March 01, 2014

Has Auer’s Hour Arrived?

Ben Snowden

A well-established precept of administrative law is that federal courts will defer to an agency’s interpretation of its own regulations, unless that interpretation is “plainly erroneous or inconsistent with the regulation.” Generally referred to as “Auer deference,” after the Court’s decision in Auer v. Robbins, 519 U.S. 452 (1997), the doctrine helps to insulate agency action from legal challenges and is a powerful tool for agencies in the enforcement context.

Although the Supreme Court has placed some limitations on the reach of Auer deference, until recently there has been little reason to question the continued vitality of the doctrine. In the last few terms, however, several members of the Court have harshly criticized Auer deference for its tendency to foster agency overreaching and unfairness to regulated parties, and it appears likely that the Court will hear a challenge to Auer deference in the near future. Some commentators have suggested that the Court may go so far as to abandon Auer deference entirely.

Such an outcome is unlikely, given the longevity of the doctrine and the small number of justices who have expressed serious concerns about the doctrine as a whole. More importantly, the concerns about agency overreach and unfairness to regulated parties behind recent criticism are not new, and existing jurisprudence under Auer gives the Court ample latitude to address these concerns. Critics of Auer deference also fail to acknowledge that by making deference contingent on agencies’ observing certain minimum standards of conduct, Auer (along with its associated cases) provides an important tool for controlling agency action to address agency overreach and protect regulated parties. Out-and-out reversal of Auer is exceedingly unlikely. At most, the Court might create new limits on the scope of the doctrine or impose additional procedural requirements for agencies that want deference.

Auer deference dates back at least to the 1945 decision in Bowles v. Seminole Rock & Sand Co., in which the Supreme Court held (without explaining its reasoning) than an agency’s interpretation of a regulation it has promulgated is “of controlling weight unless it is plainly erroneous or inconsistent with the regulation.” 325 U.S. 410, 414 (1945). The doctrine has been frequently applied by the Supreme Court and lower federal courts since. Auer v. Robbins grafted onto the Seminole Rock deference doctrine a requirement, drawn from the Court’s Chevron jurisprudence, that a proffered interpretation “reflect the agency’s fair and considered judgment on the matter in question,” and not merely be a “post hoc rationalization” advanced to defend past agency action against attack. 519 U. S. 452, 462 (1997) (quoting Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 212 (1988)). Auer deference has been afforded to formal and informal regulatory interpretations advanced in a number of contexts, such as litigation briefs (including amicus briefs), internal agency policy memoranda, interpretative rules, and agency adjudications.

Courts cite differing justifications for Auer deference. Although Seminole Rock did not provide a rationale for deference, Auer deference has on various occasions been described by the Court as a “necessary complement of the agency’s delegated lawmaking powers,” Martin v. Occupational Health & Safety Admin., 499 U.S. at 151, or more broadly as a rule of respect for an agency’s expertise and policymaking prerogatives in arenas where Congress has conferred rule-making power to the agency. See, e.g., Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 (1994). In this respect Auer deference may be seen as an outgrowth of its better-known cousin, Chevron deference, under which courts defer to an agency’s interpretation of ambiguous statutory provisions, so long as Congress has tasked the agency with administering the statute and the agency’s interpretation is based on “a permissible construction of the statute.” Chevron U.S.A. v. NRDC, 467 U.S. 837, 842–43 (1984). Under this reasoning, Congress’ delegation of rulemaking power (a prerequisite for Chevron deference) necessarily encompasses the power to interpret those rules. See Pauley v. Bethenergy, 501 U.S. 680, 697 (1991). As discussed below, not all justices of the Court have adhered to this viewpoint. Nonetheless, many of the interpretive nuances applied to Chevron deference (such as the refusal to defer to “post hoc rationalizations” of agency action) have also been applied in the context of Auer deference.

Among the purported advantages of the doctrine is that, by giving primacy to agencies’ interpretations rather than those of reviewing courts, Auer deference tends to promote certainty and predictability in the administration of regulations. This also tends to promote uniformity of application in different judicial circuits. See Talk Am., Inc. v. Mich Bell Tel. Co., 131 S. Ct. 2254, 2266 (2011) (Scalia, J., concurring); Coeur Alaska, Inc. v. Se. Alaska Conservation Council, 557 U.S. 261, 296 (2009) (Scalia, J., concurring).

