D.C. Circuit Review – Reviewed: A “Chenery I” Sort of Week

by Aaron Nielson — Friday, Sept. 21, 2018@Aaron_L_Nielson

Apologies — this post was written on the run; traveling today.

As regular readers know, Chenery — both I and II — is a big deal in the D.C. Circuit. When I was clerking, I remember an oral argument in which Judge Garland asked counsel something like, “Well, wouldn’t that present a Chenery issue?,” spoken as if everyone in the world obviously knows exactly what that means.* Garland was right to ask the question that way. After all, if you hope to practice in the D.C. Circuit, you have to know Chenery.

This week, the D.C. Circuit decided two cases — and both are Chenery I cases.

This point is obviously true for ANR Storage Company v. FERC. Here, Judge Katsas (joined by Judges Henderson and Randolph) addressed whether FERC permissibly “refused to allow ANR Storage Company to charge market-based rates, as opposed to cost-based rates, for its natural-gas storage services.” The arbitrary-and-capricious analysis is interesting (especially if you are an antitrust person — lots of analysis of market share). For our purposes, however, I want to highlight the Court’s use of Chenery I.

And this one:

The other case this week is also a Chenery I case, although the Court doesn’t cite it.

In SoundExchange, Inc. v. Copyright Royalty Board and Librarian of Congress, Judge Srinivasan (joined by Judges Rogers and Griffith) upheld the Board’s rates for “ad-based commercial noninteractive webcaster services and … subscription-based commercial noninteractive webcaster services.” I’ll let copyright people talk about that substantive analysis — I assume it is a big deal, but it isn’t my field. Instead, I want to highlight the Court’s discussion of Chevron, which (in this case) is really a discussion of Chenery I. Take it away Judge Srinivasan:

Wow, that a lot of block quoting for a blog post. But this waiver issue is fascinating. Whether an agency can waive Chevron implicates — in a sense — Chevron Step One-and-a-Half. And that, in turn, implicates Chenery I. The idea, as I understand it, is that an agency must realize that it has interpretative discretion. If it doesn’t know that it has such discretion, it can’t prevail in Court by relying on that discretion. That strikes me as a variant of Chenery I. And I’m not the only one. Professor Peter Shane, who knows a thing or two about administrative law, made this observation:

I think that’s right — though I’m not so sure about “ultra.”

Now, go forth and enjoy your (Chenery-free) weekend.

 

* If you don’t know what Chenery is about, don’t worry about it — I’ll teach you. This is how I explained it before:

The rule from Chenery I — stated best, of course, in Chenery II — is as follows:

When the case was first here, we emphasized a simple but fundamental rule of administrative law. That rule is to the effect that a reviewing court, in dealing with a determination or judgment which an administrative agency alone is authorized to make, must judge the propriety of such action solely by the grounds invoked by the agency. If those grounds are inadequate or improper, the court is powerless to affirm the administrative action by substituting what it considers to be a more adequate or proper basis. To do so would propel the court into the domain which Congress has set aside exclusively for the administrative agency.

It is hard to overstate the importance of the Chenery I “no post hoc” justification rule.

The rule of Chenery II, however, is not at all similar. There, the Court held that agencies have discretion whether to make policy through prospective rulemakings or retroactive adjudications:

Hence we refuse to say that the Commission, which had not previously been confronted with the problem of management trading during reorganization, was forbidden from utilizing this particular proceeding for announcing and applying a new standard of conduct. That such action might have a retroactive effect was not necessarily fatal to its validity. Every case of first impression has a retroactive effect, whether the new principle is announced by a court or by an administrative agency. But such retroactivity must be balanced against the mischief of producing a result which is contrary to a statutory design or to legal and equitable principles. If that mischief is greater than the ill effect of the retroactive application of a new standard, it is not the type of retroactivity which is condemned by law.

That’s a pretty good primer. How to apply Chenery in the real world, unsurprisingly, is much more complicated!

 

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About Aaron Nielson

Professor Nielson is an associate professor at Brigham Young University Law School. Before joining the academy, Professor Nielson was a partner in the Washington, D.C. office of Kirkland & Ellis LLP (where he remains of counsel). He also has served as a law clerk to Justice Samuel A. Alito, Jr. of the U.S. Supreme Court, Judge Janice Rogers Brown of the U.S. Court of Appeals for the D.C. Circuit, and Judge Jerry E. Smith of the U.S. Court of Appeals for the Fifth Circuit. All views expressed are the author's alone. Follow him on Twitter @Aaron_L_Nielson.

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