Business Law Study Set 14

Business

Quiz 44 :

Administrative Law

Quiz 44 :

Administrative Law

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Arbitrary and Capricious Test Lion Raisins, Inc., is a family-owned, family-operated business that grows raisins and markets them to private enterprises. In the 1990s, Lion also successfully bid on more than fifteen contracts awarded by the U.S. Department of Agriculture (USDA). In May 1999, a USDA investigation reported that Lion appeared to have falsified inspectors' signatures, listed false moisture content, and changed the grade of raisins on three USDA raisin certificates issued between 1996 and 1998. Lion was subsequently awarded five more USDA contracts. Then, in November 2000, the company was the low bidder on two new USDA contracts for school lunch programs. In January 2001, however, the USDA awarded these contracts to other bidders and, on the basis of the May 1999 report, suspended Lion from participating in government contracts for one year. Lion filed a suit in the U.S. Court of Federal Claims against the USDA, seeking, in part, lost profits on the school lunch contracts on the ground that the USDA's suspension was arbitrary and capricious. What reasoning might the court employ to grant a summary judgment in Lion's favor [ Lion Raisins, Inc. v. United States , 51 Fed.Cl. 238 (2001)]
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In this case, the USDA, via an investigation, found that the company had essentially falsified records to secure contracts. Despite this, the company was contracted by the USDA for several more contracts. Then in a case where the company should rightfully have been awarded a contract because they were the lowest bidder, the company was denied this right.
It does not make sense that the company could have been found in violation of the rules and granted contracts, then not granted a contract based on this violation. This behavior could be viewed as "arbitrary and capricious" and give the court reason to grant summary judgment.

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Judicial Controls Under federal law, when accepting bids on a contract, an agency must hold "discussions" with all offerors. An agency may ask a single offeror for "clarification" of its proposal, however, without holding "discussions" with the others. Regulations define clarifications as "limited exchanges." In March 2001, the U.S. Air Force asked for bids on a contract. The winning contractor would examine, assess, and develop means of integrating national intelligence assets with the U.S. Department of Defense space systems, to enhance the capabilities of the Air Force's Space Warfare Center. Among the bidders were Information Technology and Applications Corp. (ITAC) and RS Information Systems, Inc. (RSIS). The Air Force asked the parties for more information on their subcontractors but did not allow them to change their proposals. Determining that there were weaknesses in ITAC's bid, the Air Force awarded the contract to RSIS. ITAC filed a suit in the U.S. Court of Federal Claims against the government, contending that the postproposal requests to RSIS, and its responses, were improper "discussions." Should the court rule in ITAC's favor Why or why not [ Information Technology Applications Corp. v. United States , 316 F.3d 1312 (Fed. Cir. 2003)].
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In this problem, the book draws the distinction between "discussions" and "limited exchanges" with bidders. Here, the agency merely asked the two bidders for more information on the proposed contracts. The agency did not hold a conversation with either of the bidders. The agency did not tell the bidders what to propose or give either one an advantage.
This was a "limited exchange" as the agency asked for the material and received it. Thus, the court should not rule in the losing bidders' favor.

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Judicial Deference Dave Conley, a longtime heavy smoker, was diagnosed with lung cancer. He died two years later. His death certificate stated that the cause of death was cancer, but it also noted other significant conditions that had contributed to his death were a history of cigarette smoking and coal mining. Conley's wife filed for benefits under the Black Lung Benefits Act, which provides for victims of black lung disease caused by coal mining. To qualify for benefits under the act, the exposure to coal dust must be a substantially, contributing factor leading to the person's death, which, under the statute, means "hastens death." The U.S. Department of Labor collected Conley's work and medical records. An administrative law judge (ALJ) reviewed the record and took testimony from several physicians about the cause of Conley's death. Only one physician testified that the coal dust was a substantial factor leading to Conley's lung cancer, but he offered no evidence other than his testimony to support his conclusion. The ALJ nevertheless ruled that coal mining had hastened Conley's death and awarded benefits to Mrs. Conley. Conley's employer appealed to the Benefits Review Board (BRB) for black lung claims. The BRB reversed the ALJ, finding that there was insufficient evidence to hold that coal dust was a substantial factor that triggered Conley's lung cancer. Mrs. Conley appealed to a federal appellate court. Should the federal court defer to the ALJ's decision on the cause of Conley's death Why or why not Which decision does the federal appellate court review, the ALJ's conclusions or the BRB's reversal [ Conley v. National Mines Corp., 595 F.3d 297 (6th Cir. 2010)]
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Generally, after a hearing, an administrative law judge (ALJ) issues a decision. However, if a party is dissatisfied, they can appeal to the board in charge of the agency, as the employer did here to the BRB.
The BRB, in this case, reversed the ALJ's opinion and favored the employer. The finding was that the substantial cause of death to the beneficiary was not just black lung, and thus, the employer did not have to pay to the widow. This is considered the final decision.
However, the widow then appealed. When the Court of Appeals reviews the case, they must review the final decision; in this case, the final decision is that one made by BRB. Generally, the court will pay much deference to the agency board's decision. Thus, the Court of Appeals will probably uphold the decision by the BRB and deny the widow the benefits.

