246 F. Supp. 3d 1264
N.D. Cal.2017Background
- Plaintiffs challenge the NSI Functional Standard (first adopted 2009, revised 2015) under the Administrative Procedure Act (APA), arguing it permits dissemination of Suspicious Activity Reports (SARs) based on a lower “reasonably indicative” standard rather than the “reasonable suspicion” standard in DOJ’s 28 C.F.R. Part 23.
- NSI process: front-line officers submit SARs → fusion centers vet under the Functional Standard → SARs disseminated regionally and nationally (eGuardian). Plaintiffs assert innocent people are branded and data retained for long periods.
- Plaintiffs assert two APA violations: (1) the Functional Standard is a legislative rule adopted without required notice-and-comment; (2) the Standard is arbitrary and capricious because it conflicts with Part 23’s reasonable-suspicion protections for criminal intelligence.
- Defendants contend the Functional Standard is guidance/policy (not a legislative rule), the NSI is voluntary and distinct from Part 23-regulated criminal-intelligence systems, and the adoption process included public input.
- The court limited review to the administrative record, granted defendants’ motion for summary judgment, and denied plaintiffs’ motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Functional Standard is a "legislative rule" requiring notice-and-comment | Functional Standard creates binding substantive standards and thus is a legislative rule subject to APA notice-and-comment | The Standard is guidance/general policy for operations (preserving discretion) and not a legislative rule; voluntary nature of NSI supports that view | Court treated the Standard as general policy/operating guidance and held notice-and-comment was not required; defendants entitled to summary judgment on this point |
| Whether failure to use notice-and-comment was harmless or otherwise excused | Adoption without APA procedures was unlawful and not cured by informal/public input | Even if not a legislative rule, any failure was harmless because the Standard was developed collaboratively with public input | Court found no APA violation on notice-and-comment grounds (policy rather than legislative rule) |
| Whether the Functional Standard is arbitrary and capricious because it conflicts with 28 C.F.R. Part 23 (reasonable suspicion) | The Standard conflicts with Part 23 because it permits collection/dissemination absent reasonable suspicion, undermining privacy and civil liberties protections | NSI/SARs are not "criminal intelligence" under Part 23; the Standard addresses different collection/dissemination needs under different statutory authority | Court held plaintiffs failed to show arbitrary-and-capricious agency action; adoption of the "reasonably indicative" standard was supported by the administrative record |
| Admissibility of extra-record declarations offered by defendants | Plaintiffs sought to strike declarations that defendants used to show NSI not funded under Omnibus Act and explain adoption process | Defendants argued administrative-record review is appropriate and resisted extra-record discovery; presented declarations to explain funding and process | Court granted plaintiffs’ motion to strike the declarations (enforcing administrative-record principle) but this did not change the outcome |
Key Cases Cited
- Bennett v. Spear, 520 U.S. 154 (discusses final agency action requirements)
- Motor Vehicle Mfrs. Ass’n v. State Farm, 463 U.S. 29 (arbitrary-and-capricious standard for agency rulemaking)
- Mada-Luna v. Fitzpatrick, 813 F.2d 1006 (9th Cir.) (distinguishing general statements of policy from substantive rules)
- Hemp Indus. Ass’n v. Drug Enforcement Admin., 333 F.3d 1082 (9th Cir.) (legislative vs. interpretive rule analysis)