United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 7, 2000 Decided October 24, 2000
No. 99-5305
James V. Hurson Associates, Incorporated,
Appellant
v.
Dan Glickman,
Secretary of the United States Department of Agriculture,
and
The United States Department of Agriculture
Appellees
Appeal from the United States District Court
for the District of Columbia
(No. 98cv02120)
Robert J. Brooks argued the cause and filed the briefs for
appellant.
Charles W. Scarborough, Attorney, U.S. Department of
Justice, argued the cause for appellees. With him on the
brief were David W. Ogden, Acting Assistant Attorney Gen-
eral, Barbara C. Biddle, Attorney, and Wilma A. Lewis, U.S.
Attorney.
Before: Williams, Sentelle and Rogers, Circuit Judges.
Opinion for the Court filed by Circuit Judge Sentelle.
Sentelle, Circuit Judge: James V. Hurson Associates
appeals from a District Court judgment upholding a United
States Department of Agriculture ("USDA") rule that con-
trols the manner in which the agency receives requests for
the approval of food labeling. Appellant contends that the
USDA violated the Administrative Procedure Act ("APA"), 5
U.S.C. s 551 et seq. (1994), by promulgating that rule without
first engaging in notice-and-comment rulemaking. It also
claims that the District Court erred in denying its motion to
amend its complaint to include claims that the USDA's new
rule both is arbitrary and capricious and violates the Consti-
tution's Interstate Commerce Clause.
We hold that the District Court properly concluded that
USDA was not required to engage in notice-and-comment
rulemaking, since its new rule falls within the APA's proce-
dural-rules exception. We also conclude that the court erred
in refusing to allow Appellant to amend its complaint to
include an arbitrary-and-capricious claim and a Commerce-
Clause claim, as it had an absolute right to do so until the
USDA filed a responsive pleading. We therefore remand
with instructions that Appellant be permitted to amend its
complaint to include its arbitrary-and-capricious claim. We
do not, however, remand with respect to Appellant's Com-
merce-Clause claim, because we conclude that it would not be
able to survive a motion to dismiss.
I. BACKGROUND
Appellee Daniel Glickman is the Secretary of the USDA,
another appellee in this case (collectively, "USDA"). The
USDA's Food Safety Inspection Service ("FSIS") is charged
with reviewing the labels affixed to certain commercial food
products to ensure that they are truthful, not misleading, and
otherwise comply with relevant regulations. Until recently, a
commercial food producer could seek approval of a proposed
label in several ways: by mailing its application, by personal-
ly visiting the FSIS, or by hiring courier/expediter firms
whose employees would meet with FSIS representatives dur-
ing office hours. The latter method, colloquially known as
"face-to-face," enabled producers to secure instant approval of
their labels, whereas other methods could take days or even
weeks. See Meat, Poultry, and Egg Products Labeling Re-
view Process; Elimination of Appointments With Label Cour-
ier/Expediting Firms, 63 Fed. Reg. 40,010, 40,011 (1998)
[hereinafter elimination of face-to-face].
On July 27, 1998, the USDA announced its intention to do
away with "routine, daily, time-set, face-to-face appointments
with courier/expediting firms," although FSIS employees
would be available for irregular meetings with industry repre-
sentatives to discuss novel issues and provide regulatory
guidance. Id. at 40,010. The USDA cited four reasons for
its elimination of face-to-face review: (1) FSIS's need for
more time to evaluate labeling involving complex issues; (2)
FSIS's need for more time for consultation internally and
with other agencies; (3) the food industry's declining need for
immediate label approval; and (4) the unfairness of face-to-
face to food producers who submit by mail rather than
through courier/expediter firms. See id. at 40,011.
On September 2, 1998, Hurson, a courier/expediter firm the
livelihood of which was threatened by the USDA's new rule,
filed a motion for a temporary restraining order against the
agency in the United States District Court for the District of
Columbia. In its initial complaint, Hurson alleged only that
USDA had violated the APA by abolishing face-to-face with-
out engaging in notice-and-comment rulemaking. That stat-
ute obliges agencies to publish in the Federal Register notice
of a proposed rulemaking and to give interested parties the
opportunity to submit comments. See 5 U.S.C. s 553(b), (c)
(1994). USDA did not submit an answer, and simply moved
to dismiss. With the consent of both parties, the District
Court regarded Hurson's motion for injunctive relief and
USDA's motion to dismiss as motions for summary judgment.
