Plaintiff Association for Regulatory Reform ("ARR"), an association of manufacturers of mobile homes ("manufactured homes"), brings suit against defendants, the United States Department of Housing and Urban Development ("HUD" or "the agency"); HUD's Secretary, Samuel Pierce; and the Director of HUD's Manufactured Housing and Construction Standards Division, William Sorrentino.
The plaintiff charges that HUD improperly modified its definition of a manufactured home as defined by the National Manufactured Housing Construction and Safety Standards Act of 1974 ("the Manufactured Housing Act" or "the Act").
The ARR charges that HUD failed to employ the required rulemaking procedures to effect the change and that the agency's definition is arbitrary and capricious. The ARR complains that HUD's definition overturns long-standing agency practice and will severely injure, if not cripple, the manufactured housing industry. Accordingly, the ARR seeks a declaration that HUD's definition of a manufactured home is erroneous and a permanent injunction preventing implementation of the agency's definition. The defendants have moved to dismiss the case for lack of jurisdiction or, in the alternative, for summary judgment.
II. STATUTORY AND REGULATORY BACKGROUND
Congress enacted the Manufactured Housing Act in 1974 "to reduce the number of personal injuries and deaths and the amount of insurance costs and property damage resulting from manufactured home accidents and to improve the quality and durability of manufactured homes." 42 U.S.C. § 5401. To achieve this goal, the Act requires HUD to promulgate construction and safety standards, see 24 C.F.R. Part 3280, addressing, inter alia, the proper materials and manner of installing "fire safety, plumbing, heat-producing and electrical systems of manufactured homes." Id. at § 3280.1. The incentive offered by the Act is exemption from the myriad state and local regulations across the country which loosely track HUD's regulations. 42 U.S.C. § 5403(d).
Pursuant to subsection 5402(6) of the Manufactured Housing Act, a "manufactured home" is defined as one which is,
. . . transportable in one or more sections, which in the traveling mode, is eight body feet or more in width or forty body feet or more in length, or, when erected on site, is three hundred twenty or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation . . . .
42 U.S.C. § 5402(6) (emphasis added). Neither the statute nor its legislative history further defines the term "permanent chassis." However, HUD's regulations help to make the phrase explicable. HUD defines a "chassis" to be " the entire transportation system comprising the following subsystems: drawbar and coupling mechanism, frame, running gear assembly, and lights." 24 C.F.R. § 3280.902(a) (emphasis added). HUD considers a chassis permanent as long as the underlying frame remains in place, which, in the vast majority of cases, requires only the maintenance of two steel I-beams.
Declaration of William C. Sorrentino, Director of HUD's Manufactured Housing and Construction Standards Division ("Sorrentino Declaration") at para. 6. Thus, pursuant to HUD's current policy, the axles, wheels, and drawbar may be removed without destroying the permanence of the chassis.
HUD's regulations further define permanence. Manufactured housing designs must provide the manner in which the floor will be attached to the chassis, 24 C.F.R. § 3280.305(a), (e), and must demonstrate that the chassis is designed to last the intended life of the manufactured home. 24 C.F.R. § 3280.904(a). The requirement of a permanent chassis becomes more understandable when considered in light of the fact that Manufactured Housing Act prohibits manufactured homes which are "designed only for erection or installation on a site-built permanent foundation" or are "not designed to be moved once so erected or installed." 42 U.S.C. § 5403(h)(1), (2). These strictures make clear that a permanent chassis is required to ensure that manufactured homes will remain "transportable" and truly mobile. 42 U.S.C. § 5402(6) ("'manufactured home' means a structure, transportable. . ." (emphasis added)).
The action by HUD which resulted in ARR's filing this suit was the issuance of a letter-directive by defendant Sorrentino, Director of HUD's Manufactured Housing and Construction Standards Division. The letter was addressed to a Design Approval Primary Inspection Agency ("DAPIA"). Pursuant to HUD regulations, a DAPIA's function is to approve or disapprove designs for manufactured housing submitted by the producers of these homes.
See 24 C.F.R. § 3282.7(aa)(1). Sorrentino's letter transmitted HUD's disapproval of a DAPIA's decision to allow a manufactured home producer to build homes with a removable chassis.
Sorrentino's letter states, in pertinent part, that,
it has come to our attention that some DAPIAs have approved designs explicitly permitting chassis removal. This is to inform you that DAPIAs are not authorized to approve manufactured home designs permitting the removal of chassis.
Letter of William Sorrentino, Director of HUD's Manufactured Housing and Construction Standards Division (August 22, 1986) ("Sorrentino letter" or "Sorrentino directive").
The Sorrentino directive was issued without notice either to the public or to manufacturers, who claim to have previously received continuous approval of removable chassis designs. The plaintiff maintains that the Sorrentino letter constitutes either legislative rulemaking which has failed to comply with the notice and comment requirements of the Administrative Procedure Act ("APA"), 5 U.S.C. § 553, or an arbitrary and capricious definition of manufactured housing. To the contrary, HUD claims that the letter merely reaffirms the agency's long-standing policy disallowing the removal of the chassis from a manufactured home.
