Government Brief Filed in Kisor

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March 6, 2019

The government was faced with something of a dilemma in filing its response brief in the Kisor case addressing the level of deference owed to an agency’s interpretation of its own regulation. See our prior reports here. On the one hand, the government was defending the agency action in this case and the decision below, which rested on paying Auer deference to the agency’s interpretation. On the other hand, conservative legal theorists have long been critical of Auer deference, following Justice Scalia’s lead, and the views of the political appointees in this administration about Auer likely range from unenthused to hostile. But on the third hand, the government’s institutional interests would generally be better served by a strong principle of Auer deference, since that would make challenges to agency action more difficult.

The government’s brief attempts to juggle these conflicting imperatives, and the result is a bit schizophrenic. The bottom line is that the government argues that Auer should not be overruled, but that its applicability should be substantially narrowed. In the end, the government does not rely on Auer to defend the agency action in this case, but instead argues that the regulation is clear on its face without the need to consider the agency interpretation at all.  (Although outgunned by the cascade of amicus briefs filed in support of the petitioner, two amicus briefs were filed on the government’s side, including one by a group of administrative law professors (linked below) who argue that Auer “is sound and should be maintained.”)

The first, and longest, section of the government’s brief is a full-fledged assault on the doctrine of Auer deference. The government contends that the doctrine: (1) is not well grounded historically; (2) is not supported by any consistent rationale; (3) is in tension with the APA’s distinction between interpretive and legislative rules; and (4) can have harmful practical consequences by discouraging agency resort to notice-and-comment rulemaking. Notably, the government states that the reasons that support Chevron deference do not apply to Auer, and thus the brief does not signal that the current administration will argue against Chevron deference in a future case.

The government argues, however, that Auer should not be overruled because of stare decisis considerations, including that doing so “would upset significant private reliance interests” because it allegedly “could call into question” earlier decisions that rested on Auer deference. In contrast to the opening part of its brief, this section praises Auer deference where it is limited to “its core applications,” such as “when the agency announces its interpretation in advance in a widely available guidance document.” The government states that the task of choosing among reasonable interpretations is more appropriately performed by administrators than by judges, that Auer deference would promote national uniformity, that it recognizes the technical expertise of agencies, and that it fosters regulatory certainty and predictability—in contrast to a system “in which the meaning of a regulation must be determined de novo in every judicial proceeding.” In addition, the government disagrees with the petitioner’s argument that Auer deference poses a separation-of-powers problem, stating that an agency’s actions in making rules and conducting adjudications are both exercises of “executive power.”

Accordingly, the government proposes “significant limits” on the doctrine that will thread the needle, neither overruling Auer nor further entrenching it. First, the government states that deference should not be paid to an agency interpretation that is “unreasonable,” describing this seemingly benign limitation as a “rigorous predicate.” If the agency interpretation is judged to be within the range of reasonable readings of the regulation, then the government argues that deference is appropriate “only if the interpretation was issued with fair notice to regulated parties; is not inconsistent with the agency’s prior views; rests on the agency’s expertise; and represents the agency’s considered view, as distinct from the views of mere field officials or other low-level employees.”

It is hard to say at this point what the Court will do with the various permutations that have been presented to it for moving forward, but it appears that Auer deference in its current form stands on very shaky ground.

Oral argument is scheduled for March 27.

Kisor – Government Response Brief

Kisor – Amicus Brief by Administrative Law Scholars in Support of Auer

Briefing Underway in Kisor

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February 8, 2019

The opening salvo has been filed in the Supreme Court challenge to the continuing vitality of what is usually called either Seminole Rock or Auer deference – the rule that a court owes deference to an agency’s interpretation of its own regulations. See our prior report here. The petitioner, a Vietnam veteran seeking disability benefits, has filed his opening brief, supported by 25 different amicus briefs.

The petitioner argues that Auer deference is unjustified for three principal reasons. First, petitioner contends that it is incompatible with the Administrative Procedure Act (APA) because it allows an agency to exercise lawmaking authority through administrative interpretation without adhering to the APA’s procedural safeguards of public participation and agency accountability through notice-and-comment rulemaking.

Second, petitioner argues that Auer is a judge-made rule that destabilizes administrative law because it allows an agency to receive deference to what may not be the best interpretation of a regulation, even if it is “reasonable.” That can unfairly confound an individual who can only try to conform his or her conduct to what appears to be the best interpretation of the regulation. Petitioner adds that Auer deference is “especially suspect . . . where the agency has an economic interest in the outcome,” such as when the interpretive issue relates to a monetary claim against the government.

Third, petitioner contends that Auer is incompatible with separation-of-powers principles because it “renders an agency simultaneously a law’s maker and its expositor.” That is in contrast to Chevron deference, which respects Congress’s power because it “rests on agency compliance with the APA.”

