Kisor v. Wilkie

Issues 

Should the Supreme Court overrule Auer v. Robbins and Bowles v. Seminole Rock & Sand Co., which direct courts to defer to an agency’s reasonable interpretation of its own ambiguous regulation?

Oral argument: 
March 27, 2019

This case asks the Supreme Court to determine whether Auer deference—a rule that requires a court to defer to an agency’s reasonable interpretation of its own ambiguous regulation—ought to be overruled. James Kisor contends that the Auer doctrine is not part of the lawmaking authority that Congress has delegated to agencies, but it instead circumvents the limits that Congress has placed on their authority, is inconsistent with the U.S. Constitution, and lacks any policy justification. Robert Willkie, the Secretary of Veterans Affairs, counters that, while there should be significant limitations on Auer deference, altogether discarding the doctrine would have heavy practical consequences for both agencies and regulated parties. The outcome of this case will affect the ability of regulated individuals and entities to comply with agency regulations and to challenge agency interpretations of their own regulations.

Questions as Framed for the Court by the Parties 

Whether the Supreme Court should overrule Auer v. Robbins and Bowles v. Seminole Rock & Sand Co., which direct courts to defer to an agency’s reasonable interpretation of its own ambiguous regulation.

Facts 

Petitioner James L. Kisor is a veteran who served on active duty in the Marine Corps from 1962 to 1966. Kisor filed a claim for disability compensation benefits with the Department of Veteran Affairs (“VA”) Regional Office in Portland, Oregon in 1982, claiming that he suffered from post-traumatic stress disorder (“PTSD”). In connection with Kisor’s claim, a Portland Vet Center counselor sent a letter to the VA Regional Office, stating that Kisor had symptoms associated with PTSD. The VA Regional Office also received a psychiatric exam of Kisor, which described how Kisor was involved in a major ambush during his service in Vietnam. In this report, the examiner noted that he believed that Kisor suffered from a “personality disorder,” which, unlike PTSD, is not a service-connected condition. Concluding that Kisor was not diagnosed with PTSD, the VA Regional office denied his claim.

In 2006, Kisor requested that his claim be reopened. While his claim was pending, Kisor presented several documents to the VA Regional Office to be considered as new evidence in support of his claim. Thereafter, a VA examiner diagnosed Kisor with PTSD. The VA Regional Office then made a Formal Finding of Information Required to Document the Claimed Stressor and issued a 50% disability rating, granting Kisor service connection for PTSD, effective June 5, 2006.

Kisor, however, challenged both the 50% disability rating and the effective date assigned. Although the Regional Office increased Kisor’s scheduler disability rating to 70% and granted a 100% rating on an extraschedular basis, it denied Kisor’s entitlement to an earlier effective date. Kisor appealed to the Board of Veterans’ Appeals and argued that he was entitled to retroactive benefits effective the date of his initial disability claim; that the 1983 rating decision was “clear and unmistakable error”; and various duty-to-assist failures by the VA. The Board rejected each of Kisor’s arguments, but it noted that there is a regulation which allows for an effective date for reconsidered claims that is different than that for reopened claims when there are relevant service department records that are newly associated with a veteran’s claim file. The Board, though, found that the records the VA received after its 1983 rating decision were not “relevant” for purposes of the regulation because they did not address the whether Kisor had PTSD; rather, they only showed that Kisor experienced a traumatic event during his service.

On appeal, the Court of Appeals for Veterans Claims affirmed the decision, finding that the Board did not incorrectly apply the regulation. The Court of Appeals for the Federal Circuit then also affirmed, deferring to the VA’s interpretation of the word “relevant” in its regulation because it is ambiguous and the VA’s interpretation was neither erroneous nor inconsistent with the agency’s regulatory framework. The Supreme Court granted certiorari on December 10, 2018.

Analysis 

Legal Justifications for Auer Deference

Kisor asserts that Auer deference—a rule that requires a court to defer to an agency’s reasonable interpretation of its own ambiguous regulation—is wrong as a legal matter. Kisor argues that Auer deference is inconsistent with the Administrative Procedure Act (“APA”), which implements safeguards governing agency rulemaking. Kisor notes that the APA gives agency rules legally binding effect only if they go through notice-and-comment rulemaking, which requires that an agency give the public both notice of the rule that the agency intends to adopt and the right to participate in the rulemaking process. Kisor contends that Auer deference creates the anomalous result of allowing agencies to make legally binding interpretive decisions without going through notice-and-comment rulemaking.