The Supreme Court has established several limitations on Auer deference. To warrant deference, an interpretation must be consistent not only with the text of the regulation, but also with the authorizing statute and the Constitution. Stinson v. United States, 508 U.S. 36, 47 (1993). Courts also will not defer to agency interpretations where the regulation is unambiguous, or where doing so “would permit the agency, under the guise of interpreting a regulation, to create de facto a new regulation.” Christensen v. Harris Cnty., 529 U.S. 576, 588 (2000). An interpretation that is demonstrably contrary to the intent of a regulation at time of enactment is also not entitled to deference. Gonzales v. Oregon, 546 U.S. 243, 258 (2006); Thomas Jefferson Univ. v. Shalala, 512 U.S. at 512. Nor will deference be afforded to an agency interpretation of a regulation that simply parrots or paraphrases the language of the authorizing statute, although the rationale for this limitation is not well-explained. See Gonzales v. Oregon, 546 U.S. at 257, 278.

Other limitations are more fact-specific in application. For example, regulatory interpretations that depart from past agency practice are entitled to deference in some circumstances but not in others. Some cases state that long-standing agency interpretations are entitled to greater respect than recent interpretations and that a change in agency position militates against deference. Pauley v. Bethenergy, 501 U.S. at 698; Commissioner of Internal Revenue v. Schleier, 515 U.S. 323, 334 n.7 (1995). Other cases hold that an agency is free to change its mind without losing deference. See Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 127 S. Ct. 2339 (2007). The Court has also clarified that an agency is free to change a previously held view that the agency claims “to have been grounded on a mistaken legal interpretation.” Thomas Jefferson Univ. v. Shalala, 512 U.S. at 517.

The Court has also made arguably inconsistent statements about whether deference is appropriate for an agency interpretation advanced for the first time in litigation. As a general rule, the Court has found no per se problem with deferring to an interpretation advanced for the first time in a litigation brief. Long Island Care at Home, Ltd. v. Coke, 127 S. Ct. at 2349; Auer, 519 U.S. at 462. Novelty alone is not a reason to refuse deference, especially when the issue has not arisen until the advent of litigation. Talk America, Inc. v. Michigan Bell Telephone Co., 131 S. Ct. at 2263–64. As stated by the Court in Long Island Care at Home, Ltd. v. Coke, where “an agency’s course of action indicates that the interpretation of its own regulation reflects its considered views . . . we have accepted that interpretation as the agency’s own, even if the agency set those views forth in a legal brief.” 127 S. Ct. at 2349.

Some decisions, though, advance the proposition that deference is more appropriate where the agency is not a party to litigation but only appears as an amicus. Chase Bank USA, NA v. McCoy, 131 S. Ct. 871, 881 (2011). It may be that having a direct stake in the outcome raises the likelihood that an agency’s interpretation will amount to a “post hoc rationalization” of acts already undertaken by the agency. Other cases have indicated that litigation positions are less likely to constitute the “fair and considered judgment” of what the regulation required at the time the controversy arose. See Chase Bank USA, NA, 131 S. Ct. at 881; Martin, 499 U.S. at 155.

Two other apparent limitations on Auer deference are also worthy of mention. The Court held in Auer, and has often repeated, that deference is not appropriate to agency interpretations that represent “post hoc rationalizations” for past agency action or do not represent the “fair and considered judgment” of the agency on the issue in question. See Auer, 519 U.S. at 462 (quoting Bowen v. Georgetown Univ. Hosp., 488 U.S. at 212). Until its 2012 decision in Christopher v. Smithkline Beecham (discussed further below), the Supreme Court had never declined deference on these grounds, although courts of appeals in several circuits have done so.

Auer Is Called into Question

Notwithstanding the limitations placed on Auer deference, until the 2011 term there was no question of the continued vitality of the doctrine. As recently as January 2011, a unanimous Court in Chase Bank USA, N.A. v. McCoy was willing to follow the doctrine without questioning its soundness. 131 S. Ct. 871 (2011). However, since that time several opinions criticizing Auer deference have led commentators to question whether the Court may be ready to revisit Auer, or even overturn Seminole Rock and its decades of progeny.

Two months after Chase Bank was decided, seven justices (with Justice Kagan recused) again followed Auer in deferring to a regulatory interpretation advanced for the first time by the Federal Communications Commission in an amicus brief, in Talk Am., Inc. v. Mich. Bell Tel. Co., 131 S. Ct. 2254, 2263–64 (2011). In concurrence, however, Justice Scalia expressed strong reservations about Auer deference and noted that although the Court had not been invited to reconsider Auer in that case he would be “receptive to doing so” if the issue were to be raised before the Court.

