Grounds for Reversal
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Grounds for Reversal. The Court shall set aside an agency action if it finds that
(1) The action exceeds the authority granted by, or violates limitations imposed by law.
Courts evaluate agency action under the Administrative Procedure Act based on law, which can stem from various sources.
A. The Constitution:
The authority of the federal courts to keep federal agencies within constitutional limits is unquestioned. As long as review is not otherwise precluded, courts must assess whether agency actions comply with constitutional commands. Courts consider constitutional challenges both to the status of agencies, see, e.g., Morrison v. Olson, 487 U.S. 654 (1988) (addressing constitutional status of Office of Independent Counsel), as well as to the propriety of particular agency actions. See, e.g., Marshall v. Barlows Inc., 436 U.S. 307 (1978) (addressing constitutionality of agency search).
Moreover, courts will strain to determine that Congress did not intend to preclude review of constitutional questions arising in challenges to agency action. Webster v. Doe, 486 U.S. 592 (1988); Johnson v. Robison; 415 U.S. 361 (1974); Traynor v. Turnage; 485 U.S. 535 (1988); Bartlett v. Bowen, 816 F.2d 695 (D.C. Cir. 1987). Many believe that courts should refuse to permit Congress to preclude review of constitutional issues. At a minimum, courts will entertain constitutional challenges to legislation and regulations.
When exercising an adjudicative function, agencies themselves may consider a wide range of constitutional issues. In determining whether agency determinations are consistent with the Constitution, courts afford no deference to the agencies construction of the constitutional principle at stake. Cf. United States v. Nixon, 418 U.S. 683, 703-05 (1974).
B. Federal Statute
C. Agency Rule Having the Force of Law
Agency rules having the force and effect of law are as binding on agencies as the Constitution and statutes. Accordingly, courts may review agency action for conformance with previously promulgated rules. Nader v. Bork, 366 F. Supp. 104, 108-109 (D.D.C. 1973) (an agency regulation has the force and effect of law, and it is binding upon the body that issues it.). Agency procedures must be followed as well. Vitarelli v. Seaton, 359 U.S. 535, 539-40 (1959).
Consider the recent Third Circuit decision in Furnari v. Warden, 218 F.3d 250 (3d Cir. 2000). There, an inmate challenged a parole commissions decision denying him a de novo hearing which he claimed necessary in light of new evidence that had been uncovered. The Court explained that, because the agency had bound itself to provide a statement of reasons for denying parole, its failure to do so constituted an abuse of discretion. Id. at 255. See also Schroeder v. West, 212 F.3d 1265, 1270 (Fed. Cir. 2000); Moret v. Karn, 746 F.2d 989, 992 (3d Cir. 1984) (An agency abuses its discretion if it fails to follow its own regulations and procedures.).
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The question of agencies compliance with their own regulations turns on two factors. First, the regulation must have the force of law. Agency regulations more akin to internal operating procedures bind the agency as a matter of politics but not law. Private parties cannot sue the agency for failure to comply with such discretionary rules. See, e.g., Haitian Refugee Center v. Baker, 953 F.2d 1498, 1508 (11th Cir. 1992); De Silva v. Smith, 773 F.2d 1021 (9th Cir. 1985); Pasquini v. Morris, 700 F.2d 658, 662-62 (11th Cir. 1983); cf. In re Surface Mining Regulation Litigation, 627 F.2d 1346, 1357 (D.C. Cir. 1980) (stating that agency directive implementing Presidents Executive Order to be treated as discretionary rule). Unlike the situation in Furnari, such rules will be enforced at the discretion of the agency.[1]
Second, disputes more often arise over the meaning of the regulations that agencies must follow. As with statutes, regulations can be, and often are, ambiguous. Courts must then decide how much weight to afford the agencys interpretation of the regulation. Although courts would have no reason to defer to an agencys construction of another agencys regulation, see Martin v. OSHRC, 499 U.S. 144 (1991); Director, OWCP v. General Dynamics Corp., 982 F.2d 790, 795 (2d Cir. 1992), for reasons analogous to Chevron courts might uphold an agencys construction of its own regulation as long as it is reasonable.
In Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945), the Supreme Court held that deference was due an agencys interpretation of its own regulation. In considering a dispute over a regulation issued by the Office of Price Administration, the Court concluded that the Secretarys own interpretation of the contested words highest price should control: Since this [case] involves an interpretation of an administrative regulation a court must necessarily look to the administrative construction of the regulation if the meaning of the words used is in doubt. . . [T]he ultimate criterion is the administrative interpretation, which becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation. Id. at 413-14. The Court has often invoked Seminole Rock and reiterated its plainly erroneous or inconsistent standard. See, e.g., Thomas Jefferson University v. Shalala, 512 U.S. 504, 512 (1994) (collecting examples).
The rationale for deferring to an agencys interpretation of its own regulations is analogous to Chevron. If Congress has delegated power to the agency to fill in legislative gaps, then courts should defer to any reasonable interpretations that the agency forwards of its own gap-filling regulations. It is more legitimate for an agency than a court to undertake that function. The agency has more expertise, and is more politically accountable than courts. Congress, in other words, has entrusted agencies with the power to make law through regulations and to define what those regulations mean.
1
Consider the Supreme Courts decision in Auer v. Robbins, 519 U.S. 452 (1997). The dispute focused on the Department of Labors regulation fleshing out the meaning of the Federal Labor Standards Acts exemption for employees acting in executive, administrative, or professional capacity. 29 U.S.C. 213(a)(1). The agencys regulation determined that an employee paid on a salary basis was exempted from the Acts protections. 29 C.F.R. 541.1(f). That exception included employees whose salary was not subject to reduction because of variations in the quality or quantity of the work performed. 29 C.F.R. 54.118(a).
In litigation, the agency clarified that to qualify as a salaried employee, no deduction for shoddy work could be made in practice, or there must be a significant likelihood that, if an employee violates the pertinent work rules, the employee will be disciplined in a manner inconsistent with the salary basis rule. Writing for the unanimous Court, Justice Scalia held that the agencys interpretation of the regulation, even though forwarded for the first time in a brief, should be entitled to Seminole Rock deference. According to the Court, the Secretarys interpretation of the regulation is controlling unless plainly erroneous or inconsistent with the regulation.Id. at 911 (quoting Seminole Rock). The Court explained that there is simply no reason to suspect that the interpretation does not reflect the agencys fair and considered judgment on the matter in question. 519 U.S. at 462. Auer suggests, therefore, that strong deference always should be afforded agency interpretation of the regulations the agency has issued. Many lower court decisions have followed Auers lead. See, e.g., National Wildlife Fedn v. Browner, 127 F.3d 1126, 1130 (D.C. Cir. 1997); Public Citizen v. Carlin, 184 F.3d 900, 911 (D.C. Cir. 1999); Akzo Nobel Salt, Inc. v. Federal Mine Safety and Health Review Commn, 212 F.2d 1301 (D.C. Cir. 2000).
Exactly how Seminole Rock deference compares to Chevron deference is difficult to say with great confidence. The usual judicial formulations of Seminole Rock deference certainly sound (even) more deferential than Chevron. For example, in Thomas Jefferson University v. Shalala, the Supreme Court stated that it must give substantial deference to an agencys interpretation of its own regulations. 512 U.S. at 512 (citations omitted). Explaining further, the Court wrote: Our task is not to decide which among several competing interpretations best serves the regulatory purpose. . . . In other words, we must defer to the Secretarys interpretation unless an alternative reading is compelled by the regulations plain language or by other indications of the Secretarys intent at the time of the regulations promulgation. Id. (quoting Gardebring v. Jenkins, 485 U.S. 415, 430 (1988)). The Court added that this broad deference is warranted especially where the regulation concerns a complex, technical regulatory program. Id. Thus, it seems safe to conclude that, whatever its exact degree of deference, Seminole Rock might be understood as Chevron plus deference, whereas Skidmore can be understood as Chevron minus deference.
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Nonetheless, despite the theoretical difference in strength of deference, the Seminole Rock and Chevron formulations likely converge in practice. As the D.C. Circuit noted in Paralyzed Veterans of America v. D.C. Arena L.P., 117 F.3d 579, 584-85 (D.C. Cir. 1997), [i]n the aftermath of Chevron, it may be that our deference to agency interpretations of ambiguous regulations is not different than that which we afford to interpretations of ambiguous statutes. It would seem that there are few, if any, cases in which the standard applicable under Chevron would yield a different result than the plainly erroneous or inconsistent standard set forth in Bowles. Similarly, the Supreme Court in Martin v. OHSRC, 499 U.S. 144, 180 (1991), directed courts to defer to agency interpretations of regulations if the Secretarys interpretation is reasonable. The Secretarys interpretation of an ambiguous regulation is subject to the same standard of substantive review as any other exercise of delegated lawmaking power.