Kisor also maintains that Section 706 of the APA gives the reviewing court—not the agency—the power to determine the meaning of an agency rule. Kisor argues that this provision contemplates that courts—rather than agencies—will resolve ambiguities in agency regulations. Kisor adds that the traditional standards governing the validity of agency action do not apply when it comes to Auer deference. According to Kisor, unexplained changes in an agency’s regulation interpreting a statute receive no deference, whereas unexplained changes in an agency’s interpretation of its own statute receive Auer deference.

Kisor further argues that Auer deference exceeds the rulemaking authority delegated by Congress to agencies. Kisor states that an agency has lawmaking authority only to the extent that it employs the procedures which Congress has specified. Kisor contends that, in this case, Congress delegated power to the VA to make laws through notice-and-comment rulemaking. Kisor maintains that Auer deference exceeds the authority which Congress delegated to the agency by conferring the force of law on interpretations issued by the agency without notice-and-comment rulemaking. Kisor asserts that Auer deference should be overruled because it makes the procedural safeguards of the APA meaningless.

Respondent Robert L. Wilkie, the Secretary of the Department of Veterans Affairs, argues that Auer deference raises two serious legal concerns: it conflicts with the APA’s distinctions between interpretive and legislative rules, and its pre-APA legal basis is unclear and is difficult to justify based on either agency intent or Congressional delegation. Wilkie asserts that Auer deference creates the anomalous result of giving interpretive rules binding legal effect despite the rule failing to go through notice-and-comment rulemaking. Wilkie maintains that the Seminole Rock decision did not invoke any of the Court’s precedents when it held that an agency’s interpretation of its own regulation should be given controlling weight unless it is plainly erroneous.

Wilkie further contends that a legal justification for Auer deference based on the agency’s intent is tenuous since the Court’s interpretive approach in other contexts is often limited to the statute’s text and agency rules are frequently interpreted long after they were initially enacted. Wilkie goes on to restate the congressional delegation justification for Auer deference, which holds that if a regulation which Congress has authorized an agency to issue is ambiguous, Congress is presumed to have intended the agency’s interpretation of that regulation to govern. Wilkie says this justification carries little weight since the ambiguity in the regulation was created by the agency, not Congress.

In contrast to Kisor, Wilkie argues that Auer deference should be limited rather than overruled to address these problems. According to Wilkie, Auer deference should only be given when the agency has reasonably interpreted the ambiguity after all traditional tools of statutory construction have been exhausted. Wilkie also says that Auer deference should be confined to situations where the interpretation: is consistent with the agency’s prior interpretations, provides regulated parties with fair notice, is based on the agency’s expertise, and represents the views of the agency itself. Wilkie states that the agency’s interpretation only has persuasive rather than controlling effect if any of these requirements are violated. Wilkie further notes that these limitations on Auer deference would make it consistent with the APA by effectively requiring significant policy changes to go through notice-and-comment rulemaking rather than interpretations of existing agency regulations. Wilkie therefore urges the Court to limit Auer deference rather than overrule it.

STRUCTURAL Justifications for Auer Deference

Kisor argues that Auer deference violates the APA’s policy goals of predictability and public notice. Kisor contends that Auer deference gives agencies an incentive to create vague regulations which the agency can then interpret as it sees fit, which hampers both predictability and notice. Kisor adds that Auer deference allows agencies to change course quickly by issuing interpretive rules without going through notice-and-comment rulemaking. Kisor emphasizes that the lack of predictability and notice is most harmful to government fairness and impartiality when agencies interpret their regulations according to their own self-interest.

Kisor also asserts that there is little merit to the two major policy justifications of Auer deference: that the agency has special insight into the intent of the rule since the agency drafted it, and that the agency has special expertise in administering its regulatory program. Kisor maintains that agencies do not have any better insight than courts in judging the intent of a particular regulation, since the interpretation of the regulation always turns on sources available to the public and the interpretation is frequently performed years or even decades after the regulation was first enacted. Kisor also asserts that agency expertise is irrelevant since the interpretive question is not what the best policy choice is, but what the regulation actually means. Kisor argues that judges are equally qualified to determine that meaning as regulatory agencies.

