This Article presents a positive theoretical analysis of the relationship between the textual plausibility of an administrative agency’s statutory interpretation and the procedural formality with which the agency promulgates that interpretation. The central claim is that, from the perspective of an agency subject to judicial review, textual plausibility and procedural formality function as strategic substitutes: greater procedural formality will be associated with less textual plausibility, and vice versa. Greater textual plausibility increases an agency’s chances of a favorable judicial ruling but entails some sacrifice of policy discretion. Procedural formality is costly, but a reviewing court may give an agency more substantive latitude when the agency promulgates an interpretive decision via an elaborate formal proceeding. The court may view formal process as a proxy for variables that the court considers important but cannot observe directly, such as the significance of the interpretive issue to the agency’s policy agenda. Because procedural formality and textual plausibility are both costly methods for increasing the agency’s odds of surviving judicial review, a rational agency will choose the optimal mix of textual plausibility and procedural formality. Changes that increase or decrease the costs or benefits associated with one of these two variables will therefore have an indirect effect on the other variable as well. This Article develops the theoretical basis for this strategic substitution effect and explores its ramifications for administrative law.
D.C. Circuit Rules that the Federal Energy Regulatory Commission Lacks Jurisdiction over Rates for Nonconsumption of Energy.