D.C. Circuit Review – Reviewed: Prill!

by Aaron Nielson — Friday, Feb. 24, 2017@Aaron_L_Nielson

Today the D.C. Circuit applied the Prill doctrine. There are many things about administrative law that I do not know well, but Prill is not one of them. In fact, Daniel Hemel and I are currently working on an article all about Prill (which we dub Chevron Step One-and-a-Half). We’ll publish it later this year. After today, it looks like we will have to update our draft.

In Prill v. NLRB, the D.C. Circuit held that a “regulation must be declared invalid, even though the agency might be able to adopt the regulation in the exercise of its discretion, if it was not based on the [agency’s] own judgment but rather on the unjustified assumption that it was Congress judgment that such [a regulation is] desirable.’” In other words, “[d]eference to an agency’s statutory interpretation ‘is only appropriate when the agency has exercised its own judgment,’ not when it believes that interpretation is compelled by Congress.”

The D.C. Circuit has applied Prill a great many times; indeed, our article contains an appendix full of Prill cases. And since Prill was decided, the D.C. Circuit has blended its analysis with Chevron. As Judge Henderson explained in Peter Pan Bus Lines, Inc. v. Federal Motor Carrier Administration:

Under the Chevron two-step, we stop the music at step one if the Congress has directly spoken to the precise question at issue …. But if the statute is silent or ambiguous, we dance on and, at step two, defer to the Commission’s interpretation if it is based on a permissible construction of the statute …. In rejecting Peter Pan’s argument that [the licensing statute for considering of alleged ADA violations], the FMCSA unequivocally declared: “This interpretation is not consistent with the plain language of the statute and the legislative history ….” To the contrary, we find the text of the statute to be ambiguous …. We therefore cannot uphold the FMCSA’s interpretation under step 1 of Chevron. Nor may we review it under step 2 …. We must therefore remand for the FMCSA to interpret the statutory language anew.

For a host of reasons, Chevron Step One-and-a-Half — or Prill, if you prefer — is important, both doctrinally and for what it tells us about the operation of the administrative state. As Daniel explained a few months ago:

In one respect, Chevron Step One-and-a-Half presents a puzzle: why do these cases continue to crop up? After all, can’t an agency always circumvent Chevron Step One-and-a-Half by acknowledging (e.g., in the preamble to a final rule or the text of a formal adjudicatory decision) that the relevant statute is ambiguous? Better yet, can’t the agency avoid a Chevron Step One-and-a-Half remand by arguing in the alternative (e.g., “We think the statute is clear, but if it’s ambiguous, we’d stick with this interpretation nonetheless”)? The answer to both questions is “yes,” and yet still, Chevron Step One-and-a-Half continues to rear its head. In the article, we document more than 20 Step One-and-a-Half remands from the D.C. Circuit, along with several more instances in which the D.C. federal district court has invoked the doctrine. Chevron Step One-and-a-Half has also made a cameo appearance in the Ninth Circuit, while the Tenth and Federal Circuits have suggested that they will follow a similar rule. Perhaps most surprisingly, several agencies (including the Departments of Health and Human Services, Interior, and Transportation, the Federal Communications Commission, and the National Labor Relations Board) have been hit with multiple Chevron Step One-and-a-Half remands each. If the doctrine is so easy to circumvent, why don’t we see more circumvention—especially after the agency has encountered Chevron Step One-and-a-Half at least once before?

The answer, we suggest, lies in the fact that agency actors sometimes have good reasons (or, at least, good strategic reasons) to insist that a statute is clear despite the risk that a court might find the statute to be ambiguous. One motivation involves intra-agency politics: agency lawyers who prefer a particular outcome might claim that their preferred outcome is statutorily ordained, anticipating that non-lawyers within the agency will be ill-equipped to contest that claim. A second strategic motivation involves intra-executive branch politics: an agency might claim that a particular result is statutorily compelled so as to avoid having to convince the White House’s Office of Information and Regulatory Affairs that the agency’s preferred outcome is cost-justified relative to feasible alternatives. A third strategic motivation involves inter-branch politics: an agency might seek to shirk blame for an unpopular policy by claiming that responsibility lies with Congress. Fourth, an agency might maintain that a statute unambiguously points one way in an effort to prevent future administrations from choosing a different route.

Well today, we have a new Prill case — and it is a doozy. In fact, today’s case has a plausible shot at Supreme Court review.*

In United States v. Ross, Judge Williams — joined by Judge Pillard — concluded that the Sex Offender Registration and Notification Act (“SORNA”) does not apply to those who crimes predate the statute’s enactment, even though the Attorney General has discretionary power to decide to make those earlier crimes count. (Well, maybe the Attorney General could do that; Judge Williams did not decide whether doing so would violate the nondelegation doctrine.) There is a lot going on in this opinion, but here is a taste:

Where a statute grants an agency discretion but the agency erroneously believes it is bound to a specific decision, we can’t uphold the result as an exercise of the discretion that the agency disavows. Prill v. NLRB, 755 F.2d 941, 947-48 (D.C. Cir. 1985); see also Peter Pan Bus Lines, Inc. v. Fed. Motor Carrier Safety Admin., 471 F.3d 1350, 1353-54 (D.C. Cir. 2006). Obviously the agency hasn’t exercised the discretion Congress granted, on which exercise the legitimacy the outcome depends. … Here, the Attorney General expressly — and erroneously — imputed to Congress “a legislative judgment” that the public safety “benefits” of imposing registration on pre-SORNA offenders outweighed the burdens on sex offenders, leaving no room for him to balance them.