Scalia’s criticism of Auer rested on separation of powers concerns. According to Justice Scalia, judicial deference to agency interpretations of their own ambiguous regulations results in the inappropriate combination of “legislative and executive functions” in one branch of government. Auer deference also “encourages the agency to enact vague rules which give it the power, in future adjudications, to do what it pleases. This frustrates the notice and predictability purposes of rulemaking, and promotes arbitrary government.” 131 S. Ct. at 2266.

This criticism was echoed in a majority opinion the following term in Christopher v. Smithkline Beecham, in which the Court limited the deference afforded to agency regulatory interpretations that could result in “unfair surprise” or retroactive liability for regulated parties. 132 S. Ct. 2156, 2167 (2012). Christopher was a class action lawsuit for overtime wages brought under the Fair Labor Standards Act (FLSA). In briefing before the Supreme Court, the Department of Labor (the Department) filed an amicus brief supporting plaintiffs’ entitlement to relief but based on a different interpretation of its regulations than it asserted in amicus briefing and in other cases raising the same issue. The Department had never published its interpretation, and despite the fact that the interpretation was inconsistent with longstanding industry practice, the Department had never taken enforcement action based on a regulated entity’s failure to adhere to the regulation (as the Department now interpreted it).

The Court rejected the plaintiffs’ call for deference to the Department’s interpretation, finding “reason to suspect that the interpretation ‘does not reflect the agency’s fair and considered judgment on the matter[.]’” The Court observed that the Department’s position “plainly lacks the hallmarks of thorough consideration,” given the lack of opportunity for public comment and the inconsistent rationales the Department had advanced in its amicus briefs. In addition, the Court held that deferring to the agency’s interpretation would impose “potentially massive liability on [defendant] for conduct that occurred well before the interpretation was announced,” resulting in “unfair surprise” to defendants and other regulated businesses, and “seriously undermin[ing] the principle that agencies should provide regulated parties ‘fair warning of the conduct [a regulation] prohibits or requires.’” 132 S. Ct. at 2167 (quoting Gates & Fox Co. v. Occupational Safety & Health Review Comm’n, 790 F.2d 154, 156 (D.C. Cir. 1986)). The Department’s failure to bring enforcement action or state that it disagreed with the industry’s contrary interpretation of the regulation amounted to “acquiescence” to the industry interpretation, making deference inappropriate.

Citing Talk America, the majority observed the perverse incentive to enact “vague and open-ended regulations” that Auer deference creates, noting that agencies’ promulgation of such regulations “that they can later interpret as they see fit … frustrat[es] the notice and predictability purposes of rulemaking.” 132 S. Ct. at 2168. The majority pointedly warned administrative agencies that giving in to this temptation could render their regulations unenforceable:

It is one thing to expect regulated parties to conform their conduct to an agency’s interpretations once the agency announces them; it is quite another to require regulated parties to divine the agency’s interpretations in advance or else be held liable when the agency announces its interpretations for the first time in an enforcement proceeding and demands deference.

132 S. Ct. at 2168.

Christopher did not call the Auer doctrine itself into question. However, in Decker v. Northwest Environmental Defense Center, No. 11-338 (U.S. Mar. 20, 2013), more members of the Court expressed reservations about the appropriateness of Auer deference. Decker was a Clean Water Act citizen suit filed by an environmental organization against a logging company, based on the company’s alleged failure to obtain a permit for the discharge of channelized stormwater runoff from logging roads. In an amicus brief, the U.S. Environmental Protection Agency (EPA) supported defendants’ proffered interpretation of the agency’s Industrial Stormwater Rule as exempting such discharges from regulation under the Act.

The Court decided the case 7–1 (Justice Stevens was recused) in the defendants’ favor, deferring to EPA’s interpretation of the rule. But Justice Scalia authored a dissent calling for the Court to abandon Auer deference entirely, challenging on textualist grounds the traditional justifications for Auer deference “that the agency, as the drafter of the rule, will have some special insight into its intent when enacting it,” and that deference is appropriate because an agency “possesses special expertise in administering its ‘complex and highly technical regulatory program.’” Scalia also argued that although special expertise provides a reason to allow agencies to formulate rules, such expertise “has nothing to do with who should interpret regulations—unless one believes that the purpose of interpretation is to make the regulatory program work in a fashion that the current leadership of the agency deems effective.” Reprising criticism from Talk America, Justice Scalia also contended that vesting the same branch of government with the power to make rules as well as the power to interpret them is “a dangerous permission slip for the arrogation of power[.]”

Justice Roberts (joined by Justice Alito) authored a concurring opinion in which he noted the “serious questions” about Auer deference raised by Scalia’s concurrence and appeared to open the door for further challenges to the rule. Because the briefing in Decker did not properly raise and argue the question of Auer’s validity, Justice Roberts declined to engage the question directly. However, Justice Roberts noted “some interest in reconsidering” Seminole Rock and Auer deference, should a properly raised challenge to the doctrine come before the Court.