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Rulemaking and Adjudication Powers For decades, the Federal Trade Commission (FTC) resolved fair trade and advertising disputes through individual adjudications. In the 1960s, the FTC began promulgating rules that defined fair and unfair trade practices. In cases involving violations of these rules, the due process rights of participants were more limited and did not include cross-examination. Although anyone charged with violating a rule would receive a full adjudication, the legitimacy of the rule itself could not be challenged in the adjudication. Furthermore, a party charged with violating a rule was almost certain to lose the adjudication. Affected parties complained to a court, arguing that their rights before the FTC were unduly limited by the new rules. What would the court examine to determine whether to uphold the new rules
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Technological advances have made it easier for broadcasters to "bleep out" offending words in the programs that they air. Does this development support a more stringent-or less stringent-enforcement policy by the Federal Communications Commission Explain.
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QUESTION WITH SAMPLE ANSWER: Informal Rulemaking. Assume that the Food and Drug Administration (FDA), using proper procedures, adopts a rule describing its future investigations. This new rule covers all future circumstances in which the FDA wants to regulate food additives. Under the new rule, the FDA is not to regulate food additives without giving food companies an opportunity to cross-examine witnesses. Later, the FDA wants to regulate methylisocyanate, a food additive. The FDA undertakes an informal rulemaking procedure, without cross-examination, and regulates methylisocyanate. Producers protest, saying that the FDA promised them the opportunity for cross-examination. The FDA responds that the Administrative Procedure Act does not require such cross-examination and that it is free to withdraw the Promise made in its new rule. If the producers challenge the FDA in court, on what basis would the court rule in their favor
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Today, children are likely exposed to indecent language in various media far more often than they were in the 1970s, when the Federal Communications Commission first began to sanction indecent speech. Does this mean that we need more stringent-or less stringent-regulation of broadcasts Explain.
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A QUESTION OF ETHICS: Rulemaking. To ensure highway safety and protect driver health, Congress charged federal agencies with regulating the hours of service of commercial motor vehicle operators. Between 1940 and 2003, the regulations that applied to long-haul truck drivers were mostly unchanged. (Long-haul drivers are those who operate beyond a 150-mile radius of their base.) In 2003, the Federal Motor Carrier Safety Administration (FMSCA) revised the regulations significantly, increasing the number of daily and weekly hours that drivers could work. The agency had not considered the impact of the changes on the health of the drivers, however, and the revisions were overturned. The FMSCA then issued a notice that it would reconsider the revisions and opened them up for public comment. The agency analyzed the costs to the industry and the crash risks due to driver fatigue under different options and concluded that the safety benefits of not increasing the hours were less than the economic costs. In 2005, the agency issued a rule that was nearly identical to the 2003 version. Public Citizen, Inc., and others, including the Owner-Operator Independent Drivers Association, asked the U.S. Court of Appeals for the Distiict of Columbia Circuit to review the 2005 rule as it applied to long-haul drivers. [ Owner-Operator Independent Drivers Association, Inc. v. Federal Motor Carrier Safety Administration, 494 F.3d 188 (D.C.Cir. 2007)] (a) The agency's cost-benefit analysis included new methods that were not disclosed to the public in time for comments. Was this unethical Should the agency have disclosed the new methodology sooner Why or why not (b) The agency created a graph to show the risk of a crash as a function of the time a driver spent on the job. The graph plotted the first twelve hours of a day individually, but the rest of the time was depicted with an aggregate figure at the seventeenth hour. This made the risk at those hours appear to be lower. Is it unethical for an agency to manipulate data Explain.
