There's a basic tension in a democracy between the right of the people of set policies and the need for an efficient way to make decisions without undue delay.

In the United States, the focus is on process: An administrator can set the rules, but the people must have a fair chance to influence the outcome of the rules. The courts won't interfer if a bureaucrat makes an unwise decision, though the courts will invalidate a decision made without consideration to all public points of view.

That, in turn, gives rise to debate over what government officials can do and when to announce a proposed regulation and call for public comment.

Last month, two appeals court rulings on closely related issues came to opposite conclusions. The rulings dealt with attempts by the Department of Health and Human Services to ensure that the money the federal government pays for medical care is well spent. Under the plan, HHS assigns panels of doctors -- peer review organizations -- to monitor hospital records. The doctors are to alert HHS when a hospital performs a particular operation too often or readmits too many patients soon after their release.

The directives outlining how the review groups work were issued without an opportunity for public comment. The American Hospital Association objected to the program, but on Dec. 4, the U.S. Court of Appeals in Washington approved the process. The requirement for public input applies only to substantive rules, the judges said in AHA v. Bowen. They ruled the directives in question were merely elaborations of the more general rules on the duties of the review groups, making their enforcement up to the discretion of the government agency.

The Administrative Procedure Act says that interpretive regulations need not be opened for public comment. But two weeks after the appeals court in Washington issued its ruling, the U.S. District Court in Denver not only ruled against HHS in a similar dispute, but also held Secretary Otis R. Bowen in contempt for trying to bypass the public comment process. At issue in Smith v. Bowen was the providing of quality health care in nursing homes.

HHS proposed a rule that would leave the inspections up to individual states -- as long as the local officials applied federal standards and used special inspection forms.

Bowen did not, however, want to make the standards and forms part of the rule. He argued that the process would impair the efficiency of the program because any proposed changes in standards or forms would require public notice and comment. And he insisted that the process wasn't necessary because the standards and forms were interpretive, much like those involved in the directives to the review groups.

Judge Richard P. Matsch rejected the arguments. When money is involved, Matsch said, government officials can be given more freedom. But when the quality of treatment is at issue, he found particular need to allow those involved in the issues to comment on the details of the inspection procedure.

In other cases, courts ruled that: Rewarding inventive employees is different from buying their inventions. The U.S. Court of Appeals in New York said an International Business Machines Corp. chemist has to pay ordinary income tax on an incentive award given to him after he had made a major breakthrough.

The chemist believed IBM was buying his invention, which would allow him to claim a capital gain. But since his employment contract required him to assign the company all rights to inventions made while working at the company, the judges said that the award was just another form of regular pay.

Lehman v. Commissioner, Dec. 15.

Consumers can't expect privacy on a car phone. The U.S. Court of Appeals in New Orleans recently ruled on a case brought by a mobile telephone user who sued a ham radio operator who overheard a conversation and, believing that criminal activities were discussed, taped the conversation and gave the tape to the FBI.

The judges said it is not reasonable to expect privacy on a car phone conversation that can be picked up by anyone's radio receiver scanner, they said.

Edwards v. State Farm, Dec. 7.

Buyers are expected to take a used-car salesman's descriptions with a grain of salt. The Connecticut Supreme Court refused to order a dealer to take back a 5-year-old Ford Bronco after it developed rear axle problems. The buyer insisted that the salesman had violated the law through unfair trade practices by calling the vehicle an "excellent" and "unusual" buy in "mint" condition.

A sales practice is legally unfair only if it is unethical or unscrupulous, the justices said. And they found the salesman's claims so "nonspecific" that they amounted merely to the kind of exaggeration any shopper might encounter. The final deciding factor: The salesman had allowed the buyer to have the Bronco inspected.

Web Press v. New London Motors, Dec. 8.

You have to know how to use an automobile before you can use it. That seeming truism helped settle a dispute between two insurance companies over which was responsible for damages after a 3-year-old child climbed into a parked car and caused the vehicle to roll.

The company that had written the family's homeowner's policy said it was not responsible because the policy excluded liability arising from "use" of a motor vehicle -- a risk assumed by the company that had issued the car liability policy. The Pennsylvania Supreme Court gave the job of defending the family -- and paying any damages -- to the company issuing the homeowner's policy.

"Use" means "rational, purposeful conduct," not "mere movement," the justices said. They refused to believe that a 3-year-old could understand enough about a car and its functions to be able to "use" the vehicle.

Erie Ins. v. Trans., Dec. 2.

Moskowitz covers legal affairs for McGraw-Hill World News.