What Kisor Means for the Future of Auer Deference: The New Five-Step Kisor Deference Doctrine

by Chris Walker — Wednesday, June 26, 2019@chris_j_walker

Today the Supreme Court issued its long-awaited (at least for adlaw geeks) decision in Kisor v. Wilkie. The question presented in Kisor was whether to eliminate overrule Auer deference (a.k.a. Seminole Rock deference) — the doctrine that commands courts to defer to a federal agency’s interpretation of its own regulation unless the agency’s interpretation is “plainly erroneous or inconsistent with the regulation.”

In a 5-4 decision with Chief Justice Roberts casting the deciding vote on stare decisis grounds, the Court decided not to overrule Auer and Seminole Rock. Justice Kagan wrote the principal opinion. Although her opinion concludes that Auer deference remains the law of the land, Kagan’s articulation of Auer deference in Part II.B is much, much narrower than Auer deference is conventionally understood.

Indeed, gone is the blunt, bright-line rule, first articulated in the Court’s 1945 decision in Seminole Rock, that a court must defer to any agency regulatory interpretation unless it is “plainly erroneous or inconsistent with the regulation.” Enter a new, five-step inquiry that in some ways seems more searching than Chevron deference.

We find this new deference doctrine in Part II.B of Kagan’s opinion, which part Roberts joins to make it the opinion of the Court. Kagan explains that the Court “take[s] the opportunity to restate, and somewhat expand on, those principles here to clear up some mixed messages we have sent” regarding Auer deference. She proceeds to articulate what she labels a three-step Auer inquiry, with the first two steps functionally the same as the two Chevron deference steps and the third step really three independent and substantially narrowing steps that are reminiscent of, though not identical to, the Court’s development of a step zero for Chevron deference.

Here is Kagan’s reframing of the Auer deference doctrine:

Step 1. The regulation must be “genuinely ambiguous” after applying all “traditional tools” of  interpretation. This means the reviewing “court must carefully consider the text, structure, history, and purpose of a regulation, in all the ways it would if it had no agency to fall back on.” In other words, the Court expressly adopts Chevron step one for Auer deference. Indeed, it remands the case in part because the Court concludes that “the Federal Circuit jumped the gun in declaring the regulation ambiguous.” Expressly grafting Chevron step one onto Auer likely also incorporates the Scalia-like textualists’ more muscular Chevron step one to find statutes (and, here, regulations) “clear enough” on a more regular basis.

Step 2. Same as under Chevron step two, the agency’s interpretation of the ambiguous provision must be “reasonable.” Although Kent Barnett and I have found that Chevron step two in the circuit courts has largely been a nonfactor (with agencies winning nearly 95% of the time at step two), Kagan wants this second step to be more muscular as well: “And let there be no mistake: That is a requirement an agency can fail.” One way to reinvigorate step two, as Kent and I explore in another article, is to embrace Kagan’s and others’ preference for step two to be like the Administrative Procedure Act’s arbitrary-and-capricious review.

Step 3. If the agency regulatory interpretation passes steps one and two, the reviewing court must then engage in “an independent inquiry into whether the character and context of the agency interpretation entitles it to controlling weight.” Kagan explains that this inquiry incorporates (at least) three independent yet interrelated requirements:

Step 3(a). The agency’s regulatory interpretation “must be the agency’s ‘authoritative’ or ‘official position,’ rather than any more ad hoc statement not reflecting the agency’s views.” In other words, Auer deference will no longer apply to regulatory interpretations advanced by low-level agency officials, outside of the agency procedures understood to “make authoritative policy.”

In many ways, this seems like part of the Mead doctrine’s formality requirement for Chevron deference. In fact, Kagan cites and arguably incorporates Mead for this requirement. But Kagan is careful not to make this requirement too sweeping to necessarily require a rulemaking, a formal adjudication, or an otherwise formal decision from the agency head (citations omitted):

Of course, the requirement of “authoritative” action must recognize a reality of bureaucratic life: Not everything the agency does comes from, or is even in the name of, the Secretary or his chief advisers. So, for example, we have deferred to “official staff memoranda” that were “published in the Federal Register,” even though never approved by the agency head. But there are limits. The interpretation must at the least emanate from those actors, using those vehicles, understood to make authoritative policy in the relevant context

Indeed, the Court remanded this case back to the Federal Circuit to conduct this step three inquiry, noting the Solicitor General’s explanation in its Kisor brief that “all 100 or so members of the VA Board act individually (rather than in panels) and that their roughly 80,000 annual decisions have no ‘precedential value.’” (Side note: It is fascinating how Kagan’s five-step doctrine mirrors the Solicitor General’s seven-factor test — an approach that seemed to receive critical reviews from many administrative law scholars and court watchers when the brief was filed.)

Step 3(b) (a.k.a. Step 4). The “agency’s interpretation must in some way implicate its substantive expertise.” That is because, Kagan explains, “[w]hen the agency has no comparative expertise in resolving a regulatory ambiguity, Congress presumably would not grant it that authority.”

