Retroactivity Analysis After Brand X

Under Brand X, federal courts must reverse their own prior precedent in deference to an intervening agency decision if that agency decision is based on a reasonable interpretation of the statute. Thus, if the first-in-time court sets the law at A, and if a second-in-time agency later finds that B is a superior interpretation of the statute, then the third-in-time court must defer to the agency and move the law from A to B. But can law B be retroactively applied to a litigant who reasonably relied on the first-in-time court’s opinion that the law was A? The answer to that question depends on which retroactivity standard applies to the Brand X problem, which in turn depends on the answers to two threshold legal questions. First, does the decision to move the law from A to B “change” the law, or does it merely “clarify” what the law has always been? Second, if the law has been changed, should that change be attributed to the second-in-time agency, which offered the “authoritative” interpretation of the statute, or to the third-in-time court, which decided whether to ratify that interpretation? Recent decisions have created circuit splits on both questions, and the Supreme Court has offered little guidance. This Note argues that a move from A to B does “change” the law, and that the third-in-time court, rather than the agency, is legally responsible for the change. In hopes of protecting reasonable litigants from the specter of retroactivity, this Note then proposes and defends a default rule for federal courts faced with the Brand X problem. In effect, this proposal would establish a rebuttable presumption that a small subset of administrative rules–all those which overrule first-in-time court precedents–should not become operational unless and until they are ratified by third-in-time federal courts.