CHOCOLATE MANUFACTURERS ASS’N v. BLOCK
755 F.2d 1098 (4th Cir. 1985)

 JUDGES: Russell and Sprouse, Circuit Judges, and Hargrove, United States District Judge for the District of Maryland, sitting by designation.

SPROUSE, Circuit Judge:

Chocolate Manufacturers Association (CMA) appeals from the decision of the district court denying it relief from a rule promulgated by the Food and Nutrition Service (FNS) of the United States Department of Agriculture (USDA or Department). CMA protests that part of the rule that prohibits the use of chocolate flavored milk in the federally funded Special Supplemental Food Program for Women, Infants and Children (WIC Program). Holding that the Department's proposed rulemaking did not provide adequate notice that the elimination of flavored milk would be considered in the rulemaking procedure, we reverse.

I

...

The WIC Program was established by Congress in 1972 to assist pregnant, postpartum, and breastfeeding women, infants and young children from families with inadequate income whose physical and mental health is in danger because of inadequate nutrition or health care. Under the program, the Department designs food packages reflecting the different nutritional needs of women, infants, and children and provides cash grants to state or local agencies, which distribute cash or vouchers to qualifying individuals in accordance with Departmental regulations as to the type and quantity of food. In 1975 Congress revised and extended the WIC Program through fiscal year 1978 and, for the first time, defined the "supplemental foods" which the program was established to provide. The term shall mean those foods containing nutrients known to be lacking in the diets of populations at nutritional risk and, in particular, those foods and food products containing high-quality protein, iron, calcium, vitamin A, and vitamin C . . . . The contents of the food package shall be made available in such a manner as to provide flexibility, taking into account medical and nutritional objectives and cultural eating patterns…

Pursuant to this statutory definition, the Department promulgated new regulations specifying the contents of WIC Program food packages. These regulations specified that flavored milk was an acceptable substitute for fluid whole milk in the food packages for women and children, but not infants. This regulation formalized the Department's practice of permitting the substitution of flavored milk, a practice observed in the WIC Program since its inception in 1973 as well as in several of the other food programs administered by the Department.

In 1978 Congress, in extending the WIC Program through fiscal year 1982, redefined the term "supplemental foods" to mean:

Congress stated further:

To comply with this statutory redefinition, the Department ... in November 1979 published for comment the proposed rule at issue in this case. 44 Fed. Reg. 69254 (1979). Along with the proposed rule, the Department published a preamble discussing the general purpose of the rule and acknowledging the congressional directive that the Department design food packages containing the requisite nutritional value and appropriate levels of fat, sugar, and salt. Id. at 69254. Discussing the issue of sugar at length, it noted, for example, that continued inclusion of high sugar cereals may be "contrary to nutrition education principles and may lead to unsound eating practices." Id. at 69263. It also noted that high sugar foods are more expensive than foods with lower sugar content, and that allowing them would be "inconsistent with the goal of teaching participants economical food buying patterns." Id.

The rule proposed a maximum sugar content specifically for authorized cereals. The preamble also contained a discussion of the sugar content in juice, but the Department did not propose to reduce the allowable amount of sugar in juice because of technical problems involved in any reduction. Neither the rule nor the preamble discussed sugar in relation to flavoring in milk. Under the proposed rule, the food packages for women and children without special dietary needs included milk that could be "flavored or unflavored." Id.

The notice allowed sixty days for comment and specifically invited comment on the entire scope of the proposed rules: "The public is invited to submit written comments in favor of or in objection to the proposed regulations or to make recommendations for alternatives not considered in the proposed regulations." Id. at 69255. Over 1,000 comments were received from state and local agencies, congressional offices, interest groups, and WIC Program participants and others. Seventy-eight commenters, mostly local WIC administrators, recommended that the agency delete flavored milk from the list of approved supplemental foods.

In promulgating the final rule, the Department, responding to these public comments, deleted flavored milk from the list, explaining:

45 Fed. Reg. 74854, 74865-66 (1980). ...

On this appeal, CMA contends ... that the Department did not provide notice that the disallowance of flavored milk would be considered, ....