In many ways, this seems like an incorporation of the less-deferential Skidmore doctrine, under which administrative interpretations of law receive deference based on their “power to persuade.” Kagan, of course, does not fully embrace Skidmore as Auer, though Justice Gorsuch in his concurrence in judgment notes that this is the “silver lining” of Kagan’s five-step approach: “The majority leaves Auer so riddled with holes that, when all is said and done, courts may find that it does not constrain their independent judgment any more than Skidmore.”

Roberts seems to  agree with Gorsuch, noting in his concurrence that “the distance between the majority and JUSTICE GORSUCH is not as great as it may initially appear.” To be sure, Roberts also makes clear this is not a formal return to Skidmore:

That is not to say that Auer deference is just the same as the power of persuasion discussed in Skidmore v. Swift & Co., 323 U. S. 134 (1944); there is a difference between holding that a court ought to be persuaded by an agency’s interpretation and holding that it should defer to that interpretation under certain conditions. But it is to say that the cases in which Auer deference is warranted largely overlap with the cases in which it would be unreasonable for a court not to be persuaded by an agency’s interpretation of its own regulation.

Another reading of step 3(b)/step 4, however, is that Kagan is moving Auer toward a more context-specific, step-zero inquiry, similar to what Chief Justice Roberts embraced for Chevron deference in his opinion for the Court in King v. Burwell and his dissent in City of Arlington v. FCC. I explore that move toward a context-specific Chevron deference here.

6/30/2019 Update: As a reader helpfully flagged, Kagan in footnote five also includes the anti-parroting canon in this expertise step, quoting Gonzales v. Oregon for the proposition that this rule exists because an agency gets no “special authority to interpret its own words when, instead of using its expertise and experience to formulate a regulation, it has elected merely to paraphrase the statutory language.”

Step 3(c) (a.k.a. Step 5). The final step is not new, but was first articulated as a broad exception to Auer deference in the Court’s 2012 decision in Christopher v. SmithKline Beecham. Simply put, the agency’s regulatory interpretation “must reflect ‘fair and considered judgment’ to receive Auer deference.” So “convenient litigating positions” and “post hoc rationalizations” to defend prior agency actions don’t receive Auer deference. In foonote 6, Kagan explains that “[t]he general rule, then, is not to give deference to agency interpretations advanced for the first time in legal briefs.” Also out are interpretations that cause regulated entities “unfair surprise” or upset reliance interests, even if they are advanced before litigation starts. Only rarely would Auer deference apply, Kagan explains, to new agency regulatory interpretations that conflict with prior ones. For more on this Christopher exception to Auer deference, check out my literature review on the attacks on Auer (and Chevron) deference.

So here’s the new Kisor five-step doctrine for deference to agency regulatory interpretations:

  1. The regulatory provision must be “genuinely ambiguous” after applying all of the traditional tools of interpretation (Chevron step one).
  2. The agency’s regulatory interpretation must be “reasonable,” and “[t]hat is a requirement an agency can fail” (Chevron step two).
  3. The agency’s regulatory interpretation must be the agency’s “authoritative” or “official position,” which means it must “at the least emanate from [the agency head or equivalent final policymaking] actors, using those vehicles, understood to make authoritative policy in the relevant context” (some version of the Mead doctrine/Chevron step zero).
  4. The agency’s regulatory interpretation must implicate the agency’s substantive expertise (some version of Skidmore deference, plus the Gonzales v. Oregon anti-parroting canon).
  5. The agency’s regulatory interpretation must reflect “fair and considered judgment” — not an ad hoc litigating position or otherwise an interpretation that causes regulated entities unfair surprise (existing Christopher exception to Auer deference).

In sum, we now have an official Chevron-ization of Auer deference with a step one (ambiguity) and step two (reasonableness) — both of which, Kagan claims, should be searching. The Roberts Court’s narrowing of both steps in Chevron should now apply to Auer. We also have two new(ish) requirements, in addition to Christopher‘s substantial “unfair surprise” narrowing, that the agency must be exercising substantive expertise (some version of Skidmore that is not required under Chevron) and the interpretation must be “authoritative” (some version of Mead).

This new Kisor five-step deference doctrine is a dramatic departure from Auer‘s and Seminole Rock‘s original command that a reviewing court must defer to an agency’s regulatory interpretation unless it is “plainly erroneous or inconsistent with the regulation.” And it will no doubt make a substantial difference in how courts implement these five independent deference-disqualifying steps. It will be interesting to see how the lower courts further develop and apply this new Kisor deference doctrine, including what the Federal Circuit does on remand in Kisor.

 

Post-Script: Jeff Pojanowski humorously captures the essence of the new Kisor deference doctrine in one meme:

 

Cite As: Author Name, Title, 36 Yale J. on Reg.: Notice & Comment (date), URL.

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About Chris Walker

Christopher Walker is a law professor at The Ohio State University Moritz College of Law. Prior to joining the law faculty, Professor Walker clerked for Justice Anthony Kennedy of the U.S. Supreme Court and worked on the Civil Appellate Staff at the U.S. Department of Justice. His publications have appeared in the California Law Review, Michigan Law Review, Stanford Law Review, and University of Pennsylvania Law Review, among others. Outside the law school, he serves as one of forty Public Members of the Administrative Conference of the United States and as Vice-Chair of the American Bar Association’s Section on Administrative Law and Regulatory Practice. He blogs regularly at the Yale Journal on Regulation.

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