After the parties had fully briefed the notice-and-comment
issue, but before the court had ruled on their cross-motions
for summary judgment, Hurson submitted an amended com-
plaint (or, in the alternative, a motion seeking leave to amend
its complaint). Hurson proposed to add new allegations that
the USDA's elimination of face-to-face both was "arbitrary
and capricious" in violation of the APA and violated the
Constitution's Commerce Clause. The District Court denied
Hurson's motion as untimely, citing "the fact that Plaintiff
waited to amend his [sic] complaint until after full briefing of
dispositive motions." Having disposed of Hurson's substan-
tive objections to USDA's elimination of face-to-face, the
District Court concluded that the agency's new rule was a
procedural one. It was, therefore, exempt from the APA's
notice-and-comment requirement.
This appeal followed.
II. DISCUSSION
A. Notice and Comment
Although federal agencies ordinarily must provide the pub-
lic with notice of a proposed rule and the opportunity to
submit comments on it, see 5 U.S.C. s 553, the APA makes an
exception for, among others, "rules of agency organization,
procedure, or practice." Id. s 553(b)(A). This Court has
stressed that the " 'critical feature' " of a rule that satisfies
the so-called "procedural exception 'is that it covers agency
actions that do not themselves alter the rights or interests of
parties, although it may alter the manner in which the parties
present themselves or their viewpoints to the agency.' "
JEM Broad. Co. v. FCC, 22 F.3d 320, 326 (D.C. Cir. 1994)
(quoting Batterton v. Marshall, 648 F.2d 694, 707 (D.C. Cir.
1980)).
Hence in JEM, we concluded that the Federal Communica-
tion Commission's new "hard look" rules--under which the
Commission summarily would dismiss any flawed license ap-
plication without allowing the applicant to correct its error,
see id. at 322-23--were procedural ones. "The critical fact
here," we emphasized, "is that the 'hard look' rules did not
change the substantive standards by which the FCC evalu-
ates license applications, e.g., financial qualifications, pro-
posed programming, and transmitter location." Id. at 327.
That the hard-look rules employed the same substantive
criteria as their predecessors, we concluded, was "fatal to
JEM's claim." Id.; accord National Whistleblower Ctr. v.
Nuclear Regulatory Comm'n, 208 F.3d 256, 262 (D.C. Cir.
2000) ("The disputed agency action in this case merely altered
a standard for the enforcement of filing deadlines; it did not
purport to regulate or limit the Center's substantive rights."),
petition for cert. filed, 69 U.S.L.W. 3234 (U.S. Sept. 13, 2000)
(No. 00-422).
The USDA's decision to eliminate face-to-face review is the
very sort of procedural measure the JEM Court had in mind,
for, by its very terms, the rule "will not change the present
system of labeling review," even though the "new procedure
will eliminate routine, daily, time-set, face-to-face appoint-
ments with courier/expediting firms." Elimination of Face-
to-Face, 63 Fed. Reg. at 40,010. The agency's abolition of
face-to-face did not alter the substantive criteria by which it
would approve or deny proposed labels; it simply changed
the procedures it would follow in applying those substantive
standards.
Because the rule is procedural on its face--which Hurson
concedes, see Appellant's Reply Brief at 1 ("USDA devotes
the argument to showing that the challenged rule does not
change the substantive criteria for evaluating labels. But
appellant Hurson does not contend otherwise.")--appellant
attempts to characterize it as effectively substantive by point-
ing to its putatively severe consequences and its origins in a
"substantive value judgment." Neither effort is persuasive.
