INSIGHT: Supreme Court Sharply Limits Agencies’ Authority to Interpret Regulations

The U.S. Supreme Court June 26 reaffirmed—at least formally speaking—its longstanding precedents that a court should defer to an agency’s reasonable interpretation of its own regulation.

Although many court watchers will be disappointed that the court declined to overrule Auer, the real impact of Kisor v. Wilkie is the important limitations the decision puts on the doctrine. Auer deference lets agencies avoid having to amend their regulations through formal notice-and-comment proceedings.

At a minimum, agencies and the public will face significant uncertainty in the lower courts about how regulations will work—those already in existence and those that agencies are developing. In many areas, regulatory deference may turn out to have much less bite than it did.

And the decision could contain the seeds for a similar unraveling of Chevron deference. That requires courts to defer to agencies on the meaning of ambiguous laws—rather than rules—as long as the regulators’ interpretation is reasonable.

Auer Deference

An agency’s regulations might be ambiguous in various ways. When those issues come to court, traditionally the agency’s view of how to read a regulation is controlling, unless it is plainly contrary to the text.

Many people have criticized this approach—called Seminole Rock or Auer deference. Some say it gives agencies skewed incentives, because an agency can use the rulemaking process just to produce something vague, and then later fill in the real details using interpretations.
Those interpretations, the complaint goes, don’t go through the notice-and-comment process, yet have the same legal force as though they had.

Others say Auer violates the separation of powers, because only a court may authoritatively interpret a regulation in a case or controversy involving the government.

The court took the Kisor case to decide whether this deference should continue. The answer, it turns out, is yes. Justice Elena Kagan’s plurality opinion (the chief justice did not join this part) also rejected these criticisms of Seminole Rock.

Yet the court then described limitations on when a court should defer. Most of these limitations were already present in existing law, though the decision sharpened the tone. One of the conditions is new, and it will change a lot about the regulatory process. If Seminole Rock were an historical building, the court would have done a gut rehab while preserving the facade.

Deference Limitations

First, the court says a court should not defer to an agency’s interpretation unless a regulation is truly ambiguous, using all the normal tools of interpretation. A court should also guard the boundaries by deferring only if the agency’s interpretation is reasonable. While lower courts commonly deferred unless an agency’s interpretation was plainly contrary to the text of the regulation, the Supreme Court has reiterated that lower courts should analyze regulations much more carefully before deferring.

Second, the court says a court should defer only to an interpretation announced with appropriate formality and authority. Not, for example, a speech from a mid-level official. More importantly, the interpretation must represent the agency’s “fair and reasoned judgment.”

The court has used that formulation many times before, and some courts have stretched it fairly far. The D.C. Circuit, for example, readily defers to interpretations advanced for the first time in a litigation brief defending agency action. The D.C. Circuit accepts those litigation interpretations as the “fair and reasoned judgment” of agency officials. Footnote 6 of the Kisor opinion should end that practice; the court says the general rule is not to defer to litigation briefs when an agency is a party to the case.

Third, and perhaps most significantly, a court should defer only when the interpretation involves agency expertise. Here are perhaps the most important sentences in Kisor (from Justice Kagan’s opinion for the Court): “Some interpretive issues may fall more naturally into a judge’s bailiwick. … When the agency has no comparative expertise in resolving a regulatory ambiguity, Congress presumably would not grant it that authority.” This is new. From now on, it appears, a court will have to decide whether an interpretive question is “court-type” or “agency-type.”

New Argument

This is a major new argument for litigants disputing agency interpretations. It is also an area of new uncertainty. Which questions involve agency deference, and which don’t? We will have to wait and see how it plays out. Many deference cases may involve difficult arguments about whether to defer—disputes that could obscure or eclipse the deference itself.

In the long run, Kisor marks a potential path to the effective end of Chevron, a doctrine that has attracted even more criticism than Seminole Rock. Chevron instructs courts to defer to agency interpretations of statutes. So consider those critical sentences I quoted above. “When the agency has no comparative expertise in resolving a statutory ambiguity, Congress presumably would not grant it that authority.”

It is not hard to imagine Chief Justice Roberts writing the same words with the word “statutory” substituted for “regulatory.” The chief justice has not been as outspoken about Chevron as some of his colleagues on the court, and he may be reluctant to overrule the case outright. If Kisor results in a much-weakened form of deference to regulatory interpretations, the court will have a handy blueprint for remodeling Chevron.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Keith Bradley is a partner at the international law firm Squire Patton Boggs (US) LLP. Formerly at the Energy Department and the Consumer Financial Protection Bureau, he advises on regulatory compliance across a range of sectors and represents businesses in administrative and regulatory disputes.