Wilkie contends that there are practical benefits to Auer deference which counsel against overruling it. Wilkie says that Auer deference creates stability and predictability. According to Wilkie, Auer deference enables parties to make informed predictions about the interpretation of a regulation by reading the agency’s guidance, rather than predicting how a court will interpret a regulation in every judicial proceeding. Wilkie goes on to say that Auer deference promotes national uniformity in federal law since an agency regulation is given only one interpretation around the country—that is, the agency’s interpretation—whereas overruling Auer deference would result in different courts giving the same regulation different interpretations.

Wilkie further argues that Auer deference serves important reliance interests of agencies. . Wilkie notes that agencies will have difficulty enacting binding interpretations in the absence of Auer deference, since doing so would require notice-and-comment rulemaking which typically takes years and tens of thousands of person hours to complete. Wilkie also asserts that Auer deference enables agencies to utilize their technical and scientific knowledge to administer their complex regulatory schemes. Wilkie further maintains that Auer deference promotes political accountability by giving agencies rather than judges the ability to make policy-driven interpretive decisions.

Stare Decisis and Separation of Powers

Kisor asserts that stare decisis does not require that the Court refrain from overruling Auer and Seminole Rock and carries less weight given the unique circumstances of this case. Kisor emphasizes that special justifications support overruling Auer and Seminole Rock. Kisor points out that Auer deference is a judge-made rule governing judicial decision-making, which has traditionally enjoyed less stare decisis protection then constitutional or statutory interpretation rules. Kisor adds that significant developments in administrative law since Auer and Seminole Rock were decided make stare decisis less binding in this case. According to Kisor, Seminole Rock was decided before the enactment of the Administrative Procedure Act in 1946, and that the Court has never reconciled Seminole Rock with the APA. Kisor also notes that the administrative state is much larger and much more powerful today than it was when Seminole Rock was decided, which justifies a reexamination of Auer and Seminole Rock.

Kisor further maintains that there are no significant reliance interests preventing the Court from overruling Auer deference. Kisor states that private parties probably do not rely on Auer deference since it does not require any particular result for any particular rule. Kisor instead argues that the Auer doctrine is unreliable since it allows agencies to give binding interpretations of their rules after a lawsuit begins, even if that interpretation is contrary to the agency’s previous interpretations. Kisor claims that private parties frequently structure their conduct around the best interpretation of an agency regulation, but Auer deference gives the force of law to any reasonable agency interpretation, regardless of whether it is the best one. Kisor also contends that overruling Auer and Seminole Rock will not upset agencies’ reliance interests since agencies can still give their interpretations of agency regulations the effect of law if the agencies use notice-and-comment procedures. Kisor adds that Auer deference violates the separation-of-powers principle because it gives an agency the legislative power to write a law and the judicial power to interpret that law.

Wilkie argues that stare decisis counsels against overruling Auer and Seminole Rock. Wilkie notes that Congress can change the Auer and Seminole Rock decisions through legislation, which counsels against the Court overruling these cases. According to Wilkie, the question of whether Auer deference makes agency regulations more unpredictable is an empirical question which Congress can analyze and fix through legislative action. Wilkie goes on to claim that stare decisis is less significant for procedural rules, but only because those rules do not affect the primary conduct of parties. Wilkie claims that stare decisis nevertheless counsels against the Court overruling Auer deference since the rule affects the meaning of regulations which affect primary conduct.

Wilkie also maintains that overruling Auer deference would upset significant reliance interests. Wilkie states that private parties have conformed their behavior based on Auer deference, and that overruling it would result in many parties challenging interpretations that had previously received Auer deference on the grounds that such interpretations are not the most persuasive to a particular court. Wilkie claims that his proposed narrowed construction of Auer deference would not upset reliance concerns as much as a complete overruling of Auer and Seminole Rock. Wilkie adds that Auer deference does not violate separation-of-powers principles because it is an exercise of solely an executive power, even though it may take legislative and judicial forms.