II

... Section 4 of the Administrative Procedure Act (APA) requires that the notice in the Federal Register of a proposed rulemaking contain "either the terms or substance of the proposed rule of a description or the subjects and issues involved." 5 U.S.C. § 553(b)(3) (1982). The purpose of the notice-and-comment procedure is both "to allow the agency to benefit from the experience and input of the parties who file comments . . . and to see to it that the agency maintains a flexible and open-minded attitude towards its own rules." National Tour Brokers Ass'n v. United States, 192 U.S. App. D.C. 287, 591 F.2d 896, 902 (D.C. Cir. 1978). The notice-and-comment procedure encourages public participation in the administrative process and educates the agency, thereby helping to ensure informed agency decisionmaking. ...

 ... The agency concedes that the elimination of flavored milk by the final rule is a complete reversal from its treatment in the proposed rule, but it explains that the reversal was caused by the comments received from 78 interested parties -- primarily professional administrators of the WIC Program.

This presents then not the simple question of whether the notice of a proposed rule adequately informs the public of its intent, but rather the question of how to judge the adequacy of the notice when the proposal it describes is replaced by a final rule which reaches a conclusion exactly opposite to that proposed, on the basis of comments received from parties representing only a single view of a controversy. In reviewing the propriety of such agency action, we are not constrained by the same degree of deference we afford most agency determinations. "Though our review of an agency's final decision is relatively narrow, we must be strict in reviewing an agency's compliance with procedural rules." ...

There is no question that an agency may promulgate a final rule that differs in some particulars from its proposal. Otherwise the agency "can learn from the comments on its proposals only at the peril of starting a new procedural round of commentary." International Harvester Co. v. Ruckelshaus, 155 U.S. App. D.C. 411, 478 F.2d 615, 632 n.51 (D.C. Cir. 1973). An agency, however, does not have carte blanche to establish a rule contrary to its original proposal simply because it receives suggestions to alter it during the comment period. An interested party must have been alerted by the notice to the possibility of the changes eventually adopted from the comments. ...

The test devised by the First Circuit for determining adequacy of notice of a change in a proposed rule occurring after comments appears to us to be sound: notice is adequate if the changes in the original plan "are in character with the original scheme," and the final rule is a "logical outgrowth" of the notice and comments already given. See, e.g., BASF Wyandotte Corp. v. Costle, 598 F.2d 637, 642 (1st Cir. 1979), cert. denied, 444 U.S. 1096, 100 S. Ct. 1063, 62 L. Ed. 2d 784 (1980); South Terminal Corp. v. EPA, 504 F.2d 646, 659 (1st Cir. 1974). Other circuits also have adopted some form of the "logical outgrowth" test. See, e.g., Sierra Club v. Costle, 211 U.S. App. D.C. 336, 657 F.2d 298, 352 (D.C. Cir. 1981) (logical outgrowth of the notice and comments); Taylor Diving & Salvage Co. v. Dept. of Labor, 599 F.2d 622, 626 (5th Cir. 1979) (logical outgrowth of the standard originally proposed). Stated differently, if the final rule materially alters the issues involved in the rulemaking or, as stated in Rowell v. Andrus, 631 F.2d 699, 702 n.2 (10th Cir. 1980), if the final rule "substantially departs from the terms or substance of the proposed rule," the notice is inadequate.

There can be no doubt that the final rule in the instant case was the "outgrowth" of the original rule proposed by the agency, but the question of whether the change in it was in character with the original scheme and whether it was a "logical outgrowth" is not easy to answer. ...

It is apparent that for many years the Department of Agriculture has permitted the use of chocolate in some form in the food distribution programs that it administers. The only time the Department has proposed to remove chocolate in any form from its programs was in April 1978 when it sought to characterize chocolate as a candy and remove it from the School Lunch Program. That proposal was withdrawn after CMA commented, supporting chocolate as a part of the diet. Chocolate flavored milk has been a permissible part of the WIC Program diet since its inception and there have been no proposals for its removal until the present controversy.

The Department sponsored commendable information-gathering proceedings prior to publishing its proposed rule. Together with its own research, the information gathered in the pre-publication information solicitations formed the basis for the proposed rule. Most of the same information was presented to Congress prior to enactment of the 1978 statute that precipitated the 1979 rulemaking here in controversy. The National Advisory Council on Maternal, Infant, and Fetal Nutrition provided information and advice. Regional council meetings were open to the public and held in diverse areas of the country. Department of Agriculture personnel attended a number of regional, state, and local meetings and gathered opinions concerning possible changes in the food packages. The agency also gathered a food package advisory panel of experts seeking their recommendations. Food packages were designed based on the information and advice gleaned from these sources. In all of these activities setting out and discussing food packages, including the proposed rule and its preamble, the Department never suggested that flavored milk be removed from the WIC Program.