Some have criticized Seminole Rock deference, however, on the ground that agencies should not have the power to both make and interpret the law.[2] Fusing the power to fashion rules and then interpret them might endanger civil liberties. Moreover, if agencies can both promulgate regulations and then interpret them, they might have the incentive to issue overly vague rules, knowing that they could then flesh out the rules through interpretations that would avoid stringent review. Agencies can avoid procedures such as notice-and-comment rulemaking merely by reinterpreting their own regulations in an enforcement action.
Commentators criticizing Seminole Rock argue instead that minimal deference should be afforded such agency interpretations under Skidmore & Swift & Co. , 323 U.S. 134 (1944). The Skidmore standard provides that an agencys interpretive position is entitled to respect and that the weight of such a judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control. Id. at 140. The more stringent review ex post would in turn sharpen the ex ante incentives for clearer rules.
1
Such arguments, however, are not fully persuasive. First, Congress possesses the same check of revising the delegation irrespective of whether the agency is interpreting a statute or a regulation. Congress can overrule or modify the one just as easily as the other. Second, if a court overturns an agencys interpretation, the agency can reissue a clarified regulation that reflects its current interpretation. Third, the separation of powers argument is not dispositive given that agencies widely interpret both statutes and regulations in enforcing their legislatively delegated tasks. Indeed, agencies exercise a mixture of functions in many contexts. Cf. Withrow v. Larkin, 421 U.S. 35 (1975). Fourth, one would think that agencies have greater expertise in divining the meaning of agency regulation than courts. Courts construing regulations might supplant agencies as subsidiary policymakers under delegated grants of authority from Congress. Although agencies can always issue a revised regulation, a judicial gloss raises the costs of maintaining the agencys preferred regulatory interpretation. Fifth, agency interpretations of regulations must of necessity include interpretations of the statutory language the regulations were designed to implement. Chevron deference to interpretations of statutes in regulations, therefore, logically should extend to deference of interpretations of those regulations themselves. Finally, at times clearer rules do not serve the public interest. A standard-like rule may better protect the public than if the agency were compelled to issue bright-line rules.
Yet, a different argument against strong deference to agency interpretations of regulations may be more convincing. In most contexts, the agencys interpretation is not preceded by notice and comment; nor has it emerged from the agencys adjudicative role. Rather, the interpretation often arises in the midst of enforcing the law, hardly a circumstance that gives one confidence that the resulting interpretation has been well considered. From a political process perspective, strong deference seems unwarranted if the agency interpretation has been hastily reached and little discussed.
Indeed, the Supreme Courts recent decision in Christensen v. Harris County, 120 S. Ct. 1655 (2000), by curtailing Chevron deference for an opinion letter, might by analogy caution against deference to agency interpretations of their own regulations. The Court in Christensen concluded that interpretations contained in policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law[,] do not warrant Chevron-style deference. 120 S. Ct. at 1663. Christensen suggests, see supra, that Chevron deference principally should be reserved for agency interpretations issued as part of the rulemaking or adjudication process.
Viewed another way, a court should only accord an agency interpretation strong deference when the agency is interpreting a regulation in a context in which Congress intended the agency act to have the force of law.[3] Agencies interpret regulations most often in contexts in which one cannot easily infer a congressional delegation of the power to make law, whether in litigation or opinion letters. Indeed, most agency interpretations of regulations are not the outgrowth of any defined process, have not been tested by the crucible of public participation (through rulemaking or adjudication before the agency), and may reflect nothing more than the result of litigation pressures. Congress would not lightly imbue such interpretations with the presumption of correctness.