The petitioner adds that principles of stare decisis should not deter the Court from overruling Auer. He notes that this is a purely judge-made rule and that the seminal 1945 decision in Seminole Rock provided no reasoning for the doctrine. The petitioner also argues that “no private reliance interests rest on Auer’s continuing vitality” and that reexamination is warranted because of the substantial expansion of the role of administrative agencies in our government since Seminole Rock was decided.

Linked below is the petitioner’s brief and the amicus brief of Professor Thomas Merrill, a leading academic expert on administrative law, who argues that Auer should be overruled and that instead agency interpretations of regulations should be afforded the much more modest recognition of so-called Skidmore deference, which gives weight to an agency interpretation to the extent it has the “power to persuade.” Professor Merrill argues that “the persuasiveness standard would require reviewing courts to engage with and give respectful consideration to the agency’s experience in implementing the statutory regime and familiarity with its own regulations, respect that de novo review would not require.” Like the petitioner, Professor Merrill states that Chevron deference is consistent with the APA, and he does not suggest that the Court should retreat from Chevron. The other 24 amicus briefs can be found on the Supreme Court’s website.

The government’s response brief is due February 25. Oral argument has been scheduled for March 27.

Kisor – Petitioner’s Opening Brief

Kisor – Amicus Brief of Professor Merrill

Supreme Court to Reconsider Important Administrative Law Precedent

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December 10, 2018

The Supreme Court granted certiorari this morning in a non-tax case that should be of considerable interest to tax litigators because of the important administrative law principle that will be decided.  In Kisor v. Shulkin, the Federal Circuit applied the government’s interpretation of the governing regulation in ruling against a veteran’s claim for disability benefits.  The court found that the regulation was ambiguous, and therefore it ruled that it should defer to the government’s interpretation under the longstanding Supreme Court precedents of Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945), and Auer v. Robbins, 519 U.S. 452 (1997).  The court denied rehearing en banc, although three judges joined an opinion dissenting from that denial.  The Supreme Court has now granted certiorari specifically to address the question “[w]hether the Court should overrule Auer and Seminole Rock.”

Auer deference has played an increasingly prominent role in tax cases since the Supreme Court’s decision in Mayo Foundation made tax cases subject to general administrative law principles.  Revenue Rulings and other lower level administrative interpretations of Treasury regulations are pervasive in the tax area and are subject to being relied upon by courts under Auer deference principles.  And the government has even argued for Auer deference to interpretations stated in its briefs, with the Second Circuit agreeing with that argument.  See, e.g., our prior coverage of the MassMutual and Union Carbide cases here and here.  If Auer is overruled, taxpayers will likely benefit in future litigation involving conflicting views of the meaning of a Treasury regulation.

In recent years, several individual Justices have expressed concern about the wisdom of Auer or Seminole Rock deference, pointing out that it potentially allows an end run around the notice-and-comment procedure for issuing regulations and arguably violates separation-of-powers principles.  Instead of noticing clear regulations that can reasonably be commented upon, Auer enables agencies to promulgate ambiguous regulations and then later to provide administrative interpretations of those regulations (outside the notice-and-comment framework) that create a rule to which courts must defer.  Justice Scalia (who ironically was the author of Auer) was the first to suggest publicly back in 2011 that the Court should reconsider the Auer deference doctrine.  See Talk Am., Inc. v. Michigan Bell Tel. Co., 564 U.S. 50 (2011) (Scalia, J., concurring). In Decker v. Northwest Envtl. Def. Center, 568 U.S. 597, 615 (2013), Chief Justice Roberts and Justice Alito remarked that Justice Scalia had raised “serious questions” about the doctrine.  More recently, in Perez v. Mortgage Bankers, 135 S. Ct. 1199 (2015), Justice Scalia stated flatly that Auer should be “abandoned,” and Justice Thomas wrote a long concurring opinion explaining his view that Auer deference was “constitutionally suspect.”  Justice Alito added that those two Justices had “offered substantial reasons why the Seminole Rock doctrine may be incorrect.”  And just this past March, Justice Gorsuch joined an opinion of Justice Thomas dissenting from the Court’s denial of certiorari in which the latter again described Auer as “constitutionally suspect.”  Garco Construction, Inc. v. Speer, No. 17-225 (Mar. 19, 2018).  Thus, even with Justice Scalia no longer on the Court, four sitting Justices have indicated great skepticism, to put it mildly, about the continuing vitality of Auer deference.  In addition, in a keynote address at a 2016 conference at the Antonin Scalia (George Mason) Law School, Justice Kavanaugh spoke approvingly of Justice Scalia’s criticism of Auer deference and predicted that Justice Scalia’s view would become the law.  Things can change when cases are fully briefed and argued in the Supreme Court, but for now the future of Auer/Seminole Rock deference looks bleak.

The petitioner’s opening brief is due January 31, and the case should be argued in the spring and decided by June 2019. 

Kisor – Petition for Certiorari