CENTER FOR REGULATORY EFFECTIVENESS: Legal Standard for a "Case File" That Qualifies for the "Enforcement Exemption" in the Paperwork Reduction Act of 1995: Emerging Regulatory Issues

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MEMORANDUM

TO:
FROM: Center for Regulatory Effectiveness
Multinational Legal Services

DATE: October 12, 2000

RE: Legal Standard for a "Case File" That Qualifies for the "Enforcement Exemption" in the Paperwork Reduction Act of 1995

Issue Presented:

What legal standard should the Office of Management and Budget (OMB) establish to determine when a Federal agency has sufficient evidence concerning an actual or potential violation of law to allow the agency to invoke the "enforcement exemption" of the Paperwork Reduction Act of 1995⁽¹⁾ (PRA) and avoid the PRA's normal requirement for prior review and approval by OMB of an agency "collection of information" (COI)⁽²⁾?

Background:

In approximately May 2000, the Environmental Protection Agency (EPA), Region V, issued approximately 400 Clean Air Act (CAA) § 114 information demand letters to facilities that have applied for or obtained permits pursuant to Title V of the CAA. The letters asked questions that pertain to whether or not the facilities have complied with the Risk Management Plan (RMP) requirements of § 112(r) of the CAA and implementing regulations found at 40 CFR Part 68.

The Center for Regulatory Effectiveness (CRE) believes that the approximately 400 CAA § 114 letters issued by Region V constitute one or more "collections of information" pursuant to the Paperwork Reduction Act of 1995 (PRA) that are subject to prior review and clearance by OMB in accordance with the PRA, including but not limited to 44 U.S.C. §§ 3507⁽³⁾ and 3508⁽⁴⁾, before Region V may conduct the collections of information.

Multinational Legal Services (MLS) is informed that EPA's view is that the CAA § 114 letters did not require prior review and approval by OMB pursuant to the PRA, because EPA claims that the letters are part of an EPA enforcement investigation or investigations and thus are exempt from such OMB review and clearance, due to the "enforcement exemption" in the PRA⁽⁵⁾.

CRE requested MLS to advise CRE with respect to what threshold legal standard OMB should establish to determine when a Federal agency collection of information is properly within the scope of the PRA "enforcement exemption", for purposes of both:

The current EPA Region V CAA § 114 letters; and
Rulemaking to establish a standard in OMB's PRA regulations that would apply to all Federal agencies.

CRE requested MLS to base its advice upon OMB's regulations and guidance documents implementing the PRA, to the extent possible.

Generally, CRE seeks to recommend to OMB a standard that would require that a Federal agency must have in its possession a sufficient quantum of specific evidence or a sufficient specific allegation that reasonably indicates the existence of a violation of law, before an agency may open a "case file" and assert that the PRA "enforcement exemption" applies to a subsequent COI⁽⁶⁾.

Discussion:

The closely-related questions concerning (1) when an agency may invoke the PRA "enforcement exemption" and, more specifically, (2) the sufficiency of evidence that is required before an agency may properly invoke the PRA "enforcement exemption", have come to OMB's attention previously. In MLS' view, OMB needs to address these questions more specifically than OMB has done to date.

1. 1999 Issue Involving the Office of Federal Contract Compliance Programs

On January 20, 1999, the CRE filed comments with OMB concerning a PRA Information Collection Request (ICR) that the Department of Labor, Employment Standards Administration, Office of Federal Contract Compliance Programs (OFCCP), submitted to OMB⁽⁷⁾.

The CRE opposed OFCCP's claim that the ICR was exempt from OMB review and clearance pursuant to the PRA because OFCCP's planned information collection activities were allegedly within the "enforcement exemption" of the PRA. CRE stated that:

As a matter of national information policy, OMB needs to establish specific, reasonable standards for determining when an agency has opened a bona fide "case file" within the meaning of OMB's regulation and guidance.