The published preamble to the proposed rule consisted of twelve pages in the Federal Register discussing in detail factors that would be considered in making the final rule. Two pages were devoted to a general discussion of nutrients, including protein, iron, calcium, vitamin A, vitamin C, folic acid, zinc, and fiber, and the dangers of overconsumption of sugar, fat, and salt. The preamble discussed some foods containing these ingredients and foods posing specific problems. It did not discuss flavored milk.

In the next eight pages of the preamble, the nutrition content of food packages was discussed -- under the general headings of "cereal" and "juice" for infants; and "eggs," "milk," "cheese," "peanut butter and mature dried beans and peas," "juice," "additional foods," "cereals," "iron," "sugar," "whole grain cereals," "highly fortified cereals," and "artificial flavors and colors" for women and children. The only reference to milk concerned the correct quantity to be provided to children, i.e., 24 quarts per month instead of 28 quarts. Although there was considerable discussion of the sugar content of juice and cereal, there was none concerning flavored milk. Likewise, there was considerable discussion of artificial flavor and color in cereal but none concerning flavored milk. The only reference to flavored milk was in the two-page discussion of the individual food packages, which noted that the proposed rule would permit the milk to be flavored or unflavored. The proposed rule which followed the preamble expressly noted that flavored or unflavored milk was permitted in the individual food packages for women and children without special dietary needs.

At the time the proposed rulemaking was published, neither CMA nor the public in general could have had any indication from the history of either the WIC Program or any other food distribution programs that flavored milk was not part of the acceptable diet for women and children without special dietary needs. The discussion in the preamble to the proposed rule was very detailed and identified specific foods which the agency was examining for excess sugar. This specificity, together with total silence concerning any suggestion of eliminating flavored milk, strongly indicated that flavored milk was not at issue. The proposed rule positively and unqualifiedly approved the continued use of flavored milk. Under the specific circumstances of this case, it cannot be said that the ultimate changes in the proposed rule were in character with the original scheme or a logical outgrowth of the notice. We can well accept that, in general, an approval of a practice in a proposed rule may properly alert interested parties that the practice may be disapproved in the final rule in the event of adverse comments. The total effect of the history of the use of flavored milk, the preamble discussion, and the proposed rule, however, could have led interested persons only to conclude that a change in flavored milk would not be considered. Although ultimately their comments may well have been futile, CMA and other interested persons at least should have had the opportunity to make them. We believe that there was insufficient notice that the deletion of flavored milk from the WIC Program would be considered if adverse comments were received, and, therefore, that affected parties did not receive a fair opportunity to contribute to the administrative rulemaking process. That process was ill-served by the misleading or inadequate notice concerning the permissibility of chocolate flavored milk in the WIC Program and "does not serve the policy underlying the notice requirement."

The judgment of the district court is therefore reversed, and the case is remanded to the administrative agency with instructions to reopen the comment period and thereby afford interested parties a fair opportunity to comment on the proposed changes in the rule.

REVERSED AND REMANDED WITH INSTRUCTIONS.

1. If part of the problem with notice was the fact that the agency quite specific about other foods but did not mention chocolate milk, would it make sense for a lawyer to advise an agency to be less specific in its NPR ("notice of proposed rulemaking")?
2. It is difficult to give an affirmative answer to the above question with much confidence. Although § 553 states that a "description of the subjects and issues involved" would be sufficient notice, the dominant modern agency practice is to publish the text of a proposed rule in the NPR. This has the advantage of encouraging quite specific comments and the potential disadvantage of reducing broad discussion of alternative approaches to the problem. When an agency is at the preliminary stage of wanting to engage in a more open ended discussion it is likely to publish an "Advance Notice of Proposed Rulemaking" or even a "Notice of Inquiry" in the Federal Register. These forms are not envisioned in the APA, but tend to be outgrowths of agency ingenuity in framing and controlling public dialogue.
3. Is "teaching" participants, in this case about nutrition, a proper role of an administrative agency? Why or why not?
4. Would it surprise you to hear that chocolate milk is still on the WIC list?
5. As will become clearer in the next case, adequacy of notice issues also arise regarding the background information on which an agency relies. It is generally said that an agency must disclose all information provided to it by others, but not its own background expertise nor information developed during the comment period. As a lawyer for an agency, would you anticipate any exceptions to this maxim?