Master The Supreme Court held that an agency’s rescission of a rule is reviewed under the same arbitrary-and-capricious standard as rulemaking and requires a reasoned explanation that considers important alternatives. with this comprehensive case brief.
Motor Vehicle Manufacturers Association v. State Farm is the canonical Supreme Court articulation of the Administrative Procedure Act’s “arbitrary and capricious” standard of review. It is the leading case students and practitioners cite when asking whether an agency has offered a reasoned explanation that connects facts to policy choices, has considered important aspects of the problem, and has treated the abandonment of a prior policy with the same rigor that accompanies adoption of a new one.
The case arose when the National Highway Traffic Safety Administration (NHTSA) rescinded a long-debated federal safety standard requiring “passive restraints” in automobiles—automatic seatbelts or airbags—after a change in presidential administrations. The Court vacated the rescission because the agency failed to offer a satisfactory, evidence-based explanation and to consider an obvious alternative (requiring airbags). State Farm thus anchors modern “hard look” review and stands for the proposition that agencies may change course, but they must do so transparently, rationally, and with attention to relevant data and alternatives.
Motor Vehicle Mfrs. Ass'n of the United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (U.S. Supreme Court)
Congress enacted the National Traffic and Motor Vehicle Safety Act of 1966, directing the Department of Transportation (through NHTSA) to establish motor vehicle safety standards that are practicable and meet the need for motor vehicle safety. In response to persistently low seatbelt usage rates and high traffic fatalities, NHTSA in the early 1970s promulgated a passive restraint requirement under Federal Motor Vehicle Safety Standard (FMVSS) 208. After multiple delays and revisions, in 1977 NHTSA adopted a final rule mandating phased-in installation of passive restraints—either automatic (“passive”) seatbelts or airbags—in most new cars beginning with the 1982 model year. The agency predicted significant lives saved and injuries prevented. Following the 1980 presidential election and a change in administration, NHTSA reopened the record. In 1981, it rescinded the passive restraint requirement, reasoning that manufacturers would overwhelmingly comply by installing detachable automatic seatbelts rather than airbags; that many occupants would detach or defeat those belts, reducing expected benefits; and that the costs of the standard were no longer justified in light of uncertain real-world effectiveness and public acceptance. Insurers, consumer groups, and others—including State Farm—petitioned for review. The D.C. Circuit set aside the rescission as arbitrary and capricious. The motor vehicle manufacturers’ association and the government sought Supreme Court review.
Under the Administrative Procedure Act, was NHTSA’s rescission of the passive restraint requirement in FMVSS 208 arbitrary and capricious because the agency failed to provide a reasoned explanation and to consider important alternatives, including requiring airbags?
Under APA § 706(2)(A), a court shall set aside agency action, including rescissions, that is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. The arbitrary-and-capricious standard requires the agency to examine the relevant data and articulate a satisfactory explanation for its action, including a rational connection between the facts found and the choice made. An agency acts arbitrarily if it: (1) relied on factors Congress did not intend it to consider; (2) entirely failed to consider an important aspect of the problem; (3) offered an explanation counter to the evidence before it; or (4) is so implausible that it could not be ascribed to a difference in view or agency expertise. Rescission of a rule is subject to the same standard of review as promulgation; an agency is free to change policy, but it must provide a reasoned analysis and address alternatives within the ambit of the existing rule.
Yes. NHTSA’s rescission of the passive restraint requirement was arbitrary and capricious. The agency failed to provide a reasoned explanation, particularly by not considering the obvious alternative of an airbags-only standard and by relying on assumptions about user noncompliance with automatic seatbelts that were not adequately supported by the record.