Chief Justice Roberts’s apparent invitation to challenge Auer may have been motivated by his own concerns about the growing power of the administrative state, as recently articulated by him in another environmental case resolving an important question of Chevron deference. Dissenting from a majority opinion upholding Chevron deference on statutory questions of agency jurisdiction in City of Arlington v. Federal Communications Commission, Justice Roberts (joined by Justices Alito and Kennedy) expressed concern about “the danger posed by the growing power of the administrative state” and the limitations of presidential oversight into “federal agencies poking into every nook and cranny of daily life.” 133 S. Ct. 1863, 1879 (2013). He also emphasized the Court’s obligations (at least in the context of Chevron deference) to “police the boundary between the legislature and the executive,” especially in view of “the dramatic shift in power over the last 50 years from Congress to the executive . . . effected through the administrative agencies.” Id. at 1886.

Some commentators have read Talk America, Christopher, Decker, and City of Arlington to indicate that the Court may now be open to reconsidering Auer and Seminole Rock. Is the Court poised to reconsider Auer deference?

Has Auer’s Hour Arrived?

Despite tantalizing hints, there is little to suggest that a majority of the Supreme Court would be willing to reconsider Seminole Rock and Auer. The recent criticism of deference arises primarily from concerns of agency overreaching and unfairness to regulated parties. These concerns are not new, however; and courts already have adequate tools at their disposal to address these concerns. Chief among them are the limitations on Auer deference already established by the Court. Moreover, limitations on deference serve as an important means of controlling agency action, so that abandoning Auer deference outright would likely undermine, rather than advance, judicial efforts to curtail agency overreaching and protect regulated parties from unfair agency action.

At the outset it bears noting that while the Court, in considering questions of deference, is sensitive to the hardship that may be wrought by agencies’ failure to observe procedural requirements in rulemaking and enforcement, it has never expressed much concern that the substance of agency interpretations might work to the disfavor of regulated parties. Perhaps out of sensitivity to the institutional competence of the federal courts, the Court has consistently been concerned primarily with the process followed by agencies in rulemaking and enforcement and with making sure that they protect regulated parties and prevent the aggrandizement of agency power. For the Court to abandon Auer and second-guess duly adopted agency interpretations would be a marked departure from its usual tendency.

A simple robe-count also suggests that Auer’s fate is secure. Although four justices could plausibly vote to grant certiorari on challenge to Auer deference (Scalia, who has called for Auer to be overruled; Roberts and Alito, who issued the invitation to challenge Auer in Decker; and perhaps either Kennedy or Thomas, who have not criticized Auer but who have voiced concerns about agency overreach in the context of deference), none of the Court’s more liberal justices have shown the least interest in revisiting Auer.

Nor was the invitation to challenge Auer extended by Justice Chief Roberts in Decker quite as broad as it may seem. Justice Roberts’s concurrence in that case relied heavily on an amicus brief filed by a group of law professors that urged the Court not to extend deference where doing so would raise significant separation of power concerns. The cited brief did not call for Auer to be abrogated, however. Thus, Roberts and Alito may have signaled, at most, their willingness to narrow Auer deference in some situations.

There are more substantive reasons for Auer deference to persist, as well. These reasons relate specifically to the two concerns driving most of the Court’s recent criticisms of the doctrine: (1) the desire to curtail overreaching by administrative agencies, and (2) the need to protect regulated parties from unfair agency action. The potential for unfairness to regulated parties is especially pronounced in the enforcement context, where concepts of fair notice and unfair surprise come into play, but also exists in the regulatory process, to the extent that agencies have incentives to enact vague regulations.

Notwithstanding the recent attention to them, these concerns are not new. They have previously been noted by the Court without bringing Auer (or its predecessors) into question. Long before Talk America and Christopher, other opinions noted the perverse incentives for vagueness in regulation that deference creates. See Thomas Jefferson Univ. v. Shalala, 512 U.S. at 525; Shalala v. Guernsey Mem. Hosp., 514 U.S. 87, 108–09 (1995). The Court has also engaged, albeit indirectly, the separation of powers issues raised by the concentration of rulemaking and interpretative power in a single agency. In Martin v. Occupational Health & Safety Administration, 499 U.S. 144, the Court deferred to interpretation of an Occupational Safety and Health Act regulation of the Secretary of Labor, to whom Congress had delegated rulemaking and enforcement power under the statute, rather than that of the Occupational Safety and Health Review Commission, to which Congress had assigned adjudicatory power over agency actions. The Court recognized that it is Congress’ prerogative to allocate rulemaking and interpretative power to or among agencies. It further presumed that Congress, in making such delegations, is aware of the rule of judicial deference articulated in Seminole Rock and Auer. The fact that Congress has only infrequently addressed the allocation of interpretative power to or among agencies suggests that Congress has at least acquiesced to the current rule of deference.