OMB should not allow an agency to open a pro forma "case file" whenever the agency wants to compel a respondent to provide information without first obtaining OMB review and approval pursuant to the PRA of 1995.

The CRE's letter reviewed existing OMB regulations and guidance concerning the PRA "enforcement exemption" and suggested a standard for determining when an agency has sufficient evidence or a sufficient allegation of a violation of law as to constitute a legitimate, bona fide agency "case file" for purposes of invoking the PRA "enforcement exemption" and thereby avoiding the PRA's normal requirements for prior OMB review and clearance of an agency COI.

MLS is advised that in the matter of the OFCCP, OMB:

Determined that OFCCP had no evidence whatsoever with respect to a violation by some or all of the respondent facilities for which OFCCP had allegedly opened a "case file"; and
Denied OFCCP's use of the PRA "enforcement exemption" and directed OFCCP to submit an ICR with respect to the proposed COI for OMB and public review and OMB prior clearance.

MLS notes also that the January 20, 1999 CRE letter also included a petition for rulemaking, pursuant to 5 U.S.C. § 553(e), to initiate a rulemaking to define the term "case file" that is found in OMB's regulations at 5 CFR § 1320.4(c). MLS is advised that OMB did not respond to that CRE petition for rulemaking⁽⁸⁾. MLS also is advised that CRE plans to restate that petition for rulemaking when CRE petitions OMB to review the EPA CAA § 114 letters pursuant to § 3517(b) of the PRA.

2. OMB's October 1998 Decision in the Matter of the Utility Air Regulatory Group Is Not Dispositive of When A Proper "Case File" Exists for Purposes of the PRA "Enforcement Exemption"

On August 7, 1998, Hunton & Williams on behalf of the Utility Air Regulatory Group (UARG) requested the OMB Office of Information and Regulatory Affairs, pursuant to § 3517(b) of the PRA, to determine whether certain collections of information by EPA from coal-fired electric utilities, including but not limited to collections via CAA § 114 letters, are subject to prior OMB review and clearance pursuant to the PRA⁽⁹⁾.

EPA asserted that all the subject collections of information were exempt from prior OMB review and clearance, due to the "enforcement exemption" of the PRA⁽¹⁰⁾.

On October 6, 1998, OMB determined in the UARG matter that the subject EPA collections of information were exempt from the PRA⁽¹¹⁾.

For the reasons set forth below, MLS believes that OMB's decision in the UARG matter is not dispositive of the threshold issue that CRE plans to raise, the question of under what circumstances does the opening of a "case file" in connection with "an administrative action or investigation involving an agency against specific individuals or entities"⁽¹²⁾ properly qualify a subsequent COI for the PRA "enforcement exemption".

Based on the information available to MLS about the UARG matter, OMB evidently did not probe the facts of EPA's practices and did not specifically address that key threshold issue.

MLS believes that OMB's decision in the UARG matter was overly deferential to EPA's assertion that EPA was in compliance with the PRA "enforcement exemption". OMB relied on statements from EPA's Regulatory Enforcement Director such as:

All EPA collections of information that are a part of this effort occurred after EPA targeted specific facilities/companies and opened individual case files (or their investigation equivalent).⁽¹³⁾ [Emphasis in the original.]

Simply put, OMB uncritically accepted EPA's statement that EPA opened unspecified "case files" for facilities before issuing CAA § 114 information demand letters.

MLS also questions OMB's apparent acquiescence in EPA's practice of opening the "investigation equivalent" of a case file. EPA states that EPA's practice is to open such a file and then "continue[] to collect information necessary to determine the compliance status of each specific facility identified and to refine further EPA's investigative strategy"⁽¹⁴⁾ (emphasis added). That practice would include a "fishing expedition" absent any specific evidence of any violation.

Again, the core legal issue concerning the availability of the PRA "enforcement exemption" is: under what circumstances does an agency's opening of a "case file" properly qualify a subsequent COI for the PRA "enforcement exemption"?

