## Facts

- Federal employment and training funds under the Comprehensive Employment and Training Act (CETA) were allocated by statutory formulas tied to the number of unemployed persons in each area.
- The Secretary of Labor was responsible for determining unemployment levels used in these allocation formulas, and states administered CETA programs and provided unemployment-related data.
- The Department of Labor (DOL) historically used a “Handbook” method drawing on unemployment insurance data to produce unemployment estimates.
- After CETA’s enactment, DOL adopted a Bureau of Labor Statistics methodology relying primarily on the Current Population Survey (CPS), while continuing to use unemployment insurance-based estimates for small areas not reliably measured by CPS.
- DOL combined CPS and unemployment insurance-based estimates to produce state unemployment figures and later implemented a “Balance of State” procedure for areas not individually sampled.
- Maryland alleged these methodological changes would materially reduce its share of Title VI CETA funds.
- Maryland sued DOL officials, asserting (i) failure to comply with APA notice-and-comment rulemaking, (ii) failure to satisfy publication/disclosure duties under CETA and FOIA, and (iii) that the methodology was arbitrary and capricious.
- The district court granted summary judgment to DOL, finding no procedural defect and concluding the methodology was rational; Maryland appealed.

## Issues

1. Whether DOL’s adoption of a statistical methodology for estimating unemployment levels used in CETA fund allocations constituted a “rule” requiring APA notice-and-comment procedures.
2. Whether FOIA and CETA required DOL to publish or otherwise make the methodology available before applying it to allocate funds.
3. Whether summary judgment upholding the methodology as non-arbitrary and capricious was proper absent a rulemaking record.

## Decision

- The D.C. Circuit reversed in part and remanded.
- The court held the unemployment-estimation methodology was a substantive rule under the APA because it had general applicability and future effect and directly affected statutory fund allocations.
- Because DOL did not use notice-and-comment procedures, the methodology could not be implemented through the challenged process.
- The court indicated the methodology fell within FOIA’s disclosure categories for agency rules, policies, and practices affecting the public.
- The court declined to affirm substantive reasonableness at that stage, concluding arbitrary-and-capricious review was premature without an administrative record developed through rulemaking.

## Legal Principles

- Under the APA’s broad definition, an agency’s generally applicable, future-effect methodology that implements statutory terms and materially affects benefits or funding can constitute a substantive “rule.”
- Labeling a methodology as internal, investigatory, or purely technical does not exempt it from notice-and-comment when it functions as a binding component of a statutory allocation mechanism.
- Notice-and-comment procedures are especially important where technical choices determine eligibility or distribution outcomes, both to allow informed objections and alternatives and to create a reviewable record.
- FOIA generally requires agencies to make publicly available substantive rules and agency practices of general applicability; methodologies that operationalize statutory terms for affected parties may fall within those disclosure obligations.
- Courts may defer arbitrary-and-capricious review of complex technical methods until the agency has completed procedurally proper rulemaking and compiled an adequate administrative record.

## Conclusion

The D.C. Circuit held that DOL’s unemployment-estimation methodology used to allocate CETA funds operated as a substantive rule requiring APA notice-and-comment (and related public disclosure), and it remanded for further proceedings because substantive review of the methodology was not appropriate without a rulemaking record.


Batterton v. Marshall, 648 F.2d 694 (D.C. Cir. 1980)