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Ultimately, the question of the degree of deference to afford agency interpretations of their own regulations presents a close question that eventually will be resolved by the Supreme Court. The Christensen process perspective suggests, however, that only Skidmore deference should be afforded to agency interpretations of regulations that are forwarded outside of either a rulemaking or adjudication. Cf. Mission Group Kansas, Inc. v. Riley, 146 F.3d 775 (10th Cir. 1998) (refusing to accord strong deference to agency interpretation of regulation because interpretation not subject to notice and comment rulemaking); IAL Aircraft Holding, Inc. v. FAA, 206 F.3d 1042, 1045-46 (9th Cir. 2000) (refusing to extend deference to agency interpretation of its regulation on grounds that interpretation was litigating position that agency had not expressed elsewhere before). Note that the question of whether to defer to agency interpretations of their own interpretive rules or policy statements will seldom arise given that so little turns on whether the agency interpretation is correct -- the interpretive rules and policy statements themselves only warrant Skidmore deference. See, e.g., Shalala v. Guernsey Memorial Hospital, 514 U.S. 87, 99 (1995) (relating that interpretive rules do not have the force and effect of law and are not accorded that weight in the adjudicatory process.); Hoctor v. United States Dept of Agriculture, 82 F.3d 165 (7th Cir. 1996).
On the other hand, some interpretations of substantive or legislative regulations will be articulated in an agency adjudication or in a rulemaking. In those settings, the agencys interpretation is reached only after consideration is given to future applications. Such interpretations merit the full Seminole Rock deference. Thus, Christensen arguably augurs a significant limitation of Auer, and the deference accorded agency interpretation of regulations should hinge on the context in which the interpretation is forwarded.
D. Federal Common Law
Federal common law has never been a significant source of substantive regulatory policy, but it does come into play on certain collateral matters presented during judicial review of agency action. Relying squarely on their own lawmaking authority, courts have invalidated administrative decisions on such grounds as res judicata and collateral estoppel. Tait v. Western Md. Ry., 289 U.S. 620 (1933); Clark-Cowlitz Joint Operating Agency v. FERC, 775 F.2d 366, 373-76 (D.C. Cir. 1985).
For instance, consider the First Circuits decision in Bath Iron Works Corp. v. Director, OWCP, 125 F.3d 18 (1st Cir. 1997). There, an employee injured on the job obtained benefits pursuant to state workers compensation proceedings. He received an award of 25% disability due to a serious knee injury and when the disability deepened over time successfully applied for an increase to a 50% award. Thereafter, the employee sought a further award under the Longshore Act, 33 U.S.C. 901, et seq. The Department of Labor Benefits Review Board granted him full disability, rejecting the employers collateral estoppel argument. The First Circuit, however, reversed the agencys determination, holding that the agency should have given collateral estoppel effect to the state agencys prior determination: the tendency is plainly in favor of applying collateral estoppel in administrative contexts. Id. at 21.
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At other times, it is difficult to determine whether the limitation imposed on the agency stems from common law, the courts exercise of review under the arbitrary and capricious and substantial evidence standards, or an elaboration of related principles underlying the APA. For instance, one can view court decisions invalidating agency determinations because of ex parte comments as grounded in the common law. Although the APA plainly prohibits ex parte comments in formal rulemaking and adjudication, see 5 U.S.C. 553(c), 554(a), 557(d), it does not comment one way or another with respect to informal rulemaking and adjudication. Nonetheless, some courts have curtailed ex parte comments in the informal rulemaking context, either on the basis of an implied limit in the APA or because of common law requirements. See Home Box Office v. FCC, 567 F.2d 9, 51-59 (D.C. Cir. 1977) (explaining that, where, as here, an agency justifies its actions by reference only to information in the public file while failing to disclose the substance of other relevant information that has been presented to it, a reviewing court cannot presume that the agency has acted properly.); Sangamon Valley Television Corp. v. United States, 269 F.2d 221, 223-24 (D.C. Cir. 1959) (basic fairness requires such a proceeding to be carried on in the open).[4]
On the other hand, some courts have held that courts lack the power to impose a ban on ex parte comments in the absence of statutory command. District No. 1, Pacific Coast District Maritime Engineers Assn, 215 F.2d 37, 43 (D.C. Cir. 2000) (we have no jurisdiction to review under the APA an agencys procedural decision regarding how best to make a substantive decision); cf. Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 524 (1978) (reviewing courts are generally not free to impose [new requirements] if the agencies have not chosen to grant them.).