Court Deference to Agencies’ Interpretations
The conduct of individuals, companies and organizations is not only governed by statutes. Regulations, rules and interpretations of law made by administrative agencies touch upon virtually all aspects of life. This “administrative state” is gargantuan in scope and overwhelming in its impact. Consider that the Code of Federal Regulations is now over 180,000 pages long, much of it detailed and often incomprehensible to lay persons.
A Brookings scholar recently observed that such rules often prompt questions from the public: “How do the rules apply to an emerging technology? How should a business comply with the rules in light of a new requirement from another agency? Do an agency’s rules allow untimely applications to be filed in extenuating circumstances?” C. Raso, “The Supreme Court Curtails But Retains Agency Rule Deference—How Much Will It Matter?” Brookings Report, p. 1 (Sept. 24, 2019). Often, the public seeks agency guidance on questions of compliance with regulations. Agencies thus may respond with interpretations of their rules. Sometimes, those interpretations result in pervasive, intrusive and economic consequences, prompting challenges to enforcement and, eventually, courtroom battles. Or an agency may adjudicate a claim or defense based on its interpretation of its rule. (That’s what happened in our featured case.) Much the same occurs on the state level as state agencies regulate deeply into life’s nooks and crannies.
In late June, the U.S. Supreme Court issued a decision in Kisor v. Wilkie, 2019 U.S. LEXIS 4397 (June 26, 2019), a case that should be on the complex litigator’s reading list. The court wrestled with the degree of deference courts must (or should) give to an agency’s interpretation of its regulations. As one writer puts it, “the opinion is one of those head-scratching Supreme Court monstrosities with overlapping opinions that will spawn dozens of law-review articles and countless law-professor debates.” D. French, “John Roberts Throws the Administrative State a Lifeline,” National Review, p. 1 (June 26, 2019). And yet, despite the seeming split among the Justices, the court eked out an important approach on how much deference courts should accord to an agency’s interpretations of its own rules. That framework can be pivotal in many litigation scenarios.
But first, before getting into Kisor’s lessons, a few comments on court deference to agencies. When an agency interprets statutes, the administrative law doctrine known as the “Chevron deference” kicks in. Thus, if it appears that Congress delegated authority to the agency to make rules carrying the force of law, courts first ask whether the statute is itself clear on resolving the precise question at issue. If not, or if the statute is silent or ambiguous, courts then assess whether the agency’s interpretation of the statute is “reasonable.” If yes, then Chevron deference is applied even if the court’s own reading of the statute would differ. Chevron deference is based on the assumption that Congress delegated authority to the agency administering the statute to interpret it.
But what if the issue involves, not interpretation of a statute, but rather an agency’s interpretation of rules and regulations it issued? Must or should courts defer to that administrative interpretation? Traditionally, under some circumstances, there has been such deference but the conditions justifying it must be present. This doctrine to defer to agency interpretations of its rules is called “Auer deference”—so named after the court’s decision in Auer v. Robbins, 519 U.S. 452 (1997). Auer held that an agency’s interpretation of its own regulation is “controlling unless plainly erroneous or inconsistent with the regulation.”
The recent Kisor decision involved “Auer deference,” not “Chevron deference.” Kisor, a Vietnam war veteran, sought disability benefits from the Department of Veteran Affairs (VA) in 1982 alleging he had developed post-traumatic stress disorder from his military service. The agency denied his initial request. However, in 2006, Kisor moved to reopen his claim. The VA this time agreed he was eligible for benefits but granted those benefits only from the date of his motion to reopen. Thus, the agency denied retroactivity. The Veteran Appeals Court affirmed, based on its interpretation of an agency rule governing such claims. The Court of Appeals for Veterans Claims affirmed. So did the U.S. Court of Appeals for the Federal Circuit.
The federal circuit court applied “Auer deference” concluding that the VA regulation at issue was ambiguous and, therefore, deferred to the agency’s interpretation. The Supreme Court accepted review to determine whether Auer should be overruled and the Auer deference doctrine should be discarded, as Mr. Kisor urged. A plurality opinion for the court by Justice Elena Kagan (joined by Justices Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor) was augmented by a separate concurring opinion by Justice John Roberts resulting in a decision to “save” the Auer deference doctrine. However, the deference rule was modified and narrowed. As Justice Kagan put it: “But even as we uphold it, we reinforce its limits. Auer deference is sometimes appropriate and sometimes not. Whether to apply it depends on a range of considerations that … we compile and further develop today. The deference doctrine we describe is potent in its place but cabined in its scope.” Kisor, 2019 U.S. LEXIS 4397 at *9-*10.