Hurson introduces some evidence that the elimination of
face-to-face approvals will burden food producers. (It also
introduces evidence suggesting that the rule would devastate
the courier/expediter industry, but the burden to couriers/ex-
pediters--which are not regulated parties under the rules--is
irrelevant.) Hurson repeatedly argues that food producers
need to have their labels approved in "minutes and hours,"
not, as it suspects will be the case under the USDA's new
rule, after waiting for "days, weeks, even months." Appel-
lant's Brief at 24. It also cites the 180 objections to the new
rule lodged by entities representing the food industry, which,
it proposes, illustrate that food processors regard speedy
approval as "an essential cog in their output mechanism." Id.
at 25.
Hurson's allegation that the elimination of face-to-face will
produce a significant burden may or may not be empirically
true. As an initial matter, we question whether the food
processing industry truly regards the USDA's new rule as
especially burdensome. After all, this challenge is brought
not by a food processor, but by a courier/expediter firm.
Still, the District Court, as it was required to do on a motion
for summary judgment, properly viewed all factual inferences
in favor of Hurson. Cf. Fed. R. Civ. P. 56(c); Taylor v. FDIC,
132 F.3d 753, 762 (D.C. Cir. 1997).
But even if the USDA's elimination of face-to-face did
impose a substantial burden on food processors, that burden
would not convert the rule into a substantive one that trig-
gers the APA's notice-and-comment requirement. Appellant
has cited no case in which this Court has required notice-and-
comment rulemaking for an especially burdensome procedur-
al rule. Nor could it, for we recognize that "the impact of a
rule has no bearing on whether it is legislative or interpreta-
tive...." American Postal Workers Union v. United States
Postal Serv., 707 F.2d 548, 560 (D.C. Cir. 1983); accord
Cabais v. Egger, 690 F.2d 234, 237 (D.C. Cir. 1982) ("Simply
because agency action has substantial impact does not mean
it is subject to notice and comment if it is otherwise expressly
exempt under the APA."). Indeed, "interpretative rules may
have a substantial impact on the rights of individuals."
American Postal Workers, 707 F.2d at 560. The same is true
of procedural rules. We conclude, therefore, that an other-
wise-procedural rule does not become a substantive one, for
notice-and-comment purposes, simply because it imposes a
burden on regulated parties.
Hurson's second argument--that notice-and-comment rule-
making is required given the rule's origin in a "substantive
value judgment"--is equally unavailing. The USDA's deci-
sion to eliminate face-to-face does, as Hurson alleges, encode
the substantive value judgment that the new label-approval
procedures will more readily promote its already-existing
goals of fairness and efficiency. But the fact that the agen-
cy's decision was based on a value judgment about procedural
efficiency does not convert the resulting rule into a substan-
tive one. All decisions, to the extent that they derive from
reasons, necessarily are based on the value judgment that the
chosen option is better, in some relevant way, than its alter-
natives. We have, therefore, consistently recognized that
" 'agency housekeeping rules often embody a judgment about
what mechanics and processes are most efficient.' This does
not convert a procedural rule into a substantive one." Na-
tional Whistleblower, 208 F.3d at 263 (quoting JEM, 22 F.3d
at 328).
Finally, Hurson proposes that this Court is bound by our
prior holding in National Association of Home Health Agen-
cies v. Schweiker, 690 F.2d 932 (D.C. Cir. 1982), to conclude
that the USDA could eliminate face-to-face only through
notice-and-comment rulemaking. In that case, we found that
the Department of Health and Human Services was required
to engage in notice-and-comment rulemaking when it elimi-
nated Medicare claimants' right to seek reimbursement di-
rectly from the agency's Secretary, and now required them to
submit their claims to regional intermediaries. See id. at
949-50.
Home Health Agencies is distinguishable. Unlike the rule
challenged in that case, which both eliminated claimants'
access to the HHS Secretary and transferred his authority to
issue reimbursements to other agency employees, the
USDA's rule does not change the agency personnel who will
be responsible for reviewing proposed labels. Rather, "[t]he
labeling review staff will continue to receive and approve
labels," even though they will no longer do so in face-to-face
meetings. Elimination of Face-to-Face, 63 Fed. Reg. at
40,010. The crucial element of Home Health Agencies is not
whether one has "face time" with agency staff members, but
which staffers have decisionmaking authority. Home Health
Agencies is thus consistent with our holding here, for the
same USDA staffers who reviewed labels under face-to-face
continue to review labels after that procedure's abolition.