Must an agency such as EPA have in hand at least a scintilla of credible evidence before the agency may properly open a "case file" or the "investigation equivalent" of a "case file" and thereby avoid prior OMB review and clearance of the COI?

Alternatively, may an agency properly open a "case file" or the "investigation equivalent" and thereby avoid prior OMB review and clearance of subsequent COIs even though that file (or files) is (or are) totally empty of evidence or allegations until some time after the agency "continue[s] to collect information necessary to determine the compliance status of each specific facility and to refine further [the agency's] investigative strategy"⁽¹⁵⁾, as EPA apparently does?

MLS sees nothing in the current OMB regulations to prevent an agency, or all agencies, from routinely opening a pro forma "case file" for each and every permittee under each and every agency program, absent any credible evidence of a violation. OMB's current regulations do not stop EPA or other agencies from: (1) developing, as a matter of routine practice, a "target list" (similar to EPA's list in the UARG matter⁽¹⁶⁾) consisting of every permittee; and then (2) automatically opening a "case file" for each "targeted" facility; and (3) claiming that the PRA "enforcement exemption" exempts subsequent COIs to or with respect to each facility from prior OMB review and clearance.

Surely the PRA "enforcement exemption" was not intended to give agencies carte blanche authorization (exempt from prior OMB PRA review and clearance) to engage in collections of information that are really "fishing expeditions" (or, with respect to multiple facilities in a "targeted" industry, "dragnets") instead of legitimate investigations of a specific violation(s) or a reasonably suspected violation(s).

OMB has a legal obligation, as the agency charged with implementation of the PRA, to assure that Federal agencies do not abuse the PRA "enforcement exemption". In MLS' view, if OMB asserts that the UARG decision is dispositive of the threshold issue that CRE plans to raise, then OMB is abdicating its legal obligation.

If OMB's regulation that requires an agency to open a "case file" before the agency may invoke the PRA "enforcement exemption" is to have any substantive meaning, then OMB must establish a rational, specific evidentiary standard to ascertain when an agency has a sufficient evidentiary basis demonstrating or indicating a violation of law to support the opening of a bona fide "case file".

3. Existing OMB PRA Guidance Documents Provide the Basis to Establish a Rational, Specific Standard for the Sufficiency of Evidence Needed to Open a Bona Fide Case File for Purposes of Asserting the PRA "Enforcement Exemption"

MLS believes that OMB has - in OMB's PRA guidance documents - indeed established a standard, or at least the basic elements of a standard, for determining when an agency properly may assert the PRA "enforcement exemption" based on the agency's opening of a "case file". However, OMB needs to specifically articulate the standard that is implicit in the guidance and incorporate the standard into the OMB PRA regulations.

OMB has published official detailed guidance that is intended to inform OMB personnel, other agencies, and interested persons about OMB's interpretation of the PRA and OMB's implementing regulations.

OMB's official 1989 Handbook concerning the 1980 PRA remains entirely "on point" with respect to OMB's interpretation of the "enforcement exemption" in the 1995 PRA and the 1995 OMB regulations.⁽¹⁷⁾ The 1989 Handbook (as well as the 1997 draft guidance on the 1995 PRA) specifically addresses the PRA "enforcement exemption" and sheds light on OMB's intent in establishing, in its regulations, the opening of a "case file" as the threshold requirement for allowing an agency to claim the PRA "enforcement exemption":

CHAPTER IV.

COLLECTIONS OF INFORMATION THAT DO NOT REQUIRE OMB REVIEW AND APPROVAL.

EXEMPT COLLECTIONS OF INFORMATION

The Act and the OMB regulations [citations omitted] define certain purposes for which collections of information are exempt from all requirements of the Act and regulations. [Footnote omitted.] If an agency is uncertain as to whether a particular collection of information is exempt, the agency should consult with OMB. [5 CFR 1320.22(a).]
The exempt collections are those conducted:
[. . .]
3. During the conduct of Federal criminal, civil, or administrative action with respect to a specific party.