Nor has the Court been reluctant to limit deference where concerns of unfairness or agency overreach arise. As a result, the doctrine already incorporates “safety valves” that courts may employ to address agency overreach and protect regulated parties from the negative impacts of deference.

The Court’s refusal to defer to agency interpretations that amount to “post hoc rationalizations” for past agency action, or that do not represent the “fair and considered judgment” of the agency, represent clear checks on agencies’ behavior in rulemaking or in dealing with regulated parties. See Auer, 519 U.S. at 462. In declining deference on these grounds in Christopher, the Court included sharply worded dicta admonishing agencies that allowing enforcement action to proceed based on novel agency interpretations could result in “the kind of ‘unfair surprise’ against which our cases have long warned” on due process grounds and warning them against conduct that would “frustrat[e] the notice and predictability purposes of rulemaking.” Christopher v. SmithKline Beecham, 132 S. Ct. at 2167–68.

Similarly, the Court’s refusal in Gonzales v. Oregon to afford deference to an agency interpretation of a regulation that paraphrases the statute makes clear to agencies that they may not “bootstrap” themselves into Auer deference by merely enacting regulations that add no substantive content to the authorizing statute. 546 U.S. at 258. The rule announced in Christensen v. Harris County, 529 U.S. 576, 588 (2000), that a court should not defer to an agency interpretation of an unambiguous regulation, also was framed by the Court as a measure to prevent agencies from making de facto new rules without observing notice and comment procedures. The principle announced in Christopher, that courts will defer to a changed agency interpretation, or one newly advanced in litigation, only where doing so would not result in “unfair surprise” to regulated entities or “a significant threat of retroactive liability,” may also harmonize the Court’s divergent opinions on these issues.

Although it may raise concerns of agency overreach, in some respects Auer deference may result in more even-handed and predictable treatment of regulated parties. Even Justice Scalia, Auer’s fiercest critic on the Court, has acknowledged that Auer deference “imparts . . . certainty and predictability to the administrative process,” as well as helping to ensure consistent interpretation of governing regulations across circuits. Talk America, 131 S. Ct. at 2266. Abandoning Auer could cause considerable disruption if agencies were forced to contend with different controlling interpretations of their regulations in different circuits—a situation that already exists in some circumstances. Concern for the even-handed administration of environmental laws has been raised recently by EPA memoranda issued in response to decisions of the Sixth Circuit and Eighth Circuit overruling the agency’s interpretations of issues under the Clean Air Act and Clean Water Act. See Summit Petroleum v. EPA, 690 F.3d 733 (6th Cir. 2012); Iowa League of Cities v. EPA, 711 F.3d 844 (8th Cir. 2013). These memoranda instructed regional offices to follow these courts’ decisions only in the circuits where they were issued.

More importantly, Auer deference provides an important means of judicial control over agencies, helping to prevent agency overreach and protect regulated parties from unfairness in regulation and enforcement. The limitations on Auer crafted by the Supreme Court require that an agency that hopes to enjoy deference to its regulatory interpretations must (to the extent possible) explain the legal basis for its regulatory interpretations before going to court; must not pursue enforcement action that would result in procedural unfairness (such as unfair surprise) to regulated parties; and must promulgate regulations that are sufficiently specific and comprehensible for regulated parties to abide by them. Abrogating Auer would result in the loss of these safeguards, and it is unclear whether even the most critical justice would be willing to throw the baby out with the bathwater in this fashion.

Recent criticism of Auer deference by some members of the Supreme Court reflects legitimate concern about the aggrandizement of power by administrative agencies and the unfairness that agency action can impose on regulated entities. This criticism is not new, however, and does not appear to reflect a real possibility that the Court will overturn Auer if a challenge reaches the Court. Auer’s doctrine of deference already incorporates safeguards to prevent abuses, and the Court retains flexibility to add new ones. More importantly, by virtue of these limitations, Auer deference provides a mechanism for controlling agency behavior. Whatever the recognized drawbacks of deference, the Court is unlikely to abandon this tool any time soon.

Ben Snowden

Mr. Snowden is an associate on the Environmental and Land Use Team at Kilpatrick, Townsend & Stockton LLP in Washington, D.C.