Moreover, the D.C. Circuit’s analysis is unique: “A number of other circuits have found that the Final Guidelines properly specified SORNA’s application to pre-enactment offenders. But in those cases the principle we adopted in Prill was not invoked, and their opinions accordingly focused on other purported deficiencies in the Final Guidelines.”

Judge Millett dissented: “Unlike the majority opinion, I would join every other circuit that has addressed the question and hold that the Attorney General’s Final Guidelines adequately specified how and when SORNA would apply to pre-Act offenders.” After all, “the Attorney General was certainly correct that Congress itself had decided that SORNA should be retroactively applicable to pre-enactment offenders to the extent feasible.”

The D.C. Circuit also issued three other interesting decisions this week, including a 103-page opinion (including the dissent) about Fannie and Freddie Mac.

Let’s talk about that one — or, rather, let’s let Jonathan Adler talk about that one. He already summarized it pretty well: “In Perry Capital LLC v. Mnuchin, a divided panel of the U.S. Court of Appeals for the D.C. Circuit concluded that suits by investors against Fannie Mae and Freddie Mac are precluded by the Recovery Act. Judge Patricia Ann Millett and Senior Judge Douglas H. Ginsburg co-wrote the majority opinion. Judge Janice Rogers Brown dissented.” The majority opinion explains that following the housing collapse in 2007-2008, “Fannie Mae and Freddie Mac stockholders filed suit alleging that FHFA’s and Treasury’s alteration of the dividend formula” for shareholders “exceeded their statutory authority under the Recovery Act, and constituted arbitrary and capricious agency action in violation of the Administrative Procedure Act, 5 U.S.C. § 706(2)(A).” The panel majority rejected that suit: “We hold that the stockholders’ statutory claims are barred by the Recovery Act’s strict limitation on judicial review.”

Judge Brown vigorously dissented:

When assessing responsibility for the mortgage mess there is, as economist Tom Sowell notes, plenty of blame to be shared. Who was at fault? “The borrowers? The lenders? The government? The financial markets? The answer is yes. All were responsible and many were irresponsible.” THOMAS SOWELL, THE HOUSING BOOM AND BUST 28 (2009). But that does not mean more irresponsibility is the solution. Conservation is not a synonym for nationalization. Confiscation may be. But HERA did not authorize either, and FHFA may not do covertly what Congress did not authorize explicitly. What might serve in a banana republic will not do in a constitutional one.

It is safe to say that we have not heard the last of this case. There will be a cert petition. This case is only worth, I don’t know, somewhere in the neighborhood of billions of dollars.

In Bowman v. Iddon, Judge Tatel did something interesting: He wrote the majority opinion and a concurrence joined by another judge! The question was whether John Bowman was lawfully barred from representing taxpayers before the IRS. The Court (Judge Tatel, joined by Judges Wilkins and Ginsburg) holds that he was: “Bowman has failed to state a claim under Federal Rule of Civil Procedure 12(b)(6) because his complaint contains no allegation that Defendants deprived him of a constitutionally protected interest.” The concurrence (joined by Judge Ginsburg) states: “Although our resolution of this case avoids the need to address Bowman’s Bivens claim, because the issue is fully briefed and one of first impression in this circuit, I write separately to explain why, had Bowman alleged that Defendants barred him from preparing taxes, I would have concluded that he was entitled to pursue his claim against Defendants.”

And in United States v. Borda, Judge Wilkins — joined by Judges Tatel and Ginsburg — issued a 44-page criminal decision involving cocaine distribution. (Confession: I skimmed this one, though it seems well written. I did find this paragraph interesting: “Finally, the Government analogized transportation of the cocaine into the United States to bees flying across the U.S.-Mexico border. Specifically, the Government argued that if Appellants had opened a box of bees at the U.S. border and instructed the bees not to fly north, some of the bees would inevitably disobey instructions and cross the border. Similarly, by transporting cocaine close to the border, Appellants knew that some of the cocaine would be imported into the United States. Appellants objected to the metaphor, arguing that cocaine lacks the ability to self-locomote.” Here is the panel’s answer: “Appellants are correct that bees self-locomote while cocaine does not, but the metaphor is not so inapt as to raise due process concerns.”)

That’s a lot of law for one week.

* Predicting Supreme Court review, of course, is dicey.

 

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About Aaron Nielson

Professor Nielson is an associate professor at Brigham Young University Law School, where he teaches and writes in the areas of administrative law, civil procedure, federal courts, and antitrust. He currently serves as a public member of the Administrative Conference of the United States, a federal agency that studies the administrative process and makes recommendations on ways to improve it. He also co-chairs the Rulemaking Committee of the American Bar Association’s Section of Administrative Law & Regulatory Practice. Previously he chaired the Section's Antitrust & Trade Regulation Committee. 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. Follow him on Twitter @Aaron_L_Nielson.

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