Discussion 

AUER’S EFFECT ON REGULATED ENTITIES AND INDIVIDUALS

The Chamber of Commerce of the United States of America, Business Roundtable, and Association of American Railroads (collectively “Chamber of Commerce”), in support of Kisor, contend that Auer and Seminole Rock deference incentivize agencies to forego formal notice-and-comment rulemaking in favor of promulgating broad and vague regulations. The Chamber of Commerce argues that this type of agency behavior harms regulated entities by making it difficult for them to monitor agencies’ changing views and interpretations of their regulations. Further, the Chamber of Commerce contends that this unpredictability generates significant costs for businesses; when a business fails to accurately monitor an agency’s views, it may have to change its compliance mechanisms or even pay damages. Similarly, Dean Ronald A. Cass and other professors, also in support of Kisor, assert that granting agencies expansive latitude to interpret and apply vague regulations risks unfair surprise for regulated entities that have limited opportunity to anticipate agency action.

The National Association of Home Builders and other public service organizations (“Home Builders”), in support of Kisor, note that Auer deference has real-world implications for the livelihoods of not only companies, but also most individuals. For example, the Home Builders contend that an agency’s interpretation of “critical-habitat” designations can affect individuals in various industries, from farming to construction. The Center for Workplace Compliance (“Center”), like the Home Builders, emphasizes the far-reaching impact that Auer deference has on individuals and focuses on its effect in the employment context. The Center argues that Auer deference to agency interpretation of regulations regarding the employer/employee relationship, such as minimum wage and disability regulations, makes it difficult for employers to comply with the law.

A group of administrative law scholars (the “Scholars”), in support of affirming the Federal Circuit’s decision below, counters that Auer deference does not make agency action impermissibly unpredictable. In fact, the Scholars argue, tasking courts with the responsibility of deciding what the “best” interpretation of statutes is could have the perverse effect of incentivizing agencies to simply make policy through case-by-case adjudications rather than rulemaking—thus creating even more unpredictability for regulated entities and individuals. The Scholars further contend that heightened judicial review of agency interpretations would exacerbate the unpredictability of regulations’ interpretations because courts that have less familiarity with the technicalities of regulations are likely to come to conflicting judgments. Conflicting judgements, the Scholars conclude, would increase compliance costs for regulated entities.

The Scholars also assert that experience quashes the “theoretical allure” of the notion that Auer deference induces agencies to write vague statutes. The Scholars contend that there is no factual, or even anecdotal, evidence of any regulations that have been designed vaguely because of Auer deference. In fact, the Scholars assert, since Auer has been decided, regulations that have been promulgated by agencies have been increasingly clear, thus supporting regulated entities and individuals in their efforts to conform their conduct to the law. Further, the Scholars note that judicial review of whether agency rulemaking is “arbitrary and capricious” deters agencies from purposely promulgating vague regulations.

COMPROMISING THE ROLE OF THE JUDICIARY

The New Civil Liberties Alliance (“Alliance”), in support of Kisor, contends that Auer deference forces judges to blindly give weight to agencies’ interpretations of their regulations—regardless of how the judges would otherwise interpret the regulations in their own independent judgment. Further, the Alliance argues, Auer deference compels judges to “display systematic bias” against individuals or entities that oppose an agency’s interpretation of their regulation. This practice, the Alliance asserts, deprives regulated parties of the ability to pursue an independent and impartial proceeding. The Center for Workplace Compliance also argues that Auer deference has a negative effect on entities who seek to challenge agency interpretations of regulations. The Center argues that under a scheme where the courts “reflexively” defer to agency interpretations, many regulated entities will be unwilling to risk pursuing litigation, while agencies will become empowered to take a firmer stance on even infirm regulatory interpretations. This phenomenon, the Center contends, leads to entities either settling enforcement actions or else facing significant costs to comply with unwise regulatory interpretations.

The Scholars counter that Auer deference is not an “abdication of judicial responsibility,” but rather a standard of review that allows the courts to engage in an independent evaluation of the agency’s interpretation. The Scholars emphasize that even where Auer deference is applied, it is nevertheless the court that ultimately decides whether the agency’s interpretation is applicable and correct. Further, the Scholars note that courts have the flexibility to shape the Auer doctrine if it appears that its application is eroding our country’s fundamental values.

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Acknowledgments 

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