The exemption for collections of information conducted during the Federal criminal, civil, or administrative action is a limited one. It applies only after a case file or its equivalent is opened with respect to a particular party. It does not apply prior to the opening of such file, and therefore does not apply to:

Complaints or allegations of an individual(s) or other person(s) that form the basis for the agency's subsequent opening of a case file - even though the file is opened immediately upon receipt of the compliant or allegation.
[. . .]
General investigations that are not focused on a particular party.
General collections of information about a category of individuals or entities, such as a class of licensees or an industry.
(Collections of information from some or all members of a category of individuals or entities are within the scope of the exemption - if the collection is made after a case file dealing with a particular party has been opened and the collection is designed to obtain information relative to the complaint or allegation, or to any administrative or judicial proceedings that may follow.)

[Information Collection Review Handbook, Office of Management and Budget, Office of Information and Regulatory Affairs, issued January 1989, at pp. 26 - 27; emphasis added.]

Clearly, OMB intends that the PRA enforcement exemption applies only when the agency has opened a "case file" that is based on a complaint or allegation about an alleged violation that warrants the opening of a case file. The references in the guidance to the "complaint" or "allegation" that is "the basis for the agency's subsequent opening of a case file" (emphasis added) clearly show that OMB intends that there must be some reasonable evidentiary basis for opening a "case file" (as OMB uses that term in 5 CFR § 1320.4(c)), before the "case file" and any subsequent collection of information may qualify for the PRA "enforcement exemption".

Therefore, based on its PRA guidance documents, OMB clearly should not condone the practice of an agency opening a pro forma case file and asserting the PRA "enforcement exemption" based thereon.

Conclusion:

In MLS' view, for purposes of allowing an agency to claim the PRA "enforcement exemption" and thus avoid the PRA requirements for OMB prior review and clearance of a COI, a legitimate agency "case file" must include, before the information collection demand is issued, specific evidence or a specific allegation that meets two basic tests akin to "probable cause":

The evidence or allegation must specifically indicate or specifically allege that a particular person or entity has committed a violation of a law, regulation, or permit that is enforceable by the agency that wishes to issue the information collection demand; and
The evidence or allegation must be of sufficient specificity and credibility that an agency official who is responsible for law enforcement and who is at the supervisory level within the agency determines that the evidence or allegation legitimately would be a sufficient basis for, or reasonably could lead to corroborating or additional evidence that would be a sufficient basis for, formal initiation of an enforcement action (for example, the issuance of an administrative Notice of Violation).

MLS believes it advisable for OMB to conduct a rulemaking to establish such a standard for properly opening a "case file" for purposes of the OMB regulation at 5 CFR § 1320.4(c) and for asserting the PRA "enforcement exemption". If OMB fails to establish a uniform, government-wide standard, agencies will be compelled to address this issue ad hoc and the resulting standards may be inconsistent. MLS notes that EPA's Environmental Appeals Board addressed this issue and reached a conclusion that is in many respects very similar to MLS' conclusion herein.⁽¹⁸⁾