The Court reaffirmed that the arbitrary-and-capricious standard applies equally to the rescission of a rule as to its adoption. While judicial review is deferential, it requires a “hard look” at whether the agency considered the relevant factors and explained its decision. NHTSA justified rescission largely on the prediction that manufacturers would comply by installing detachable automatic seatbelts rather than airbags and that many occupants would disconnect the belts, undermining benefits. The Court found this reasoning deficient in several respects. First, the agency failed to consider an obvious, less drastic alternative within the scope of the existing rule—requiring airbags, or at least nondetachable belts—particularly where the record contained substantial evidence that airbags were effective at preventing fatalities and did not depend on occupant behavior. An agency’s failure to consider important alternatives is classic arbitrary-and-capricious decisionmaking. Second, NHTSA’s analysis was internally inconsistent and counter to the evidence. The agency discounted airbag effectiveness on the basis of cost, safety concerns, and projected consumer acceptance, without adequately grappling with record evidence of their life-saving benefits or explaining why those concerns outweighed prior findings supporting passive restraints. It also relied heavily on anticipated nonuse of detachable automatic belts without examining whether the problem could be addressed by requiring nondetachable belts or by enforcement and design changes. Third, the agency’s cost-benefit reassessment did not connect its factual findings to its policy choice; it did not quantify or reasonably explain why uncertain compliance with one compliance option justified rescission of the entire passive restraint rule. The Court emphasized that agencies may change policy after elections, but such shifts must be justified by reasoned analysis explaining the departure from prior policy and addressing the relevant data and alternatives. Because NHTSA did not provide that explanation, its rescission could not stand. The Court vacated the rescission and remanded for further proceedings. Chief Justice Rehnquist, concurring in part and dissenting in part, underscored that a change in administration can legitimately prompt policy reevaluation, but the majority concluded that even so, the agency must still confront the obvious airbag alternative and support its assumptions with record evidence.
State Farm is the definitive statement of “hard look” review under the APA. It establishes that rescinding a regulation is not subject to a laxer standard than promulgating one; both require reasoned decisionmaking grounded in the record. The case supplies the now-standard checklist: did the agency consider the relevant factors, address important aspects of the problem (including obvious alternatives), and articulate a rational connection between facts and choices? It is regularly invoked to invalidate agency actions that ignore alternatives, rely on speculation, or depart from prior policies without adequate explanation. For students, State Farm is foundational for understanding administrative law’s separation-of-powers function: courts do not substitute their policy judgments for agencies’, but they ensure agencies act rationally and transparently. The decision also frames later cases about policy reversals, informing how agencies justify changing course in light of new administrations or priorities.
No. The Court explicitly held that rescission is reviewed under the same APA § 706(2)(A) arbitrary-and-capricious standard as rulemaking. However, when an agency changes policy, it must provide a reasoned analysis that explains the change and addresses the prior factual findings and the important alternatives considered during promulgation.
Because airbags were a central, viable compliance option under the existing passive restraint rule and the record contained substantial evidence of their effectiveness. Ignoring an obvious, less drastic alternative within the ambit of the rule is an “entire failure to consider an important aspect of the problem,” rendering the action arbitrary and capricious.
Yes, but not without analysis. A new administration may reasonably reevaluate costs, benefits, and priorities, but it must still ground its decision in the record, explain its reasoning, confront contrary evidence, and address feasible alternatives. Political change is not a substitute for reasoned explanation.
The agency must examine relevant data, address significant comments, grapple with key evidence (including evidence that cuts against its decision), and articulate a rational connection between the facts found and the policy choice. Quantification is not always required, but assumptions and predictions must be reasonable and explained.
Litigants routinely cite State Farm to challenge agency actions that fail to address alternatives, rely on speculative or contradicted assumptions, or depart from prior positions without adequate justification. Courts use it as the template for assessing whether an agency’s explanation is sufficiently reasoned to survive arbitrary-and-capricious review.
The Supreme Court set aside the rescission as arbitrary and capricious and remanded to the agency for further consideration consistent with its opinion. The Court did not order adoption of any particular standard (such as airbags-only), leaving that policy choice to the agency upon reasoned reconsideration.
State Farm cements the principle that agencies must practice reasoned decisionmaking. Rescission cannot be justified by bare assertions, speculative predictions, or political preference alone. Agencies must confront the record as it exists, address obvious alternatives, and explain why their choices follow from the evidence and statutory objectives.
For lawyers and students, the case is a touchstone for arbitrary-and-capricious review. It provides both a doctrinal framework and a practical litigation roadmap: identify neglected alternatives, demonstrate disconnects between evidence and agency choices, and highlight unexplained departures from prior policy. In doing so, State Farm preserves a balance between agency expertise and judicial oversight under the APA.