Justice Neil Gorsuch (joined in part by Justices Clarence Thomas, Brett Kavenaugh and Samuel Alito) would scrap the Auer deference approach since it requires judges to accept an agency’s interpretation “even when that interpretation doesn’t represent the best and fairest reading.” This creates a “systematic judicial bias in favor of the federal government, the most powerful of parties, and against everyone else.” Id. at *50. Legions of writers have called for abandonment of Auer. “Yet today a bare majority flinches and Auer lives on.” He further said: “So the doctrine emerges maimed and enfeebled—in truth, zombified.” Id. at *51-*52.
What, then, is Auer deference after Kisor has “cabined its scope”? What is the “range of considerations” that determine whether Auer deference should be applied? Justice Kagan elaborated. First and foremost, the regulation must be “genuinely ambiguous.” If uncertainty does not exist, there is no plausible reason for deference. The regulation then “just means what it means—and the court must give it effect.” If there is only one reasonable construction of a regulation, then a court has no business deferring to any other reading. And before concluding that a rule is genuinely ambiguous, a court must exhaust all the “traditional tools of construction.” Id. at *25.
Second, if genuine ambiguity remains, the agency’s reading must still be “reasonable.” The agency’s reading must fall “within the bounds of reasonable interpretation.” Id. at *27. Next, a court must make an “independent inquiry into whether the character and context of the agency determination entitles it to controlling weight. It’s not an “exhaustive test” but here follow some “especially important markers” for identifying when deference is and is not appropriate.
Thus, the regulatory interpretation must be one “actually made by the agency.” In other words, it must be the agency’s “authoritative” or “official” position, rather than any mere ad hoc statement not reflecting the agency’s views. Not everything the agency does comes from, or is even in the name of, the Secretary or his chief advisors. But the interpretation must at least emanate from actors understood to make authoritative policy. Thus, for example, a “speech of a mid-level official” was not deferred to as an “authoritative departmental position”. Likewise, an “informal memorandum recounting a telephone conversation between employees” was not entitled to deference. Id. at *29-*30.
Next, the agency interpretation must in some way “implicate its substantive expertise.” Does it involve interpreting a technical rule or involve policy expertise? And finally, an agency’s reading of a rule must reflect “fair and considered judgment” to get Auer deference. A new interpretation that creates “unfair surprise” to regulated parties may not justify deference. Expectations may be disrupted when an agency substitutes one view of a rule for another. The “upending of reliance” or the lack of “fair warning” may outweigh the reasons to apply Auer. Id. at *31-*32.
What emerges, says Justice Kagan, is “a deference doctrine not quite so tame as some might hope, but not nearly so menacing as they might fear.” Justice Roberts’ concurring opinion summarizes the Kagan approach as follows: “The underlying regulation must be genuinely ambiguous; the agency’s interpretation must be reasonable and reflect its authoritative, expertise-based, and fair and considered judgment; and the agency must take account of reliance interests and avoid unfair surprise.” Id. at *49.
The newly-narrowed Auer deference doctrine seems to offer aggrieved litigants opportunities to challenge agency interpretations of their own rules—provided some of the “flaws” described above can be shown. It’s not per se an easy task but, as opposed to the pre-Kisor era, the effort to have a court independently decide “unfairness” or “surprise”, rather than just rubber-stamping the agency’s interpretation, is made more hopeful.
Let’s keep in mind that “Chevron deference” (agency interpretations of statutes) and “Auer deference” (agency interpretations of their own regulations or rules) are doctrines rooted in policy rationales. Thus, litigators opposing court deference, or those claiming it, should familiarize themselves with the policies behind the deference doctrines. The strengths and weaknesses of those policies are set out in the respective Justices’ opinions. There’s a kind of point-counterpoint quality to these arguments. They are a litigator’s “stealth” weapons to be whipped out when some “high-road” principles are needed to justify one’s position. (We just don’t have the space here to discuss them.)
The tensions surfacing in Kisor actually reflect broader conflicts among jurists, scholars and lawyers. The Goliath-like legal grip the administrative state exerts on the public via rules and regulations issued by agency administrators goes far beyond the statutes that enabled them. Congress thus has punted to agencies wide swathes of governance. Forcing courts to defer to those agencies (whether under Chevron or Auer), in effect, also makes courts punt to agencies their own judicial tasks. Many believe that the main bodies of constitutional government ought not delegate so much of their tasks to others. But all that is for another discussion. Litigators should start with Kisor and be equipped to tackle the impact of agency interpretations.
Michael Hoenig is a member of Herzfeld & Rubin.