Supreme Court Likely to Limit Administrative State’s Ability to Interpret Rules

Last week the Supreme Court heard a case on limiting the powers of the administrative state that could be one of the most important this term. The Trump administration has actually agreed that the executive branch’s ability to interpret its own regulations should be limited (it is remarkable that the executive branch is advocating limiting its own power), although it doesn’t contend that it should be entirely overturned.

The case is Kisor v. Wilkie, and it concerns the rights of James Kisor, a Marine who served in the Vietnam War, and his claims of post-traumatic-stress disorder (PTSD). In 1983, Mr. Kisor was denied a PTSD claim, but in 2007 the Veteran’s Administration diagnosed him as having PTSD and that the effective date for the disability was June 5, 2006. Kisor is seeking to have that date changed based on his service records demonstrating when he had PTSD in 1983.

The VA regulation states:

[A]t any time after VA issues a decision on a claim, if VA receives or associates with the claims file relevant official service department records that existed and had not been associated with the claims file when VA first decided the claim, VA will reconsider the claim…. 38 C.F.R. § 3.156(c)(1).

The dispute is over the meaning of the word “relevant” in the regulation. The VA claims that the word requires that the evidence be “outcome determinative”—that is, that it in some way contradict the basis for its previous denial. Mr. Kisor instead claims relevant records are those that have “any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.” Mr. Kisor’s definition mirrors Federal Rule of Evidence 401, which defines “relevant” evidence as “any tendency to make a fact more or less probable” when the “fact is of consequence in determining the action.”

According to the lower court: “Both parties insist that the plain regulatory language supports their case, and neither party’s position strikes us as unreasonable. We thus conclude that the term ‘relevant’ in § 3.156(c)(1) is ambiguous.” Once the court determined that the relevant regulatory language is “ambiguous,” the doctrine of Auer deference (also known as Seminole Rock deference) requires the court to defer to the federal agency’s interpretation of the regulation.

It is this doctrine of Auer deference that the Supreme Court is reconsidering. There are several things wrong with Auer deference.

First, it undermines the method Congress chose to require agencies to consider public input through a notice-and-comment requirement. Every federal regulation, such as the one above, when issued, requires that the agency accept comment from the public about the good and bad aspects of the regulation at issue. Many agencies change their regulations based on this input before they are finalized. But if an agency is able to later interpret the meaning of the regulation, it can evade the notice-and-comment requirements and the ability of the public to meaningfully influence the regulations they are required to comply with.

Second, the doctrine of Auer deference encourages agencies to write vague regulations. Maybe when the VA was writing this regulation it didn’t know exactly which records it wanted to consider relevant (it isn’t otherwise mentioned in the regulation). So, instead, the VA issued a vague regulation with a word like “relevant,” knowing that it could later interpret that word to whatever it wants to. Forcing agencies to actually make such decisions up front makes the regulations clearer.

Third, requiring agencies to make these decisions up front increases the notice to the public as to what the law is. Many people are required to comply with regulations, but Auer deference can change the meaning of these regulation after you try to comply. This undermines the rule of law, as James Madison noted: “It will be of little avail to the people that the laws are made by men of their own choice if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood.”

Lastly, how can this be fair? Judges are meant to be neutral and impartial between parties. A doctrine that puts a thumb on the scales of justice in favor of one party, especially one as powerful as the federal executive branch, seems rather contrary to the notion of impartiality.

Many of these problems with Auer deference were brought before the justices at oral argument last Wednesday. Justices Ginsburg, Bryer, Sotomayor, and Kagan still seemed to support Auer deference. Many of the arguments made in its favor concerned the expertise that agencies have in these specialized technical areas that judges do not have. Another argument concerned the greater political control of agencies compared to judges. Lastly, Kagan raised the issue of stare decisis, the general disfavor by the court of overturning past cases due to how it unsettles the law and people’s expectations.

Still it seems more likely than not that the court will overturn Auer deference. Justice Gorsuch led a strong series of questions challenging the government’s advocacy for even a limited part of the Auer doctrine to stand. At one point he forced the government to admit that even an amicus brief filed in the Supreme Court mid-way through litigation would be sufficient, under the government’s approach, to change how the justices should determine the meaning of the regulation. In response, Gorsuch asked: “A person who litigates against the government for years, for his disability benefits as a veteran of the United States, is on public notice when the case arrives here and you file an amicus brief?” This was a truly damning question concerning as to why this satisfies the requirements of due process. Justices Alito and Kavanaugh appeared to go along with Gorsuch in questioning Auer deference. While Justice Thomas didn’t ask any questions (he rarely does), but he has previously called the doctrine “constitutionally suspect” and “on its last gasp.”

The big question concerns how Chief Justice Roberts will vote. He appeared to be questioning the Auer doctrine more than supporting it, but his views were the most unclear. This case will likely be a 5-4 case, with the winning side being that which side Roberts agrees with. It seemed likely that he will vote to strike down the existing Auer doctrine, but perhaps he will go along with the government’s suggested limitations.