June 01, 2019

No More Deference to State Environmental Agencies?

Douglas A. Henderson and J. Houston Shaner

Just how much should courts defer to an agency’s interpretation of its own regulations? For several decades now, the answer in federal court has been “quite a lot.” The agency deference doctrine is commonly traced back to the U.S. Supreme Court’s 1945 decision, Bowles v. Seminole Rock & Sand Co., where the Court remarked that an “administrative interpretation[,]” in that case the Office of Price Administration’s view of a maximum price rule, “becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation.” 325 U.S. 410, 414 (1945). How much this remark about deference dictated the ultimate outcome in Seminole Rock is up for debate. On its own reading, the Court found the rule to be perfectly clear (which would make deference unnecessary), and it gave neither authority nor policy argument for why agency views receive “controlling weight.”

Since Seminole Rock articulated its plain-error standard, federal courts generally have been very accommodating toward federal environmental agencies’ views of their own rules, perhaps even more than to agencies’ views of their governing statutes. See, e.g., Udall v. Tallman, 380 U.S. 1, 16–17 (1965) (oil and gas leasing on public lands). The Supreme Court revisited and reinforced this deference principle in Auer v. Robbins, 519 U.S. 452, 461–63 (1997). There, Justice Scalia relied on Seminole Rock to adopt the Department of Labor’s interpretation of its own overtime exemptions—notably finding that even though the department offered its view through an amicus brief, those views still reflected its “fair and considered judgment[.]” Id. at 462.

Auer has held significant sway over federal environmental law ever since. In effect, the plain-error test tilts the playing field in favor of the U.S. Environmental Protection Agency, the U.S. Army Corps of Engineers, the Department of the Interior, and other agencies, and that advantage has carried the agencies’ view to victory in a wide variety of contexts: agency enforcement, citizen suits, permits, and administrative proceedings of all stripes. See, e.g., United States v. Duke Energy Co., 981 F. Supp. 2d 435, 463 (M.D.N.C. 2013) (deferring in context of a motion in limine). Indeed, Auer’s full impact on federal environmental law may be much larger than reported decisions can convey. For every defendant who contests an enforcement action, there may be many more who quickly settle under the expectation they cannot overcome the plain-error test, and for every administrative proceeding contested in federal court, there may be several never raised for lack of a way around Auer. Alternatively, if a party can persuade the agency to adopt its interpretation at the outset (say, in a permit), Auer and Seminole Rock are powerful weapons for that party’s cause. Their influence on the day-to-day practice of the environmental bar might even match that of their better-known cousin, deference to agency views of ambiguous statutes. See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).

The Supreme Court appears set to dilute—or even end—that influence in a case argued on March 27, 2019, Kisor v. Shulkin, 869 F.3d 1360 (Fed. Cir. 2017), cert. granted sub nom. Kisor v. Wilkie, 139 S. Ct. 657 (2018). In its narrowest sense, Kisor examines the meaning of “relevant” in a federal rule governing claims for veterans’ benefits (see 869 F.3d at 1365–67), but the Supreme Court granted review late last year on the sole question of whether it should overrule Seminole Rock and Auer. The Court’s reconsideration follows criticism from conservative jurists, including Justice Scalia himself, that these cases create poor incentives in the rule-writing process or impinge on separation of powers. These judicial critics have not been alone. Numerous amici, including major industry groups and many states, have piled on against Seminole Rock and Auer. Even the solicitor general—the defender of federal agencies before the Court—argues in his merits brief that the Court should rework its test to make deference less likely. The environmental bar might soon witness a major change in the balance of power between federal agencies and their legal opponents.

But that might not be the last that environmental law sees of Seminole Rock and Auer, because these federal deference cases also have had significant impact on state environmental law. Certainly, some states reject the idea of deferring to their environmental agencies entirely, whether the issue concerns a regulation or a statute. But in other states, the plain-error rule of Seminole Rock and Auer quietly has made its way into administrative jurisprudence, blending federal and state law. See, e.g., Verhein v. Piper, 917 N.W.2d 96, 105–06 (Minn. Ct. App. 2018) (citing Auer alongside comparable state case law); In re Stowe Cady Hill Solar, LLC, 182 A.3d 53, 59 (Vt. 2018) (same). And since state environmental law creates its fair share of that jurisprudence, it might let these cases live a second legal life after Kisor. Recent environmental cases from two states, Georgia and Nebraska, illustrate both how Auer and Seminole Rock form the basis of deference to state agencies and how Kisor might put an end to that deference.

Take Nebraska. On January 11, 2019, just one month after the Supreme Court decided to take up Kisor, the Nebraska Supreme Court issued its opinion in Prokop v. Lower Loup Natural Resources District, 921 N.W.2d 375 (Neb. 2019). Prokop began when a farmer refused to report his crop yield to a state groundwater management agency that had a practice of collecting yield data even though its rules did not explicitly require it. The farmer’s efforts gained him a cease-and-desist order from the agency against use of his wells and, eventually, an audience before the Nebraska Supreme Court.

The farmer lost. For the Nebraska Supreme Court, Prokop was a run-of-the-mill deference case, easily decided for the agency under Nebraska’s own plain-error test. The court did not cite to federal law for its deference principle, but the resemblance to Auer is clear: Bring a compelling case against the agency’s interpretation, or lose.

