United States: Supreme Court Decides Important Agency-Deference Question

As we reported back in March 2019, the Supreme Court of the United States was reexamining what level of deference, if any, courts must show to a federal agency in cases challenging an agency's interpretation of its own regulations. Today, in Kisor v. Wilkie, No. 18-15, a narrow majority of the Supreme Court relied on principles of stare decisis in refusing to overrule the Court's past rulings addressing the deference question. After doing so, however, the majority purported to "reinforce [the] limits" of the test courts must apply when evaluating an agency's interpretation of its own regulations.

Much ink will be spilled over Kisor given the issues involved and the intensity of the disagreeing views expressed by four Justices. For now, let us focus on what constitutes the opinion of the Court that lower federal courts must follow on a going-forward basis. (The opinion of the Court was authored by Justice Kagan and joined by Chief Justice Roberts and Justices Ginsburg, Breyer, and Sotomayor.)

The refined test is as follows:

First, a court should not afford deference to an agency's interpretation of its own regulation unless the regulation is "genuinely ambiguous." In deciding whether such ambiguity exists, a court must carefully consider the text, structure, history, and purpose of the regulation. The Kisor majority specifically cautioned that a court "cannot wave the ambiguity flag just because it found the regulation impenetrable on first read. Agency regulations can sometimes make the eyes glaze over. But hard interpretive conundrums, even relating to complex rules, can often be solved."

Second, even if the regulation is genuinely ambiguous, the agency's interpretation must still be "reasonable." "In other words," the Kisor majority explained, "it must come within the zone of ambiguity the court has identified [in step one] after employing all its interpretive tools."

Third, even if the agency's interpretation of the ambiguous regulation is reasonable, a court "must make an independent inquiry into whether the character and context of the agency interpretation entitles it to controlling weight." This, in turn, involves three elements. First, the "regulatory interpretation must be one actually made by the agency. In other words, it must be the agency's 'authoritative' or 'official position,' rather than [an] ad hoc statement not reflecting the agency's views." Second, the agency's interpretation "must in some way implicate [the agency's] substantive expertise." Finally, an agency's interpretation of a regulation "must reflect fair and considered judgment" to receive deference. For example, Kisor instructs that a court "should decline to defer to a merely convenient litigating position or post hoc rationalization advanced to defend past agency action against attack. . . . And a court may not defer to a new interpretation, whether or not introduced in litigation, that creates unfair surprise to regulated parties."

Only time will tell if the test as refined by Kisor actually results in more court decisions rejecting agency regulatory interpretations and/or a change in agency behavior when drafting regulations.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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