Endnotes

1.	The Paperwork Reduction Act of 1995 is codified at 44 U.S.C. § 3501 et seq.
2.	The OMB regulations implementing the Paperwork Reduction Act of 1995 were published at 60 Federal Register 44978 et seq., August 29, 1995. The OMB regulations say, in relevant part: [5 CFR] § 1320.3 Definitions. [. . .] (c) Collection of information means, [. . .] As used in this Part, "collection of information" refers to the act of collecting or disclosing information, to the information to be collected or disclosed, to a plan and/or an instrument calling for the collection or disclosure of information, or any of these, as appropriate.
3.	Section 3507 of the PRA says, in relevant part: § 3507. Public information collection activities; submission to Director; approval and delegation. (a) An agency shall not conduct or sponsor the collection of information unless in advance of the adoption or revision of the collection of information-- [. . .] (2) the Director has approved the proposed collection of information or approval has been inferred, under the provisions of this section; [. . .] [44 U.S.C. § 3507.] Those statutory requirements are in the OMB regulations at 5 CFR §§ 1320.5(a) and (g).
4.	Section 3508 of the PRA says: § 3508. Determination of necessity for information; hearing. Before approving a proposed collection of information, the Director shall determine whether the collection of information by the agency is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility. Before making a determination the Director may give the agency and other interested persons an opportunity to be heard or to submit statements in writing. To the extent, if any, that the Director determines that the collection of information by an agency is unnecessary for any reason, the agency may not engage in the collection of information. [44 U.S.C. § 3508.]
5.	Section 3518 of the PRA, the "enforcement exemption", says, in relevant part: (c)(1) Except as provided in paragraph (2), this chapter shall not apply to the collection of information – (A) [. . .]; (B) during the conduct of – (i) a civil action to which the United States or any official or agency thereof is a party; or (ii) an administrative action or investigation involving an agency against specific individuals or entities; (C) [. . .]; or (D) [. . .]. (2) This chapter applies to the collection of information during the conduct of general investigations [. . .] undertaken with reference to a category of individuals or entities such as a class of licensees or an entire industry. [44 U.S.C. § 3518(c).] See also, OMB’s regulations at 5 CFR § 1320.4(a)(2) and (c).
6.	OMB's PRA regulations explain that the PRA "enforcement exemption" with respect to a civil action or an administrative action or investigation (set forth in § 1320.4(a)(2)): [. . .] "applies during the entire course of the investigation, audit, or action, whether before or after formal charges or complaints are filed or formal administrative action is initiated, but only after a case file or equivalent is opened with respect to a particular party. [. . .]" [5 CFR § 1320.4(c); emphasis added.] The OMB PRA regulations do not define the term "case file".
7.	Letter from Brooks J. Bowen, for the Center for Regulatory Effectiveness, to Desk Officer for BLS, OSHA, ESA, Office of Information and Regulatory Affairs, Office of Management and Budget, January 20, 1999, at p. 4.
	As requested by CRE, MLS will research whether OMB's failure to respond to the CRE's January 20, 1999 petition for rulemaking constitutes a violation of the Administrative Procedure Act or other applicable law.
8.	August 7, 1998 letter from Andrea Bear Field and Norman W. Fichthorn, Hunton & Williams, to Donald R. Arbuckle, Acting Administrator and Deputy Administrator, Office of Information and Regulatory Affairs (OIRA), Office of Management and Budget (OMB).
9.	September 29, 1998 letter from Eric V. Schaeffer, Director, Office of Regulatory Enforcement, U.S. Environmental Protection Agency, to Donald R. Arbuckle, Acting Administrator and Deputy Administrator, OIRA, OMB, at page 3. MLS notes that Mr. Schaeffer's September 29, 1998 letter cites two cases, Phillips Petroleum Co. v. Lujan, 963 F.2d 1380, 1387 (10^th Cir. 1992) and Shell Oil Co. v. Babbitt, 945 F.Supp. 792, 807 (D.Del. 1996), affirmed 125 F.3d 172. Although those cases deal in part with the PRA "enforcement exemption", they shed no light on the issue at hand in this memorandum, i.e., what is the threshold standard for opening a "case file" that properly qualifies for the PRA "enforcement exemption". MLS notes further that the Phillips and Shell cases are cited, and distinguished, in the EPA Environmental Appeals Board's (EAB) opinion in In Re: Zaclon, Inc., 7 E.A.D. 482, 1998 WL 43014 (E.P.A.). See, note 17 below.
