With respect to settlement agreements unsupported by consent decree, the Meese Policy imposed similar limitations buttressed by the following requirement: that the sole remedy for the government’s failure to comply with the terms of an agreement requiring it to exercise its discretion in a particular manner would be revival of the suit against it. In all instances, the Attorney General retained the authority to authorize consent decrees and agreements that exceeded these limitations but did not “tend to undermine their force and [were] consistent with the constitutional prerogatives of the executive or the legislative branches.”
The Meese Policy addresses the fundamental problem of sue and settle: It blocks agencies from relinquishing their discretionary authority to outside groups, thereby reinforcing traditional norms of administrative rulemaking. An administration that embraces the Meese Policy will benefit from greater flexibility, improved transparency, and, ultimately, better policy results.
In short, if the Trump Administration is serious about promoting accountability and pursuing its policy goals, it should formally adopt the Meese Policy. The fact that it has not done so yet is cause for concern and for oversight by this Subcommittee.
D. Congress Should Enact Reform Legislation
There is also a need for action by Congress. As we have seen, the use of collusive settlements is a recurring problem. Addressing it therefore requires actions that endure beyond the tenure of a single administration. That means legislation. Congress can and should adopt certain common‐sense policies that provide for transparency and accountability in settlements and consent decrees that compel future government action.
My previous written testimonies and articles on this issue have detailed at length the consequences and costs of collusive settlements, as well as principles for reform.6 Those principles are reflected in the Sunshine for Regulatory Decrees and Settlements Act, H.R. 469 and S. 119. That bill represents a leap forward in transparency, requiring agencies to publish proposed settlements before they are filed with a court and to accept and respond to comments on proposed settlements. It also requires agencies to submit annual reports to Congress identifying any settlements that they have entered into. The bill loosens the standard for intervention, so that parties opposed to a “failure to act” lawsuit may intervene in the litigation and participate in any settlement negotiations. Most substantially, it requires the court, before approving a pro‐posed consent decree or settlement, to find that any deadlines contained in it allow for the agency to carry out standard rulemaking procedures. In this way, the federal government could continue to benefit from the appropriate use of settlements and consent decrees to avoid unnecessary litigation, while ensuring that the public interest in transparency and sound rulemaking is not compromised.
E. Congress Should Consider More Comprehensive Reform To Bolster the Constitutional Separation of Powers
Finally, Congress may wish to consider a more comprehensive approach that limits the ability of third parties to compel Executive Branch action. Suing to compel an agency to act on a permit application or the like is different in kind from seeking to compel it to issue generally applicable regulations or take action against third parties. As Justice Anthony Kennedy has observed, “Difficult and fundamental questions are raised” by citizen‐suit provisions that give private litigants control over actions and decisions (including the setting of agency priorities) “committed to the Executive by Article II of the Constitution of the United States.”7 Constitutional concerns aside, at the very least, the ability to compel agency action through litigation and settlements gives rise to the policy concerns identified above, subordinating the public interest to special interests and sacrificing accountability.
The sue‐and‐settle phenomenon is facilitated by the combination of broad citizen‐suit provisions with unrealistic statutory deadlines that private parties may seek enforced through citizen suits. According to William Yeatman of the Competitive Enterprise Institute, “98 percent of EPA regulations (196 out of 200) pursuant to [Clean Air Act] programs were promulgated late, by an average of 2,072 days after their respective statutorily defined deadlines.”8 Furthermore, “65 percent of the EPA’s statutorily defined responsibilities (212 of 322 possible) are past due by an average of 2,147 days.”9 With so many agency responsibilities past due, citizen‐suit authority allows specialinterest groups (whether or not in collusion or philosophical agreement with the agency) to use the courts to set agency priorities. Not everything can be a priority, and by assigning so many actions unrealistic and unachievable non‐discretionary deadlines, Congress has inserted the courts into the process of setting agency priorities, but without providing them any standard or guidance on how to do so. It should be little surprise, then, that the most active repeat players in the regulatory process—the agency and environmentalist groups—have learned how to manipulate this situation to advance their own agendas and to avoid, as much as possible, accountability for the consequences of so doing.
