Auer and the Incentives Issue, by Ronald M. Levin

by Guest Blogger — Monday, Sept. 19, 2016

At the center of the challenge to Auer deference is the thesis that the deference prescribed in that case gives agencies an incentive to write regulations vaguely, so that they will subsequently be able to adopt interpretations of those regulations that have not undergone the rigors of the notice and comment process but will nevertheless receive the benefit of strong judicial deference. A problem with the argument, however, is that there appears to be no good evidence showing that this incentive has often – or for that matter ever — had the effect that the theorists ascribe to it. I am not saying that the evidence of the incentive effect is weak. That label would imply that there is at least some evidence of it – but, as best I can discover, the literature on this subject contains no evidence of it at all.


The theory got its start in a well-known 1996 article by John Manning. He discussed Shalala v. Guernsey Memorial Hospital as a case in which the agency would have known that writing a vague rule would have left it significant latitude to interpret the rule afterwards, without judicial interference. But Manning did not assert that in Guernsey, or any other case, the issuing agency actually did write the rule for the purpose of reaping these benefits of vagueness. In a contemporaneous case, Thomas Jefferson University v. Shalala, Justice Thomas wrote in dissent that “[i]t is perfectly understandable, of course, for an agency to issue vague regulations, because to do so maximizes agency power and allows the agency greater latitude to make law through adjudication rather than through the more cumbersome rulemaking process.” But he did not say, let alone try to show, that the agency actually had kept the regulation vague for that reason.


Justice Scalia gave further impetus to the challenge to Auer deference in his separate opinions in the line of decisions running from Talk America through Decker to Mortgage Bankers, but even he did not claim that the specific regulations underlying those cases were, in fact, examples of rules in which the incentive to be vague had played any part. (Indeed, none of those rules looks particularly bereft of detail.) Meanwhile, a rapidly burgeoning scholarly literature has developed in recent years to fuel the anti-Auer crusade. I have read as much of it as I can find and have spotted not a single example of a regulation that, in some author’s view, purportedly was written vaguely so as to reap the benefits of Auer deference. (I acknowledge the data cited by Chris Walker in his blog post in this symposium; I consider it nonprobative for reasons expressed by Cass Sunstein and Adrian Vermeule, as quoted in that post.)


When I refer to evidence, I do not mean to insist on specific case citations or empirical studies. As yet, however, the critics of Auer have not even produced any good anecdotes to support their theory. I have yet to read an account by a former regulator saying, “why, sure, I exploited the opportunities Auer creates all the time.” Or even: “I remember once when I proposed a regulation, my boss responded, ‘Why bother? We can get the same deference through interpretation with much less procedural hassle.’” Frankly, I have been surprised that no such stories have crept into the public dialogue. Considering the enormous variety of situations that can arise in bureaucratic life, I assume that at some point such tales will be told. Then we can have a debate over whether this paltry evidence is enough to justify foregoing the benefits of Auer deference. At present, however, the factual basis of the critique of Auer isn’t paltry. It’s one hundred percent guesswork.


Actually, however, I’ve got some evidence of my own. Last year the GAO asked officials at four departments (including twenty-five subagencies) to explain what factors they consider in deciding whether to issue guidance or undertake rulemaking. You can probably guess how many of them mentioned judicial review as a factor. (Hint: If you guessed “one,” you’re high.)


“But wait!” the perspicacious reader might interject. “Of course they didn’t mention judicial review. Since they would get about the same deference regardless of whether they proceed by regulation or by guidance, naturally they don’t consider deference when they choose which of these routes to take. But if the courts were to abolish or substantially dilute Auer deference, agencies would then have an incentive to favor notice and comment rulemaking in order to take advantage of the higher level of deference they could thereby obtain.” In fact, this is similar to an argument that Bill Funk offered in a recent blog post.


Even that line of reasoning would rest on unproven factual assumptions about how much influence the supposed incentive would exert. (Its magnitude might depend on what, exactly, the new standard of review for agency interpretations of their regulations would turn out to be.) But let’s assume for the moment that the newly created incentive would, indeed, make agencies less inclined to deploy interpretations through guidance. Proponents of this alteration in the standard of judicial review would still need to answer the question of why the alteration should be adopted. The goal of curing the allegedly distortive incentive effects of Auer deference – the policy foundation of the Manning-Scalia critique – would not suffice.


It is disconcerting that the challenge to Auer deference has picked up so much steam with so little factual grounding for one of its key premises. Manning’s article provided an excellent theoretical analysis, but the logical next step should have been to ask whether agencies really do act in line with the theory. I do not mean to suggest that the incentive to write regulations vaguely does not exist at all. It presumably does – but it surely does not exist in a vacuum. A myriad of factors may influence agencies in their decisions about how broadly or narrowly to write a given regulation. Some of those factors can militate toward specificity rather than vagueness. A good reason to be specific, for example, is to nail down a concrete application of the regulation, instead of leaving the question to be resolved through all the contingencies and delays that may accompany the implementation and enforcement process. How all these diverse influences net out in the regulatory process is far from obvious.


Auer deference is a venerable doctrine. It is deeply rooted in our history and, in its Seminole Rock formulation, older than the Administrative Procedure Act. It reflects the courts’ sound recognition of the value of the agency’s perspective in judicial review, in light of the complexity of many regulations and the agency’s responsibility for making the overall program work. In my view, the incentive argument is far too speculative to justify abandonment of that doctrine.


Ronald M. Levin is the William R. Orthwein Distinguished Professor of Law at Washington University in St. Louis. This post is adapted from the author’s testimony at hearings conducted by a subcommittee of the House Committee on the Judiciary in May 2016 and by a subcommittee of the Senate Committee on Homeland Security and Governmental Affairs in April 2015.


 This post is part of an online symposium entitled Reflections on Seminole Rock: The Past, Present, and Future of Deference to Agency Regulatory Interpretations.  You can read the entire series here.


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