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Rulemaking The Investment Company Act of 1940 prohibits a mutual fund from engaging in certain transactions in which there may be a conflict of interest between the manager of the fund and its shareholders. Under rules issued by the Securities and Exchange Commission (SEC), however, a fund that meets certain conditions may engage in an otherwise prohibited transaction. In June 2004, the SEC added two new conditions. A year later, the SEC reconsidered the new conditions in terms of the costs that they would impose on the funds. Within eight days, and without asking for public input, the SEC readopted the conditions. The Chamber of Commerce of the United States-which is both a mutual fund shareholder and an association with mutual fund managers among its members-asked the U.S. Court of Appeals for the Second Circuit to review the new rules. The Chamber charged, in part, that in read opting the rules, the SEC relied on materials not in the "rulemaking record" without providing an opportunity for public comment. The SEC countered that the information was otherwise "publicly available." In adopting a rule, should an agency consider information that is not part of the rulemaking record Why or why not [ Chamber of Commerce of the United States v. Securities and Exchange Commission , 443 F.3d 890 (D.C.Cir. 2006)]
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Agency Powers A well-documented rise in global temperatures has coincided with a significant increase in the concentration of carbon dioxide in the atmosphere. Some scientists believe that the two trends are related, because when carbon dioxide is released into the atmosphere, it produces a greenhouse effect, trapping solar heat. Under the Clean Air Act (CAA) of 1963, the Environmental Protection Agency (EPA) is authorized to regulate "any" air pollutants "emitted into … the ambient air" that in its "judgment cause, or contribute to, air pollution." Calling global warming "the most pressing environmental challenge of our time," a group of private organizations asked the EPA to regulate carbon dioxide and other "greenhouse gas" emissions from new motor vehicles. The EPA refused, stating, among other things, that Congress last amended the CAA in 1990 without authorizing new, binding auto emissions limits. The petitioners-nineteen states, including Massachusetts, and others-asked the U.S. Court of Appeals for the District of Columbia Circuit to review the EPA's denial. Did the EPA have the authority to regulate greenhouse gas emissions from new motor vehicles If so, was its stated reason for refusing to do so consistent with that authority Discuss. [ Massachusetts v. Environmental Protection Agency , 549 U.S. 497, 127 S.Ct. 1438, 167 L.Ed.2d 248 (2007)]
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CASE PROBLEM WITH SAMPLE ANSWER: Investigation. Riverdale Mills Corp. makes plastic-coated steel wire products in Northbridge, Massachusetts. Riverdale uses a water-based cleaning process that generates acidic and alkaline wastewater. To meet federal clean-water requirements, Riverdale has a system within its plant to treat the water. It then flows through a pipe that opens into a manhole-covered test pit outside the plant in full view of Riverdcde's employees. Three hundred feet away, the pipe merges into the public sewer system. In October 1997, the Environmental Protection Agency (EPA) sent Justin Pimpare and Daniel Granz to inspect the plant. Without a search warrant and without Riverdale's express consent, the agents took samples from the test pit. Based on the samples, Riverdale and James Knott, the company's owner, were charged with criminal violations of the federal Clean Water Act. The defendants pled a suit in a federal district court against the EPA agents and others, alleging violations of the Fourth Amendment. What right does the Fourth Amendment provide in this context This right is based on a "reasonable expectation of privacy." Should the agents be held liable Why or why not [ Riverdale Mills Corp. v. Pimpare, 392 F.3d 55 (1st Cir. 2004)]
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Investigation Maureen Droge began working for United Air Lines, Inc. (UAL), as a flight attendant in 1990. In 1995, she was assigned to Paris, France, where she became pregnant. Because UAL does not allow its flight attendants to fly during their third trimester of pregnancy, Droge was placed on involuntary leave. She applied for temporary disability benefits through the French social security system, but her request was denied because UAL does not contribute to the French system on behalf of its U.S.-based flight attendants. Droge filed a charge of discrimination with the U.S. Equal Employment Opportunity Commission (EEOC), alleging that UAL had discriminated against her and other Americans. The EEOC issued a subpoena, asking UAL to detail all benefits received by all UAL employees living outside the United States. UAL refused to provide the information, in part, on the grounds that it was irrelevant and compliance would be unduly burdensome. The EEOC filed a suit in a federal district court against UAL. Should the court enforce the subpoena Why or why not [ Equal Employment Opportunity Commission v. United Air Lines, Inc., 287 F.3d 643 (7th Cir. 2002)]
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