22 Admin. & Reg. L. News 1 (1996-1997)

handle is hein.journals/admreln22 and id is 1 raw text is: Published by the Section of Administrative Law and Regulatory Practice o American Bar Association Fall 1996  Vol. 22, No. 1
First Judicial Review of Reg Neg a Disappointment
by Phi/ipJ. Harter*

N egotiated rulemaking, or reg-neg for short
(based on an earlier name that did not last), has
been around for at least fifteen years. The
Administrative Conference recommended its use in
1982, and almost immediately agencies began using
it to address some of their most intractable problems.
Congress codified the procedures in the Negotiated
Rulemaking Act of 1990 (5 U.S.C.  581-90); it
was used to implement a number of major, complex
environmental issues in the Reagan and Bush admin-
istrations; and the Clinton administration has sup-
ported its use through Executive Orders and direct
encouragement to agencies. Given this history, it has
been rather remarkable that until this spring not a
single court discussed the process in the review of a
rule developed by reg-neg. The first case to do so
came in an opinion by
Judge Richard Posner
S rC-t on Cal-ndarl-         in USA Group Loan
Services, Inc. v. Riley,
Midyear Section Meeting        82 F.3d 708 (7th Cir.
La Mansion del Rio          1996). While the
San Antonio, TX            court reaches what is
January 31 -February 2, 1997    probably the right
Spring Section Meeting        conclusion, it displays
Hotel Washingtonremarkable igno-
Washington, DC             rance of the process
April 18-20, 1997          and provides only a
superficial analysis.
ABA Annual Meeting              Although negotiat-
Hyatt on Union Square        ed rulemaking is fully
San Francisco, CA          legal and feasible with-
July 3 1-August 3, 1997       out specific legislation,
Fall Section Meeting         Congress enacted the
Fasetinon Meetint         Negotiated Rulemak-
Washington Marriott         ing Act in part to pro-
Washington, DC             vide explicit general
October 17-18, 1997          authorization to use
the process so that
*Last Retiring Chair of Section. Mr. Harter is in private practice in
Washington, D.C., specializing in mediation of complicated policy
disputes and a sometime facilitator of negotiated rulemaking.

Congress itself would be less tempted to write in direc-
tives to use it to develop rules when enacting substan-
tive requirements. That goal notwithstanding, the
1992 Amendments to the Higher Education Act
requires the Department of Education to hold a series
of regional meetings to obtain public involvement in
the development of the proposed regulations and,
before publishing proposed regulations in the Federal
Register, to submit such regulations to a negotiated
rulemaking process. 20 U.S.C.  1098a. Although one
section of the statute calls for selecting a committee
that reflects the diversity in the industry, another calls
for the participation of the full range of interests,
including students, schools, financial institutions, guar-
antors, lenders, and secondary markets. The committees
that were established reflected the broader scope.
The Department then held a whole series of reg-
negs to develop the rules under the Act. As called for
by the Act, the agency
held public meetings
at which the issues
were discussed, then           In   This Issue
empaneled a number                Chairs Message
of reg neg committees                    2
to address the individ-
ual rules. One of them         Supreme Court News
focused on rules for                     3
the servicers of stu-        News from the Circuits
dent loans. They are                     6
the middlemen
among the students,            News from the States
banks, and the guar-                     8
antors of the student        Recent Articles of Intere
loans. The issue in
contention centered
on the Department's
rule that imposed
strict liability on the servicers for violation of a statute,
regulation, or contract - that is, liability would
accrue for an innocent mistake in the processing of a
loan if the Department is unable to collect from the

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