In considering the defendants' motions, the Court must determine whether HUD's directive constitutes a legislative rule pursuant to the APA or an interpretive bulletin under HUD's regulations, also subject to informal rulemaking requirements of notice and comment, or whether HUD's directive is only an interpretive rule. In either case, the Court must decide whether the definition of a "manufactured home" stated by the Sorrentino letter should be sustained.
As a threshold issue, HUD questions this Court's jurisdiction. Subsection 5403(a) of the Manufactured Housing Act requires HUD to "establish by order appropriate Federal manufactured home construction and safety standards" ("construction and safety standards"). 42 U.S.C. § 5403(a). As previously noted, these standards address, inter alia, the proper materials and manner of installing "fire safety, plumbing, heat-producing and electrical systems of manufactured homes." See 24 C.F.R. § 3280.1. The jurisdictional provision of the Manufactured Housing Act specifies that,
in a case of actual controversy as to the validity of any order under section [ 42 U.S.C. § 5403] [construction and safety standards], any person who may be adversely affected by such order when it is effective may at any time prior to the sixtieth day after such order is issued file a petition with the United States court of appeals for the circuit wherein such person resides or has his principal place of business, for judicial review of such order.
42 U.S.C. § 5405(a)(1) (emphasis added). This grant of jurisdiction to the court of appeals is narrow. By its terms, the provision only applies to inquiries about the "validity of any order under section [ 42 U.S.C. § 5403]." The jurisdictional question thus reduces itself to whether the Sorrentino letter addresses the validity of a HUD order relating to Federal construction and safety standards.
ARR maintains that jurisdiction is proper in this Court. The plaintiff attempts to support this proposition by assuming that the Sorrentino directive represents a modification of the construction and safety standards. See Plaintiff's Supplemental Opposition at 2. Pursuant to subsection 5405(a)(1), only the court of appeals has jurisdiction over "orders" relating to construction and safety standards. 42 U.S.C. § 5405(a)(1). However, pursuant to subsection 5403(b), all "orders" issued under the construction and safety standards section of the Act must be preceded by notice and an opportunity for comment. See 42 U.S.C. § 5403(b). ARR thus reasons that since HUD provided neither notice nor an opportunity for comment, the Sorrentino directive cannot constitute a valid subsection 5405(a)(1) type "order" triggering review by the United States court of appeals.
This argument fails because the Sorrentino letter does not address the validity of an order relating to the construction and safety standards; rather, it seeks to define more clearly the term "manufactured home." Section 5403 of the Manufactured Housing Act requires the Secretary to "establish by order appropriate Federal manufactured home construction and safety standards." 42 U.S.C. § 5403. The statute does not define the scope of these standards. Part 3280 of HUD's regulations generally addresses construction and safety matters. 24 C.F.R. § 3280.1 et seq. The regulations are divided into groups and address topics like design of manufactured housing, proper equipment and installation, fire safety, plumbing, heating, and proper electrical systems. See 24 C.F.R. § 3280.1(a). By setting forth specific criteria for producing manufactured housing, the regulations "seek, to the maximum extent possible, to establish performance requirements . . . ." 24 C.F.R. § 3280.1(b).
In determining whether the Sorrentino directive is an order relating to construction and safety standards, two groupings of regulations are particularly significant: Subpart D, Body and Frame Construction Requirements, and Subpart J, Transportation. The regulations in both of these parts touch upon the uses of the chassis. Pursuant to Subpart J, the chassis is defined as the transportation system. 24 C.F.R. § 3280.902(f). As such, the chassis is required by HUD to be "designed and constructed as an integrated, balanced and durable unit which is safe and suitable for its specified use during the intended life of the manufactured home." 24 C.F.R. § 3280.904(a). Moreover, the chassis is required to sustain part of the design loads during transport, "in conjunction with the manufactured home structure." Id. at § 3280.904(b)(3). Pursuant to Subpart D, the chassis serves certain structural functions. For example,
roof framing shall be securely fastened to wall framing, walls to floor structure, and floor structure to chassis to secure and maintain continuity between the floor and the chassis, so as to resist wind overturning and sliding . . . .
24 C.F.R. § 3280.305(a) (emphasis added). These regulations demonstrate that the construction and safety standards, like the Sorrentino directive, touch upon HUD's interpretation of the chassis' function.
However, the regulations do not convince the Court that the Sorrentino directive can be read as pertaining to the validity of an order concerning construction and safety standards. Rather, the letter explicitly addresses a legally and logically prior and totally separate question: What is a manufactured home? The Sorrentino letter focuses on the section of the Manufactured Housing Act entitled "Definitions" in which manufactured housing is statutorialy defined. See 42 U.S.C. § 5402(6). This definitional section of the Act is wholly separate from section 5403 describing construction and safety standards, and questions raised under it are not subject to review by the court of appeals. Thus, jurisdiction in this Court is proper on the ground that a federal question exists, 28 U.S.C. § 1331, relating to the definition of a manufactured home as identified in the Manufactured Housing Act. See ARR's Complaint at para. 6.
