Yesterday in his Supreme Court Relist Watch, John Elwood highlighted the Supreme Court’s unusual action this past summer on a cert petition regarding Chevron deference. Mr. Elwood observed that the Supreme Court relisted—again—

Scenic America, Inc. v. Department of Transportation, 16-739, which garnered attention this summer when the court called for a reply . . . for only the second time since 2001. The case involves a hot topic these days, Chevron deference – the doctrine under which courts are supposed to defer to federal agencies’ reasonable (and formal) interpretations of ambiguous statutory language. . . .

According to Mr. Elwood’s report, Scenic America contends that the D.C. Circuit improperly awarded Chevron deference to the Federal Highway Administration’s interpretation of its agreements with various States on regulating billboards. In contrast:

The government . . . contends that [the deference] question is not actually presented here. The rare request that the petitioner submit a reply brief—which is entirely optional under Supreme Court Rule 15.6—suggests that someone at the court is very interested in whether the issue really is presented in this case.

The petition in Scenic America was redistributed for the Court’s conference today. As of now, no case on the Supreme Court’s docket this Term squarely challenges the legality or constitutionality of the Chevron doctrine.

In addition, no granted case squarely challenges the related, but distinct, doctrine known as Auer/Seminole Rock deference* in which courts defer to agency interpretations of their own ambiguous regulations. Two years ago in Perez v. Mortgage Bankers Association, multiple Justices expressed concerns about “the aggrandizement of the power of administrative agencies” via the application of Auer deference. (See concurring opinions by Justice Alito and Justice Thomas.) The separate writings in Perez build on the Court majority’s efforts in Christopher v. SmithKline Beecham Corp. in 2012 to narrow the application of Auer so as to avoid any “unfair surprise” for litigants from agency interpretations that arise suddenly as “convenient litigating position[s]” or during agency enforcement proceedings. (Slip Opinion at 10-11, 14.)

Near the conclusion of a recent panel discussion analyzing the upcoming Supreme Court Term, participants were asked what issues they thought the Court may have an interest in considering soon. In response, former Solicitor General Paul Clement indicated that he thought the Court may be willing to revisit Auer or Chevron deference within the next Term or two.

Perhaps that reconsideration will come sooner rather than later. Eighteen States, the Chamber of Commerce, and several other amici recently joined the George Mason Supreme Court Clinic** in petitioning the Court to consider overruling the deference scheme in Auer.

In Garco Construction, Inc., v. Secretary of the Army, government contractors had been providing employment opportunities to individuals with minor criminal histories. For years such employees had been granted access to work on construction jobs on Malmstrom Air Force Base without any problem. Then in 2007 the Base made an apparently sudden change to its access policy. The change resulted in the denial of entry to previously employable individuals—some of whom had been affiliated with a local pre-release center that helps individuals recently “released from prison to transition back into society.”

The petitioner contends that its case “squarely presents” the question of the validity of Auer deference:

This case turns on whether denying access to Malmstrom Air Force Base to government contractor employees with criminal records adhered to the applicable Air Force regulation or instead represented a change in policy. The Federal Circuit upheld the government’s reading under Auer.

In particular, as of 2005 the Base had been operating under the following policy:

A 911 dispatcher certified on the National Criminal Information Center system (NCIC) will run the contractor names through the NCIC for wants and warrants …. Unfavorable results will be scrutinized and eligibility will be determined on a case-by-case basis by the [security forces squadron commander].

But by spring 2007, base personnel had stopped issuing passes to several employees of one of Garco Construction’s subcontractors, James Talcott Construction:

Although base personnel initially refused to explain those decisions, Talcott eventually learned that the base was running full background checks—not “wants and warrants” checks—and then denying access to all Talcott employees with criminal records. App. 53a-55a.

This led to numerous exchanges between Talcott and base personnel. In a letter, Talcott explained that the “unemployment rate in Montana is at a historical low,” that the contract incorporated a . . . provision allowing contractors to use employees with criminal records, and that Talcott needed these “qualified employees” to complete the project. App. 53a.

