D.C. Circuit Review – Reviewed: A Tale of Two Chenerys

by Aaron Nielson — Saturday, Dec. 5, 2015@Aaron_L_Nielson

What a strange world we administrative lawyers call home. Ours is a land where elephants hide in mouseholes, wolves sometimes wear clothes, and some even say that “Article III judges — like jackals stealing the lion’s kill — expropriate some of the power that Congress has wrested from the unitary Executive.” We talk of “Black Monday,” the Headless Fourth Branch, “a Matryoshka doll of tenure protections,” and a “junior-varsity Congress” — to say nothing of the “Four Horsemen,” the “Star Chamber,” and the “Goodness and Niceness Commission.” Canonical cases concern chickens, bubbles, soap operas, and something called a “Brand X.” Our dictionaries duel, there is no sound at our “hearings,” and a great power known only as Vermont Yankee II is always lurking just beyond the horizon. All the while, our soundtrack is psychedelic, but we can’t seem to stop this insanity. No wonder the “administrative state . . . would leave the Framers rubbing their eyes”!

And to top it all off, two of the most important cases have the same name. I refer to Chenery I and Chenery II — all too often just called Chenery.* Although both of these cases concerned the same parties and, more or less, the same facts, the two rules they stand for are very different. (In a future post, I will recount the full story. To give you a sneak peak, Chenery ends up owning Secretariat.)

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.

It is interesting that Justice Jackson — joined by Justice Frankfurter, the author of Chenery I — dissented in Chenery II, criticizing the Court’s decision as “an ominous one to those who believe that men should be governed by laws that they may ascertain and abide by, and which will guide the action of those in authority as well as of those who are subject to authority.” Nonetheless, Chenery II has stuck, though, to be sure, subject to the “fair notice” doctrine.

Both Chenery cases have been the law for, give or take, 70 years. They have been applied countless times. One would think after all of that, there would be nothing new to say. But Law is surprising. Consider Canonsburg General Hospital v. HHS, decided this week by the D.C. Circuit. This case represents Round Two (technically, Round Three, if you count the administrative proceeding sandwiched in the middle) of a hospital’s attack on HHS’s reasonable cost limits for Medicare reimbursements. Judge Henderson, joined by Judges Edwards and Sentelle, affirmed the district court’s decision that Canonsburg I, through the doctrine of collateral estoppel, precluded the hospital’s argument. Relevant here, Canonsburg argued that HHS could not raise issue preclusion as a defense in federal court because the agency failed to mention it during the administrative proceedings leading up to Canonsburg II. According to the hospital, any other conclusion would violate Chenery I. (The hospital also made an interesting, but unsuccessful, waiver argument along the same lines.) The panel disagreed: “Issue preclusion is not a determination specially entrusted to an agency’s expertise; it is instead the sort of antecedent determination that a court usually makes. Simply put, Chenery does not apply to legal principles like issue preclusion.”

(The D.C. Circuit’s other two opinions this week, United States v. Zagorski and United States v. Law, dealt with criminal defendants challenging their sentences. Zagorski involved a conviction for distributing child pornography, and Law was based on a drug trafficking conspiracy. Both defendants lost.)

After reading this post, the distinction between Chenery I and II should, hopefully, be clearer: Chenery I makes it harder for agencies by limiting their ability to engage in post hoc rationalizations; Chenery II makes it easier for agencies by giving them discretion to make policy through retroactive adjudication. Unless you spend a lot of time thinking about administrative law, however, you are forgiven for getting them mixed up. (Of course, name confusion afflicts more than just the two Chenery cases. Remember, the Court of Appeals for the District of Columbia Circuit is not the same court as the District of Columbia Court of Appeals. But boy, does such confusion fit well in a world of administrative law whose imagery is worthy of Salvador Dali — if not T.S. Eliot.)

* Wouldn’t it be wonderful if there was only one case named Chenery? As the Poet Geisel explained:

Did I ever tell you that Mrs. McCave
Had twenty-three sons and she named them all Dave?
Well, she did. And that wasn’t a smart thing to do.
You see, when she wants one and calls out, “Yoo-Hoo!
Come into the house, Dave!” she doesn’t get one.
All twenty-three Daves of hers come on the run!
This makes things quite difficult at the McCaves’
As you can imagine, with so many Daves.
And often she wishes that, when they were born,
She had named one of them Bodkin Van Horn
And one of them Hoos-Foos. And one of them Snimm.
And one of them Hot-Shot. And one Sunny Jim.
And one of them Shadrack. And one of them Blinkey.
And one of them Stuffy. And one of them Stinkey.
Another one Putt-Putt. Another one Moon Face.
Another one Marvin O’Gravel Balloon Face.
And one of them Ziggy. And one Soggy Muff.
One Buffalo Bill. And one Biffalo Buff.
And one of them Sneepy. And one Weepy Weed.
And one Paris Garters. And one Harris Tweed.
And one of them Sir Michael Carmichael Zutt
And one of them Oliver Boliver Butt
And one of them Zanzibar Buck-Buck McFate …

But she didn’t do it. And now it’s too late.

It is too late for “admin law” too; we’re stuck with just one name.

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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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