In fact, the resemblance to federal law was especially clear to Justice Papik, who concurred separately. On his account, the plain-error test had crept into state law almost unthinkingly. He traced its state origins back to 1984, when the Nebraska Supreme Court cited to an Eighth Circuit decision, which itself relied on Seminole Rock. What Justice Papik did not unearth was much prior discussion, at any point, of why plain error was the proper standard in the first place. And perhaps that’s a fitting way to adopt Seminole Rock, a case that chose its own rule without explaining why.

Justice Papik’s legal genealogy might carry over to other states, as well. Auer and Seminole Rock, whatever their merits, seem to have shaped the thinking of state jurists almost by default. Why? Simple availability might be the best explanation. Because the federal system addressed the deference question back in 1945, the federal agency deference test has been an obvious option for state judges looking to decide an environmental case quickly and cleanly.

Justice Papik wrote separately because he, like many others, thought Auer and Seminole Rock to be flawed decisions. Yet he did not seek to abandon their principles in Prokop, calling instead for reconsideration in a later case. Whether his call will be met is far from clear. At this point, Auer and Seminole Rock have been the basis of Nebraska jurisprudence for nearly four decades. The plain-error test is now well-settled law there, and the Nebraska Supreme Court may have little appetite for overturning established precedent, even if Kisor rewrites agency deference. That may be a tough choice for many other states, too. Pulling a keystone out of the current regulatory structure can be risky, even if the test’s formal legal basis seems shaky.

The Supreme Court of Georgia suggested that Seminole Rock and Auer might not be permanent fixtures in state law. Eleven days after Prokop was filed, the Georgia justices heard oral argument in the consolidated appeals of City of Guyton v. Barrow and Dunn v. Barrow. See Jan. 22, 2019, Oral Arguments, Ga. Supreme Ct., https://scgtv.new.swagit.com/videos/23457. Like Prokop, Barrow arose out of environmental law, this time involving a permit for a city’s land application system under the Georgia Water Quality Control Act. See Barrow v. Dunn, 812 S.E.2d 63, 64 (Ga. Ct. App. 2018).

Barrow, a nearby landowner, claimed the permit did not comply with the Georgia Board of Natural Resources’ “anti-degradation rule,” which requires a strong economic justification for any permit that might degrade the quality of state waters and which agency guidance claimed did not apply to “non-point sources” like a land application system. As in Prokop, the Georgia Court of Appeals reviewed the agency stance for plain error, a test it traced back to Atlanta Journal v. Babush, 364 S.E.2d 560, 562 (Ga. 1988). Babush, in turn, adopted its test from United States v. Larionoff, 431 U.S. 864, 872 (1977), one of Seminole Rock’s progeny. Despite its government-friendly test, the Georgia Court of Appeals ultimately sided against the agency, and the agency predictably sought review by the state’s highest court, calling for deference to its guidance under both Babush and Auer.

The agency got the Supreme Court of Georgia’s attention, but maybe not in the way it wished. The court’s first question presented was “[w]hat level of judicial deference should be afforded to a state agency in its interpretation of its own internal rules and regulations?” Order, Dunn v. Barrow, No. S18G0945 (Aug. 27, 2018). Perhaps, like Justice Papik in Nebraska, the Georgia court recognized the federal heritage of its deference decisions and wondered if that truly suited state law. The Georgia justices might also have noticed another Georgia Court of Appeals decision, issued shortly before the high court’s writ, that grounded its plain-error test entirely in federal cases. See Altamaha Riverkeeper, Inc. v. Rayonier Performance Fibers, LLC, 816 S.E.2d 125, 130 (Ga. Ct. App. 2018). At the Barrow oral argument, one justice described Babush as adopting federal law “without any meaningful analysis,” and asked how deference can be “remotely consistent with” the court’s constitutional duties. See Jan. 22, 2019, Oral Arguments at 1:04, 1:06.

The Georgia justices recently resolved Barrow on grounds unrelated to deference, electing not to provide a definitive answer on the first question presented. See City of Guyton v. Barrow, Nos. S18G0944, S18G0945, slip op. at 3, 7 (Ga. May 20, 2019). Nonetheless, the court noted at the outset that the Auer doctrine “is in tension with our role as the principal interpreter of Georgia law[.]” Id. at 1. And, like Justice Papik, the Georgia Supreme Court recounted “significant criticism” of “the validity of Auer/Seminole Rock deference” and its application by federal courts, pointing to the possibility of a new doctrine in Kisor. Id. at 7–8, 11. The court then made considerable efforts to qualify the plain-error test adopted in Atlanta Journal. Id. at 9–12. That test remains a part of Georgia law, but its viability in a future case is not so clear after Barrow.

Will justices in other states take up Justice Papik’s call to uproot Auer and Seminole Rock from state jurisprudence, or conclude that the rules from those cases create too much “tension with [their] role as the princpal interpreter” of state law? Will state courts decide to change course even if the Supreme Court decides not to? It’s not yet clear. Environmental lawyers, like the rest of the bar, will have to wait and see, just as they will have to wait to see if those cases continue as viable federal precedent after Kisor. Perhaps this is the end for deference to federal agency regulation interpretations, but perhaps agency deference will live on in some form or another, at least for a while, through state environmental law.

Entity:
Topic:

Douglas A. Henderson and J. Houston Shaner

Mr. Henderson is a partner at King & Spalding LLP in Atlanta, Georgia. He may be reached at dhenderson@kslaw.com. Mr. Shaner is an associate at Troutman Sanders LLP in Atlanta, Georgia. He may be reached at houston.shaner@troutman.com.