Judicial review is the process by which the courts determine the validity of agency actions. Judicial review is governed by the provisions in sections 701-706 of the APA plus any specific provisions in the agency's organic or program statutes. With respect to court challenges to agency rules, there are three basic grounds for arguing that the rule is invalid: (1) the agency did not have authority to issue the regulation; (2) the agency did not follow proper procedure in issuing the regulation; or (3) there was insufficient "evidence" to support the agency decision to issue the regulation. Under the APA, a court reviewing a regulation issued under "informal rulemaking" procedures is not supposed to invalidate a rule on substantive grounds unless the rule is found to be "arbitrary or capricious." A slightly different test is used if the rule being reviewed was issued under "formal rulemaking" procedures-the court looks to see if there was "substantial evidence" to support the agency decision. (The distinction between these two reviews tests has virtually disappeared in recent years.) (See Arbitrary-or-Capricious Test.)

Probably the easiest way to overturn an agency rule is to convince a court that the agency did not follow proper procedure. When a court finds that an agency rule is arbitrary or capricious or was issued after improper procedure, normally the court will vacate the rule and remand it to the agency. For example, if an agency did not go through the proposed rulemaking stage, a court could decide that the agency did not have sufficient grounds for skipping that stage and could order the agency to start over again.

Before 1970 there were few cases involving judicial review of the rulemaking actions of Federal agencies. One of the major reasons was because a person would have had to risk noncompliance to precipitate a challenge. This made judicial review very unlikely. However, the Supreme Court made it possible for a regulation to be challenged before enforcement at about the same time that Congress was enacting numerous new laws that spawned a large volume of Federal regulations. The result was a great increase in court challenges to agency rules.

Throughout the 1970s, Federal courts raised questions about the adequacy of the procedures that agencies followed in issuing their regulations. Sometimes courts ordered agencies to hold hearings or allow cross-examination of witnesses during informal rulemaking procedures even though the APA does not have such a requirement. However, the Supreme Court, in Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519 (1978), put a stop to this by stating emphatically that courts must not require additional procedures not mandated by the APA or any other statute.