## Facts

- Congress amended the Federal Aviation Act in 1987 to expand FAA civil-penalty authority and create a temporary demonstration program allowing the FAA to prosecute and adjudicate certain civil-penalty actions.
- The FAA issued regulations implementing the demonstration program, including a civil-penalty schedule and an adjudicatory framework (notice, settlement, discovery, ALJ hearing, and administrative appeal).
- The FAA promulgated the regulations without notice-and-comment rulemaking.
- The FAA asserted the rules were exempt from notice and comment as “rules of agency organization, procedure, or practice” under APA § 553(b)(A) and, alternatively, that “good cause” justified dispensing with notice and comment under APA § 553(b)(B).
- A trade association representing major U.S. air carriers petitioned for review in the D.C. Circuit, challenging the rules under the APA.

## Issues

1. Whether the FAA’s civil-penalty adjudication regulations qualified as “rules of agency organization, procedure, or practice” exempt from notice and comment under APA § 553(b)(A).
2. If not exempt as procedural rules, whether the FAA had “good cause” under APA § 553(b)(B) to issue the regulations without notice and comment.

## Decision

- The court granted the petition for review and set aside the rules for failure to comply with APA notice-and-comment requirements.
- The court held the rules were not exempt under APA § 553(b)(A) because they had substantial practical effects on regulated parties’ rights or interests.
- The court rejected the FAA’s “good cause” justification under APA § 553(b)(B), finding administrative convenience, speed, and the program’s temporary nature insufficient.
- A dissent would have treated the rules as procedural and within the § 553(b)(A) exemption.

## Legal Principles

- The APA § 553(b)(A) procedural-rule exemption does not apply where a rule, in operation, substantially alters the rights or interests of regulated parties, even if framed as procedural.
- Courts apply a functional, effects-based inquiry to distinguish exempt procedural rules from rules requiring notice-and-comment rulemaking.
- The APA § 553(b)(B) “good cause” exception is narrowly construed; a desire for prompt implementation and administrative efficiency generally does not justify bypassing notice and comment for rules with significant regulatory consequences.
- When an agency establishes an enforcement adjudication regime that meaningfully changes regulated parties’ exposure and litigation posture, notice-and-comment procedures are ordinarily required.

## Conclusion

The D.C. Circuit invalidated the FAA’s civil-penalty adjudication regulations because they materially affected regulated parties and therefore required APA notice-and-comment rulemaking; the FAA also failed to show “good cause” to dispense with those procedures.


Air Transp. Ass’n of Am. v. Dep’t of Transp., 900 F.2d 369 (D.C. Cir. 1990)