Chicago-Kent College of Law

Final Examination in administrative Law



1.                  This examination consists of 6 pages.  Please check to make certain you have the complete examination.

2.                  Read these instructions carefully and read each question carefully.  Think each problem through before you write and treat every appropriate issue in each question.  Be direct and concise.

3.                  Answers will be graded upon the reasons given as well as the conclusions drawn.  If more than one reason is pertinent to an answer, state every reason.

4.                  While you have been permitted to bring materials into the examination room, answering the questions appropriately will put time pressure on you.  You should not do extensive research during the examination.  Credit will be weighted according to the time allocations shown.  Manage your time accordingly.

5.                  You may decide, in answering one or more questions, that a complete answer would require legal research.  If this is so, you should identify the specific issue that you would research.  If you have a mastery of the basic concepts, you will be able to frame research issues very narrowly and precisely.

6.                  It also may be that more factual information is required to answer a question.  If this is the case, you should say what factual information is required and why you need it.  A mastery of the underlying concepts will permit you to frame any factual inquiries very narrowly and link them precisely to the legal issue involved.

7.                  Organization and clarity are very important.  A shorter answer that is well organized and evidences a clear understanding of basic concepts and their interrelationships is better than a long answer with disconnected fragments of information.

8.                  Do not write outside the margins of your bluebook pages, but write clearly.  If it’s not legible, it will not get credit.

9.                  Write your examination number on your bluebook(s) and on each page of this examination.  Do not use your name.

10.              When you have finished the examination place it inside your bluebook(s) and deposit them in the appropriate box in the examination room.


Any material including any outlines whether commercially prepared or not, whether accessible by computer or not.  No communication by e-mail is permitted during the exam.


Administrative Law Final Examination

Spring, 2004


The Congress of the United States, responding to public pressure and calls by many state governors to relax prohibitions in the new Medicare Reform Act, while seeking not to anger the U.S. pharmaceutical industry, has enacted a the new “Affordable Prescription Drug Act of 2004.” (“APDA”). The Act establishes a Drug Import Panel (“DIP”) comprising the governors of Illinois, California, and New York, three private citizens designated by American Association of Retired Persons (“AARP”), and two U.S. cabinet officers: the Secretary of Health and Human Services and the Secretary of the Treasury. Under the statute, the Panel is directed to investigate drug prices in the U.S., Canada and Mexico, and to issue regulations determining which drugs, if any, may be purchased from sources outside the United States and at what prices. In making rules, the Panel is to be governed by “its view of the public interest, informed by the expertise of its members and their experience in public affairs.” Anyone purchasing drugs not on the list defined by the regulation or purchasing drugs on the list at a price different from the price specified in the regulation is subject to forfeiture of the purchased drugs and for civil money penalties in amounts up to $1,000 per each fifty pills or capsules purchased. Such violations and penalties are to be determined “solely by DIP investigators, inspectors, and special agents, under such procedures as the DIP determines, considering the public interest. Any such determinations by DIP investigators, inspectors and special agents shall be absolutely conclusive in any subsequent litigation in state or federal courts.”

On the day after the President signed the APDA, the DIP met and issued a notice of proposed rulemaking designating ten drugs, and determining that the acceptable price is the “suggested retail price” established by the three largest U.S. pharmaceutical manufacturers, as that price may be revised from time to time. The pharmaceutical industry submitted comments on the proposed rule, opposing the designation of any drugs for purchase in other countries, but generally approving the Panel’s approach to allowable prices. The AARP submitted comments generally supporting those of the pharmaceutical industry. The industry and AARP comments emphasized the importance of U.S. price levels to support research and development spending on new drugs. Several individuals submitted comments opposing the proposed price regulation, and arguing that the list of allowable drugs should be expanded significantly. Those comments argued that pharmaceutical industry expenditures on advertising dwarf R&D expenditures, and that lower drug prices would benefit not only low-income seniors but also would boost sales.

The DIP issued a final rule identical to the proposed rule, accompanied by a short preamble, stating in its entirety:

“We believe that our mandate required us to act quickly, without the usual bureaucratic delays and trivia-quibbling usually associated with big government. We were impressed by the agreement between the pharmaceutical industry and the AARP in the comments and find them much more credible than the handful of comments we received from a few soreheads around the country. The pharmaceutical industry obviously is in the best position—better than our Panel, by far—to judge pricing in a free market and how best to fund R&D and how to allocate profits between R&D and advertising. Our rule best accomplishes the goals of the Act.”