Because the USDA's decision to eliminate face-to-face label
review was a "rule[ ] of agency organization, procedure, or
practice," 5 U.S.C. s 553(b)(A), we hold that the agency was
not required to do so through notice-and-comment rulemak-
ing.
B. Amended Complaint
On November 10, 1998, Hurson attempted to amend its
complaint to supplement its notice-and-comment claim with
allegations that the USDA's elimination of face-to-face both is
arbitrary and capricious and violates the Constitution's Com-
merce Clause. The District Court disallowed the amend-
ment, citing the fact that Hurson had not filed its motion until
after the parties had fully briefed their cross-motions for
summary judgment. USDA now proposes that the District
Court's refusal was within its discretion, and cites our pro-
nouncement that, when a plaintiff seeks to amend "more than
a year after the filing of [its] initial complaint and after
dispositive motions had been filed and opposed," denying its
motion "does not appear to be an abuse of discretion."
Wilderness Soc'y v. Griles, 824 F.2d 4, 19 (D.C. Cir. 1987).
We conclude that, while the decision whether to permit
amendments ordinarily "is left to the discretion of the district
court," Gaubert v. Federal Home Loan Bank Bd., 863 F.2d
59, 69 (D.C. Cir. 1988), the District Court here erred because
Hurson was entitled to amend its complaint as a matter of
right.
The Federal Rules of Civil Procedure guarantee a plaintiff
an absolute right to amend its complaint once at any time
before the defendant has filed a responsive pleading. See
Fed. R. Civ. P. 15(a) ("A party may amend the party's
pleading once as a matter of course at any time before a
responsive pleading is served...."). In this case, the USDA
filed no answer, but only a motion to dismiss. We have
repeatedly clarified that a motion to dismiss is not a respon-
sive pleading for the purposes of Rule 15. See, e.g., Confeder-
ate Memorial Ass'n v. Hines, 995 F.2d 295, 299 (D.C. Cir.
1993) ("As a motion to dismiss is not ordinarily considered a
'responsive pleading' ... under Rule 15(a), appellants could
have amended their complaint as of right prior to the court's
decision on the motions." (citation omitted)); accord, Bowden
v. United States, 176 F.3d 552, 555 (D.C. Cir. 1999) ("At the
time Bowden sought to amend, the government had filed only
a motion to dismiss or in the alternative for summary judg-
ment, which is not considered a responsive pleading."). Be-
cause Hurson therefore was entitled as a matter of right to
amend its complaint, it was error for the District Court to
refuse to consider its added claims.
But not all such errors require a remand. See Bowden, 176
F.3d at 555 ("Though erroneous, the district court's denial of
Bowden's motion to amend does not require a new trial.").
Rather, we recognize that a district court need not be made
to reconsider an amended complaint that fails to state a claim
upon which relief could be granted, or that would otherwise
fail as a matter of law. In other words, no remand is
necessary if the amended complaint would not survive a
motion to dismiss under Federal Rule of Civil Procedure
12(b)(6). Thus, in Confederate Memorial, we declined to
remand because the plaintiff's amended complaint "fail[ed] to
state a civil RICO claim" in that it failed to allege two
essential elements: "the existence of an enterprise" and "that
appellants suffered injury." Confederate Memorial, 995 F.2d
at 299, 300. And in Bowden, we likewise refused to remand
for a new trial based on the plaintiff's amended complaint,
which added demands for fees, compensatory damages, and a
jury trial, because the plaintiff was "not a prevailing party
entitled to attorneys' fees or compensatory damages" and
"had no right to trial by jury." Bowden, 176 F.3d at 555, 556.
