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VALIANT STEEL & EQUIP., INC. v. GOLDSCHMIDT

October 17, 1980

VALIANT STEEL AND EQUIPMENT, INC., Plaintiff,
v.
Neil GOLDSCHMIDT et al., Defendants



The opinion of the court was delivered by: GREENE

This is a case in which plaintiff, Valiant Steel and Equipment, Inc., seeks a preliminary injunction to restrain the defendant Secretary of Transportation and defendant Federal Highway Administrator from enforcing "interim" regulations promulgated under § 401 of the Surface Transportation Assistance Act of 1978, P.L. No. 95-599, 92 Stat. 2689 (the "Act"), the so-called "Buy America" provisions relating to federally-financed transportation projects.

Plaintiff asserts that the regulations contained in 23 C.F.R. § 635.410, promulgated eleven days after enactment of the Act, were issued in violation of the Administrative Procedure Act, 5 U.S.C. § 553, which requires, with some exceptions, that notice and opportunity for public comment precede agency rulemaking. It further maintains that the regulations, even if validly issued under the "good cause" exception of § 553(b)(B), cannot be upheld as "emergency regulations" over twenty-two months later. Finally, plaintiff claims that the regulations are inconsistent with the Act and beyond the authority of the defendants.

 Subsection (a) of section 401 mandates that no federal funds be expended on any highway project whose cost exceeds $ 500,000 unless all materials used in the project are of domestic origin. However, subsection (b) goes on to state that the proscription on foreign materials "shall not apply where the Secretary determines" that the ban would be inconsistent with the public interest; sufficient domestic materials are not available; or the use of domestic materials would increase the cost of the project by more than ten percent. The regulations include only the last of these exceptions. *fn1"

 I

 In order to deal with plaintiff's claims the Court must determine first whether, in view of the partially discretionary nature of the subsection (b) provisions, agency regulations are at all required to be issued. On the basis of applicable precedent, it is clear that the answer must be in the affirmative.

 As early as in Securities and Exchange Commission v. Chenery Corp., 332 U.S. 194, 67 S. Ct. 1575, 91 L. Ed. 1995 (1946), the Supreme Court stated (332 U.S. at 202, 67 S. Ct. at 1580), that the

 
function of filling in the interstices of the Act should be performed, as much as possible, through the quasi-legislative promulgation of rules to be applied in the future.

 Since then, and especially in the last decade, courts have with increasing frequency required agencies to limit their discretion by promulgating rules. Thus, the Court of Appeals for this Circuit held in the leading case of Environmental Defense Fund v. Ruckelshaus, 142 U.S. App. D.C. 74, 439 F.2d 584, 598 (D.C.Cir.1971) (citations omitted):

 As Professor Davis has stated

 
When standards are lacking to guide the exercise of discretionary power in individual cases, courts should in appropriate circumstances require administrative rulemaking to provide the standards, the guides, the rules, the limits and the procedures. The movement during the 1970s toward judicially required administrative rulemaking has been a strong one.

 K. Davis, Administrative Law Treatise, 2d ed. § 3:15, at 214. *fn2"

 The Act here involved states that the ban on foreign materials "shall not apply where the Secretary determines" that any of several conditions holds, and it thus vests far narrower discretionary authority in the agency than in the typical situations where regulations have been required. *fn3" More specifically, the Secretary must grant a waiver when he makes a determination that certain conditions exist, and it could hardly be argued that he could evade that responsibility simply by never making any determinations with respect to subject matter encompassed by the exceptions enumerated in subsection ...


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