Your client runs a senior center in Waukegan, Illinois. She has, for several years, campaigned for legislative action at the state and federal level to moderate what she believes are excessive increases in drug prices and drug costs for senior citizens. Six months after the APDA was enacted and one month after the DIP issued its final regulations, the client organized a trip to Canada and purchased 2,000 pills and capsules at prices lower than those posted in the DIP regulation. She has received a letter from the AARP on behalf of the DIP, notifying her that she has violated the APDA, and that she must turn over “any and all drugs purchased in Canada,” and send a certified check in the amount of $40,000 to satisfy penalties imposed for violation of the APDA. If she does not comply, the letter says, she will be subject to condemnation proceedings commenced in United States District Court and a parallel proceeding to enforce and collect the $40,000 in civil money penalties.

As her request, you have telephoned, emailed, and written the DIP asking what steps your client may take to oppose the penalties proposed in the letter, but you have received no response. The DIP has published no procedural regulations in the Federal Register; nor has it made any available on its website.

A.                          (45 minutes) What arguments can you make, and where, that the rule is invalid? Evaluate your prospects for success on each argument, considering likely opposing arguments.

B.                           (45 minutes) Apart from the arguments identified in part A, what action can you take and what arguments can you make to prevent your client from having to surrender the drugs she bought in Canada and from having to pay the $40,000? Evaluate the prospects for success on each argument, considering likely opposing arguments.


The Congress has enacted a new comprehensive “National Transportation Efficiency Act of 2004” (“NTEA”). NTEA directs the Secretary of Transportation to balance the national interests in environmental protection, control of the costs of new highway construction and maintenance expenditures, and efficient transportation of commodities.  In particular, “if the Secretary determines that specific commodities could be carried more efficiently by rail than by truck over specific routes, as defined by origins and destinations, at lower costs for transportation infrastructure expenditures out of federal and state budgets and lower overall environmental burden, the Secretary may impose a ‘transportation efficiency surcharge’ of up to 50% of the rate otherwise charged for truck shipments.” NTEA requires the Secretary to make rules “under 5 U.S.C. §553,” and says that “adjudicatory decisions must be made on the record after opportunity for agency hearing.” The duty to collect the surcharge is imposed on trucking companies. Any charge that a violation has occurred must be filed with the Secretary, who also is authorized to commence an enforcement proceeding on his or her own by docketing a charge. Upon filing or docketing of a charge the Secretary must send a complaint to the trucking company accused of a violation specifying the violation charged. After receiving a complaint, any trucking company is entitled to a formal hearing before an ALJ, who shall hear evidence and then make findings of fact and issue conclusions of law supporting a preliminary decision, which shall become the final decision of the Secretary unless the Secretary exercises discretion upon request to hear an “appeal” of the ALJ decision.

The Secretary issued a notice of proposed rulemaking under the Act, citing studies from MIT and Northwestern University which, according to the NPRM, all concluded that freight movements by rail for more than 400 miles between metropolitan areas of 1 million or more in population cost 40% less in labor, fuel, and capital than shipping the same freight in trucks. The NPRM said that the studies also reported that air pollution from diesel fuel exhaust (diesel fuel is used both in trucks and in railroad locomotives) is 40% less for rail movements than for truck movements of freight over the same distances between the same types of metropolitan areas.

Based on these studies, the NPRM proposes a rule that would impose a 50% surcharge on “all freight shipments by truck for distances over 400 miles between metropolitan areas with more than 1 million in population.”

Several hundred comments were received, about half supporting the proposed rule and about half opposing it. None of the comments presented any factual data or analysis directly contradicting the MIT and Northwestern studies. The Secretary issues a final rule identical to the proposed rule and, in the preamble, cites the statutory authority, again cites the MIT and Northwestern studies, and notes that the comments were evenly divided.

The rail industry is delighted. The trucking industry is apoplectic.

A.     [30 minutes) The principal trade association for the trucking industry asks you to represent it in seeking to invalidate the rule. What arguments would you make, and where? Evaluate your prospects for success, considering likely counterarguments.

B.     (30 minutes) If the Association had come to your for advice during the comment period, what, if anything, would you have advised it to do to strengthen its prospects for succeeding in the arguments identified in part A, assuming the same final rule? Be as specific as possible in your answer.

C.     (30 minutes) Suppose the Association comes to you only after one of its members has received a complaint letter from the Secretary. The association and the member company ask you to represent the member company in the adjudicatory proceeding. Your new client admits that it did not collect the surcharge on movements of Mothers’ Day flowers from the Memphis area to Chicago, but argues that the flowers all would have been dead by the time they reached Chicago if they had moved by rail. What evidence and arguments would you present in the adjudicatory hearing, and what arguments would you present and where in attacking any possible decision by the ALJ against your client, assuming that the Secretary does not hear an “appeal” of the ALJ decision, and that the evidence against your client is limited to his admission that he did not collect the surcharge, excerpts of the rule, and data from an atlas showing that Memphis is more than 400 miles from Chicago and that the populations of the Chicago and Memphis metropolitan areas are more than 1 million. Evaluate your prospects for success, considering likely opposing arguments.