Motor Vehicle Manufacturers Ass’n v. State Farm Mutual Automobile Insurance Co.
Citation: 463 U.S. 29 (U.S. Supreme Court, 1983)
Facts
The National Highway Traffic Safety Administration (NHTSA) had issued a rule in 1977 requiring passive restraints (automatic seatbelts or airbags) in new cars. In 1981, the Reagan Administration rescinded the rule before it took effect, reasoning that manufacturers would largely comply by installing detachable automatic seatbelts that consumers would simply disconnect, making the rule ineffective. State Farm and other insurers challenged the rescission.
Issue
Was NHTSA’s rescission of the passive restraint rule arbitrary and capricious under APA § 706(2)(A)?
Holding
The Supreme Court held that the rescission was arbitrary and capricious. The agency’s primary rationale — that detachable belts would be ineffective — could have supported modifying the rule to require non-detachable belts or airbags, but the agency entirely failed to consider that obvious alternative. An agency must consider relevant alternatives and reasonably explain why it chose not to pursue them.
Rule
Under the “hard look” doctrine, agency action (including rescission of a prior rule) is arbitrary and capricious if the agency: (1) relied on factors Congress did not intend it to consider; (2) failed to consider an important aspect of the problem; (3) offered an explanation counter to the evidence; or (4) offered an explanation so implausible that it cannot be ascribed to expertise. Agencies must examine the relevant data and articulate a satisfactory explanation, including a rational connection between the facts found and the choice made.
Significance
State Farm is the defining case for arbitrary and capricious review under APA § 706(2)(A) and the leading exposition of the “hard look” doctrine. It establishes that APA review is meaningful and substantive — courts do not simply rubber-stamp agency decisions — while still deferring to agency expertise and policy choices within the bounds of reasoned explanation. The case is also critical for the proposition that rescinding or modifying a prior rule requires the same quality of reasoned decision-making as issuing a new rule.