Garco challenged the government’s actions, requesting on behalf of Talcott an equitable adjustment for the extra employment costs the company had borne because its original employees were denied base access. Garco eventually appealed its claims to the Armed Services Board of Contract Appeals where:

. . . The government sought summary judgment on the ground that both the original and revised base-access regulations were “sovereign acts.” App. 81a. Garco acknowledged that the base commander had the statutory authority to issue those regulations. App. 89a. The dispute was over whether Malmstrom had complied with the original base-access regulation, i.e., the “wants and warrants” rule, when it ran full background checks and then denied access to all Talcott employees with criminal records. App. 89a-98a.

The dispute eventually reached the Federal Circuit, which observed that:

Because the case required the court to “interpret the base access policy, an agency regulation,” Seminole Rock and Auer provided the rule of decision. App. 8a. . . .

The . . . court acknowledged that there was “merit to Garco’s argument that the plain meaning of ‘wants and warrants check’ in isolation suggests a check only for wants or warrants.” Id. Yet it concluded that “the surrounding language,” i.e., that “[un]favorable results will be scrutinized and eligibility [to enter] will be determined on a case-by-case basis,” “casts doubt on that interpretation.” Id. Because the court believed that this “sentence cut[] against Garco’s plain meaning interpretation,” it needed to “consider the Air Force’s interpretation” through the lens of Auer. App. 10a.

The court held that the government’s reading was not plainly erroneous. In reaching that conclusion, the court pointed to the testimony adduced at the evidentiary hearing, including the testimony of Mr. Ward and Major General Finan. App. 10a-13a. The court then weighed the competing views of that controverted testimony in the light most favorable to the government. App. 12a-13a. In sum, the court afforded the government’s interpretation “controlling weight” . . . . App. 13a.

In its petition to the Supreme Court, Garco Construction observes:

“A fundamental principle in our legal system is that laws which regulate persons or entities must give fair notice of conduct that is forbidden or required.” FCC v. Fox Television Stations, Inc., 567 U.S. 239, 253 (2012). . . .

. . . A policy that allows “the person who promulgates a law to interpret it as well” is problematic. Talk Am., Inc., 564 U.S. at 68 (Scalia, J., concurring). It is a basic tenet of Anglo-American law “that no man can be a judge in his own case and no man is permitted to try cases where he has an interest in the outcome.” In re Murchison, 349 U.S. 133, 136 (1955). The agency has a clear self-interest in wielding its ambiguous regulation to impose its policy agenda retroactively—there would never be an Article III case unless the agency had surrendered to that temptation. By transferring to the agency the authority to dictate the meaning of its own ambiguous regulation, Seminole Rock/Auer deference effectively authorizes “the same person [to serve] as both accuser and adjudicator in a case.” Williams v. Pennsylvania, 136 S. Ct. 1899, 1905 (2016).

That concern is acute here. The government was a party to the contract at issue. Garco argues that the government violated it by restricting the labor pool in ways that contradicted the plain meaning of the regulation that was in place when the agreement was formed. In any other setting, a neutral arbiter would decide who had the better reading of the regulation. Yet unless its interpretation is simply implausible, the government gets to decide if it owes Garco money for violating the contract. That is the very definition of self-interest.

Finally, Garco Construction contends this particular case is emblematic of the misapplication of Auer deference and reconsideration of the “interpretive canon is overdue”:

. . . In Seminole Rock, the Court deferred to the agency in a dispute in which “the rule ‘clearly’ favored the Administrator’s interpretation” anyway. Perez, 135 S. Ct. at 1214 (Thomas, J., concurring in the judgment). Yet the doctrine has taken “on a life of its own,” to the point that—as this case highlights—Seminole Rock/Auer deference now occupies a place in the law that the Court could never have anticipated. Id.

Here, the Federal Circuit has upheld the government’s reading of a regulation because it was “not plainly erroneous,” based on the controverted testimony of regulators as to their subjective understanding of the rule’s intent, and in a case in which the government has a financial stake in the outcome.

We’ll see if this petition resonates with the Court. The government has asked for an extension of its time to file a response, making the response not due until mid-fall.

 

* But see Jeffrey Pojanowski’s excellent recent essay contending that the Court in Auer actually misapplied Seminole Rock—misinterpreting that earlier decision to establish a new deference regime when in fact Seminole Rock was merely an iteration of the pre-existing, more modest Skidmore deference approach.

** Disclosure: Although I cannot take any credit for the clinic’s petition, which was filed prior to my start at George Mason, this fall I joined the law school as an Assistant Professor of Law and Faculty Director of the Supreme Court and Administrative Law Clinics.