10.	October 6, 1998 letter from Donald R. Arbuckle, Acting Administrator and Deputy Administrator, Office of Information and Regulatory Affairs, OIRA, OMB, to Andrea Bear Field and Norman W. Fichthorn, Hunton & Williams, at page 2, last sentence.
11.	See, 44 U.S.C. § 3518(c)(1)(B)(ii), quoted at note 5, above.
12.	October 6, 1998 letter from Donald R. Arbuckle, Acting Administrator and Deputy Administrator, OIRA, OMB, to Andrea Bear Field, Hunton & Williams, at pages 1 - 2, quoting from a September 29, 1998 letter from Eric V. Schaeffer, Director, Office of Regulatory Enforcement, U.S. Environmental Protection Agency, to Mr. Arbuckle.
13.	September 29, 1998 letter from Eric V. Schaeffer, Director, Office of Regulatory Enforcement, U.S. Environmental Protection Agency, to Mr. Arbuckle, at page 2, second paragraph.
14.	Id.
15.	Id., at p. 2, first line.
16.	The 1989 Handbook was issued concerning the PRA of 1980 and the OMB regulations implementing the PRA of 1980; however, the statutory exemption provision in the PRA of 1995 is functionally identical to that in the PRA of 1980. OMB's guidance for implementing the PRA of 1995, "Preliminary Draft (February 3, 1997), The Paperwork Reduction Act of 1995: Implementing Guidance" contains guidance on the PRA "enforcement exemption" that is functionally identical to that in the 1989 Handbook, see the 1997 guidance at pp. 22 - 23.
17.	The Environmental Protection Agency's Environmental Appeals Board (EAB) indicated clearly in its opinion in In Re: Zaclon, Inc., 7 E.A.D. 482, 1998 WL 43014 (E.P.A.), that EPA cannot assert the PRA "enforcement exemption" based upon EPA's opening a "case file" at a time when there was "no reason to believe" the respondent facility was in violation and there was no "adversarial relationship" between EPA and the respondent facility. Although the EAB did not use the terms pro forma and bona fide with respect to characterizing the particular "case file", it is clear that the EAB believes that some evidence or reasonable suspicion of a violation must exist before EPA properly can assert the PRA "enforcement exemption". Zaclon involved an EPA information request concerning a RCRA Part B permit application. The EPA Region stated that it had opened a "facility case file regarding Zaclon" and argued that the information collection thus was within the scope of the PRA "enforcement exemption"and therefore the defendant could not invoke the "public protection provision" of the PRA (44 U.S.C. § 3512) as a defense against subsequent EPA enforcement action because EPA's information request was totally exempt from the PRA. The EAB ruled that EPA could not invoke the PRA "enforcement exemption" with respect to the particular information request to Zaclon concerning the RCRA Part B permit application, because that information request was not part of an enforcement action or investigation. The EAB did not analyze the OMB regulation (5 CFR § 1320.4(c)) concerning the existence of a "case file" as a precondition to asserting the PRA "enforcement exemption", nor did the EAB analyze the OMB PRA guidance. However, the EAB based its reasoning in significant part on the fact that, at the time EPA issued the information request, "[t]he Region had no reason to believe that the company would not comply with the information request" and "there was no indication of an adversarial relationship between Zaclon and the Region". In the EAB's analysis of the proper scope of the PRA "enforcement exemption", the EAB used a two-prong test of (1) "reason to believe [a facility is not in compliance with applicable law]" and (2) the existence of an "adversarial relationship" between the agency and the respondent. This strongly indicates that the EAB would allow EPA to assert the PRA "enforcement exemption" only if the agency opens a "case file" that is based on legitimate evidence or allegations that are sufficient reasonably (i.e., "reason to believe [a facility is not in compliance with applicable law]") to support an "adversarial relationship" (i.e., a legitimate enforcement-related action or investigation into a suspected violation) during the subsequent information request or demand to or with respect to the regulated party. MLS believes that the EAB's analysis and conclusion on this point in Zaclon is fully consistent with MLS' conclusion in this memorandum that OMB's PRA guidance requires that some reasonable evidentiary basis of a violation must exist to support opening a "case file" (as OMB uses that term in 5 CFR § 1320.4(c)), before the "case file" and any subsequent collection of information may qualify for the PRA "enforcement exemption".