As was true in Confederate Memorial, Hurson's Com-
merce-Clause claim would fail as a matter of law, because it
fails to allege the claim's essential elements. In order to
articulate a cognizable Commerce-Clause challenge, a plaintiff
must allege, at a minimum, that Congress has regulated an
activity that falls within none of the following three catego-
ries: (1) the channels of interstate commerce; (2) the instru-
mentalities of interstate commerce; or (3) activities that have
a substantial relation to interstate commerce. See United
States v. Lopez, 514 U.S. 549, 558-59 (1995). Hurson's com-
plaint neither contains nor even suggests any such allegation.
In fact, what Hurson styles as a Commerce-Clause claim is
unlike any Commerce-Clause claim this Court has ever en-
countered. Hurson does not allege that the statutes authoriz-
ing the USDA to regulate food labels exceed the scope of
Congress's authority under the Commerce Clause. (Nor
could it, if it wishes to remain in business, for if Congress
lacks the authority to regulate labeling, there is no need for
courier/expediter firms.) Instead, it alleges that the USDA's
elimination of face-to-face transgresses the Commerce Clause
because it imposes an undue burden on interstate commerce.
See Appellant's Brief at 31-34. Hurson's argument, in es-
sence, is that the federal government may exercise its Com-
merce-Clause powers only in ways that promote the free flow
of interstate commerce. No court has ever recognized any
such claim for relief, nor do we now. Therefore, we do not
remand Hurson's Commerce-Clause claim as it would not
withstand a motion to dismiss in any event.
Hurson's arbitrary-and-capricious claim is a different mat-
ter. A plaintiff can state a claim that an agency's action was
"arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law," 5 U.S.C. s 706(2)(A) (1994), in a
number of ways. Those include alleging that the agency
failed to articulate an adequate explanation for its new policy,
see, e.g., AT&T v. FCC, 974 F.2d 1351, 1355 (D.C. Cir. 1992),
and that it failed to consider factors made relevant by Con-
gress, see, e.g., Motor Vehicle Mfrs. Ass'n v. State Farm Mut.
Auto. Ins. Co., 463 U.S. 29, 43 (1983).
It seems to this Court that Hurson's arbitrary-and-
capricious claim is exceptionally weak. We harbor grave
doubts that it would be able to prevail on remand. Still, it
appears that Hurson has alleged all the elements necessary to
state a claim. In its amended complaint, it argued that:
The reasons for the challenged action, as stated by
Defendants in the notice, are patently pretextual, implau-
sible, counter to the attendant facts, and show a failure to
consider important factors; and thus the defendants'
decision reflected by the Notice is arbitrary, capricious
and clearly erroneous.
Amended Complaint at 6. Whatever its substantive flaws,
Hurson's arbitrary-and-capricious claim would survive a
12(b)(6) motion to dismiss. If USDA did, in fact, fail to
proffer an adequate explanation for its decision to eliminate
face-to-face, or if it did in fact fail to consider factors deemed
relevant by Congress, a court could conclude that the agency
acted arbitrarily and capriciously.
Because Hurson had an absolute right to add an arbitrary-
and-capricious claim to its complaint, we therefore have no
alternative but to remand with instructions that it be permit-
ted to amend its complaint to include that claim. The Court
would have the USDA realize that it could have avoided this
additional stage of litigation by doing no more than filing an
answer, or other responsive pleading.
In sum, the District Court erred in declining to allow
Hurson to amend its complaint to allege that the USDA's
elimination of face-to-face violates the Commerce Clause and
is arbitrary and capricious, because Hurson was entitled to
amend its complaint as a matter of right. Although the
Commerce-Clause claim would not survive a motion to dis-
miss, and therefore need not be remanded, Hurson alleges
the necessary elements of an arbitrary-and-capricious claim.
Hurson must, therefore, be permitted to amend its complaint
to include the latter claim.
III. CONCLUSION
We affirm the District Court's grant of summary judgment
on Hurson's notice-and-comment claim. We also affirm its
denial of Hurson's motion to amend its complaint to include a
Commerce-Clause claim. We reverse the District Court's
denial of Hurson's motion to include an arbitrary-and-
capricious claim in its complaint, and remand for further
proceedings.
It is so ordered.