiding vacatur. Its error, the Sixth Circuit ruled, was “fundamental” and a “bait-and-switch” that “left Kentucky without sufficient notice.” Moreover, the EPA had “not shown that vacatur would have unusually disruptive effects.” So vacatur was the proper remedy.

Judge Murphy concurred with himself to query just whether vacatur was the proper APA remedy—a question that courts continue to grapple with as more agency rules are challenged.

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That’s it for today’s Sixth Circuit Review, but don’t fret. We’ll return tomorrow with more from America’s Court, including its latest attempt to grapple with statutes after the fall of Chevron.

John Kerkhoff is a senior managing associate at Benesch, Friedlander, Coplan & Aronoff where he practices in the litigation, administrative law, and appellate law practice groups. You can reach him at jkerkhoff@beneschlaw.com.