The ARR's complaint relies upon the theory that the Sorrentino letter is a legislative rule which HUD failed to subject to informal rulemaking procedures, including notice and comment, as provided for by the APA, 5 U.S.C. § 553. As such, the ARR requests that the Court set aside HUD's interpretation of the term "manufactured home" as "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). In response, HUD seeks summary judgment.
For reasons provided hereafter, the Court will grant HUD's motion.
A. Notice and Comment
ARR founds its right to notice and comment upon the Manufactured Housing Act, referencing the APA, and the APA itself. Subsection 5403(b) of the Manufactured Housing Act specifies that,
all orders issued under this section [construction and safety standards] shall be issued after notice and an opportunity for interested persons to participate are provided in accordance with the provisions of section 553 of title 5, United States Code.
42 U.S.C. § 5403(b) (emphasis added). While subsection 5403(b) would be dispositive if HUD had issued an order pursuant to that section, the Court has previously held that the Sorrentino letter did not promulgate a construction and safety standard or an order issued under that section. See, supra, at 8-10. Accordingly, rulemaking is not required by subsection 5403(b).
Whether APA section 553 itself requires rulemaking in the instant case is a more troublesome question. Ordinarily, section 553 requires federal agencies to provide notice in the Federal Register of proposed rulemaking and to provide an opportunity for interested persons to comment on the proposals. See 5 U.S.C. § 553. ARR contends that the Sorrentino letter "changes the concept of a 'manufactured home' as set forth in the Act and Regulations . . . [and] amounts to indirect issuance of a regulation without notice or comment . . . ." Complaint at para. 18. Consistent with this claim, ARR requests the Court to hold unlawful and set aside HUD's action as conduct which is "without observance of procedure required by law." 5 U.S.C. § 706(2)(D).
To prevail, HUD must demonstrate that transmittal of the Sorrentino letter did not improperly fail to comply with the APA's requirements attending notice and comment rulemaking. Toward this end, HUD styles the Sorrentino letter an interpretive rule, the promulgation of which does not require notice or comment. In support of its position, HUD quotes the APA as follows: "except when notice or hearing is required by statute, this subsection does not apply--(A) to interpretive rules, general statements of policy, or rules of agency organization, procedure, or practice." 5 U.S.C. § 553(b)(3)(A) (emphasis added).
If the Sorrentino letter is an interpretive rule, then the plaintiff's claim that it was entitled to notice and an opportunity for comment must fail.
The question presented is thus whether the letter is a legislative or interpretive rule. The distinction between legislative and interpretive rules has been aptly stated by a leading commentator:
[a] legislative rule is the product of an exercise of delegated legislative power to make law through rules. An interpretive rule is any rule an agency issues without exercising delegated legislative power to make law through rules.
K. Davis, Administrative Law Treatise § 7.8 (1979). Thus, a court can rule out the possibility that a rule is legislative when an agency is not empowered by Congress to issue rules having the force of law. Cf. Joseph v. United States Civil Service Comm'n, 180 U.S. App. D.C. 281, 554 F.2d 1140, 1153 n.24 (D.C. Cir. 1977). The Manufactured Housing Act appears to limit HUD's authority to promulgate legislative rules to the issuance of construction and safety standards. See 42 U.S.C. § 5403. Given the Court's earlier finding that the Sorrentino directive does not establish such a standard, it follows that HUD was not authorized to issue a legislative rule defining the term "manufactured home."
Even if HUD had the delegated power to issue a legislative rule relating to the definition of a manufactured home, it is clear to the Court that the agency did not intend to do so. In his affidavit, William Sorrentino, the author of the Sorrentino directive, states that the purpose of the letters he sent to the DAPIAs was "to remind" them of their obligations under the Manufactured Housing Act, not to create new duties and obligations. See Supplemental Sorrentino Declaration at para. 4. However, in General Motors Corp. v. Ruckelshaus, 239 U.S. App. D.C. 408, 742 F.2d 1561 (D.C. Cir. 1984) (en banc), cert. denied sub nom. General Motors Corp. v. Thomas, 471 U.S. 1074, 85 L. Ed. 2d 509, 105 S. Ct. 2153 (1985), the United States Court of Appeals for the District of Columbia Circuit observed that divining an agency's intent is a difficult task, and the agency's own characterization, while relevant, does not control. Id. at 1565.
More telling is the substance of the agency's action. See Chamber of Commerce of the United States v. Occupational Safety and Health Admin., 204 U.S. App. D.C. 192, 636 F.2d 464, 468 (D.C. Cir. 1980). To properly elevate substance over agency classification, a better understanding of interpretive rules is necessary. In Chrysler Corp v. Brown, 441 U.S. 281, 60 L. Ed. 2d 208, 99 S. Ct. 1705 (1979), the Supreme Court noted that interpretive rules are "issued by an agency to advise the public of the agency's construction of the statutes and rules which it administers." Id. at 302 n.31 (quoting the Attorney General's Manual on the Administrative Procedure Act (1947)). Thus, as the Court of Appeals in this Circuit has stated,
'if you had an expression in a statute such as "Interurban Railway, " the query might come up as to what is an "interurban railway. " A particular agency may adopt a rule defining an interurban railway. That, in a sense, may be called an interpretive rule.'