Two potential solutions suggest themselves. First, a deadline that Congress does not expect an agency to meet is one that ought not to be on the books. If Congress wants to set priorities, it should do so credibly and hold agencies to those duties through oversight, appropriations, and its other powers. In areas where Congress has no clear preference as to timing, it should leave the matter to the agencies and then hold them accountable for their decisions and performance. What Congress should not do is empower private parties and agencies to manipulate the litigation process to set priorities that may not reflect the public interest while avoiding the political consequences of those actions. To that end, Congress should seriously consider abolishing all mandatory deadlines that are obsolete and all recurring deadlines that agencies regularly fail to observe.10
Second, Congress should consider narrowing citizen‐suit provisions to exclude “failure to act” claims that seek to compel the agency to consider generally applicable regulations or to take actions against third parties. As a matter of principle, these kinds of decisions regarding agency priorities should be set by government actors who are accountable for their actions, not by litigants and not through abusive litigation.
II. Time To Act on “Slush Fund” Settlements and Judgment Fund Abuse
The Subcommittee and Committee are well aware of the phenomenon of “slush fund” settlements, having conducted an extensive investigation finding that the Obama Administration’s Department of Justice “subverted Congress’ spending power by requiring settling defendants to donate money to non‐victim third‐parties.”11 A related phenomenon is the use of settlements that direct funds from the federal government’s Judgment Fund to third parties who have not been injured by the government for non‐compensatory and non‐restitution purposes. I do not intend, in this testimony, to recapitulate the factual background of this problem or the constitutional issues it raises—on the legal issues, I would direct you to the testimony and publications of the Heritage Foundation’s Paul Larkin.12 But I do wish to discuss a recent decision by the D.C. Circuit addressing this phenomenon and to reiterate the need for reform.
The decision comes in a case known as Keepseagle and involves a settlement of a class action brought by Native American farmers and ranchers who alleged the Department of Agriculture had discriminated against them in farm credit and benefit programs.13 In 2001, the district court certified the class for equitable relief only, declining to address monetary relief. In 2010, the class counsel and government announced a settlement including monetary relief: fully $680 million from the Judgment Fund would be placed in a compensation fund for claimants. This was, as Prof. Paul Figley has described, “remarkably generous,” given that it represented about 98 percent of what the plaintiff class could possibly have won at trial had everything gone its way.14 Reporting by the New York Times indicated that, as is almost always the case, the proceeds of actual litigation would likely have been far less than the class’s projections, due to weaknesses in many class members’ cases and the fact that Native American farmers had, in general, fared well economically.15 Indeed, through the Clinton and George W. Bush Administrations, the Executive Branch had contested the very existence of money damages, reversing course only after the Obama Administration took power.16
Contemplating that claims on the compensation fund would not exhaust it, the settlement provided that remaining funds would be directed to socalled “cy pres” beneficiaries. “[A]ny non‐profit organization, other than a law firm, legal services entity, or educational institution” that served Native American farmers was eligible for funding. With no one challenging the cy pres provision, the district court approved the settlement.
Ultimately, despite a low bar to seeking compensation under the settlement, only about 3,600 farmers made eligible claims—far fewer than the 19,000 or more predicted by the complaint. Less than half of the compensation fund was distributed to class members, leaving $380 million for payment to third‐party organizations to advance various programmatic activities.17 Ultimately, the settlement was modified, at the request of class counsel, the government, and an objector to provide claimants with an additional $18,500 (plus taxes) each, irrespective of their individual circumstances; to promptly distribute $38 million to cy pres organizations proposed by class counsel; and to place the remainder—fully $265 million—in a trust to distribute to cy pres organizations over the next 20 years. Unsurprisingly, again no one challenged the cy pres provision—after all, it wasn’t anybody’s money.
On appeal to the D.C. Circuit, an objector argued that the settlement’s cy pres provision violates the Appropriations Clause, because it proposes to expend Treasury funds without a specific appropriation by Congress, and violates the Judgment Fund Act, because cy pres beneficiaries have no right to recover against the United States.18 These arguments, the majority held, were forfeited.
Judge Janice Rogers Brown disagreed, and her dissent merits serious consideration, beginning with her pithy analysis of the political economy of settlements that draw on the Judgment Fund for purposes other than compensation: