Supreme Court Yet Again Weighs In At the Edges on Legislative and Interpretive Rules (6/26/19; 7/2/19)

In Kisor v. Wilkie, 588 U.S. ___, 139 S.Ct. 2400 (2019) [Sup Ct Slip Op here; Google Scholar with S.Ct. pagination here], the Supreme Court decided to retain Auer deference, at least for now.  I offer some preliminary thoughts on the opinions in Kisor and may revise them as I think further and consider others comments.

Although perhaps oversimplifying for analysis, I think Auer deference functions like Chevron deference but one step removed from the statutory text.

• Chevron deference applies to some reasonable agency interpretations of ambiguous statutory text.
• Auer deference applies to reasonable agency subregulatory interpretations of  ambiguous agency regulations (which for this purpose may be either (i) ambiguous legislative regulations (e.g., in a tax context, ambiguous consolidated return regulations) or (ii) ambiguous interpretive regulations entitled to Chevron deference (e.g., in a tax context, say ambiguous “away from home” interpretive regulations entitled to deference as in Correll)).

In Kisor, while re-affirming Auer deference, the opinions were fractured as to what Auer continues to mean and whether it may be on life support.  All we can say for sure is that Auer lives (for now, although its precise application may be muddled and Kisor clearly restricts Auer’s application over what some of the prior less restrained applications suggested).

I don't want to get into the Justices competing views of Auer deference.  The pundits will be doing that for some time now.

I do want to get into what, if anything, Kisor says about the legislative / interpretive issue that I have fulminated about recently.  See Article on the Continued Viability of the APA Category of Interpretive Regulations (Federal Tax Procedure Blog 6/21/19), here; and Supreme Court Again Weighs In At the Edges on Legislative and Interpretive Rules (Federal Tax Procedure Blog 6/23/19), here.

Just to restate the issue.  Some, a considerable consensus in the scholarly community, claim that the interpretive regulation is no longer viable, having been conflated into legislative rules by judicial opinions after the adoption of the APA.  I reject that notion.  I do note as an important pushback Justice Breyer's comment in the Kisor oral argument:  “there are hundreds of thousands, possibly millions of interpretive regulations.”   Justice Breyer is, of course, an administrative law expert (he and Justice Kagan are the administrative law experts on the Court), and he thinks that interpretive regulations are still viable.  (Significantly, at oral argument, no Justice challenged the notion that interpretive regulations were a viable APA category.)

The Kisor opinions, as I said, were fractured, with some key points not gathering a majority. The Justices in the plurality for the Court opinion which I discuss herein were Justices Kagan (author), Ginsburg, Breyer and Sotomayor.  Remember  that Justices Kagan and Breyer are the Court's administrative law experts, so from the perspective I focus on (the APA distinction between legislative and interpretive regulations), Justice Kagan's opinion concurred in by Justice Breyer are most important to the legislative /interpretive issue.
My key points from Kisor:

1.  The notion has been expressed that giving deference of any sort to an agency interpretation is an abdication of the APA mandate of 5 USC § 706, that "the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action." As I note in the article, deference to agency interpretations was established well before the APA and, upon enactment of the APA, was not seen as violating that mandate.  Justice Kagan, in a plurality portion of the opinion (III.A. at Slip Op. 20-23), rejects that notion that giving deference violates § 706's mandate.  The plurality notes:  "If Section 706 did not change the law of judicial review (as we have long recognized), then it did not proscribe a deferential standard then known and in use."

2.  Significantly, in rejecting that notion, the plurality says (III.A., Slip Op. 22-23, 139 S.Ct., at p. 2420):

Kisor next claims that Auer circumvents the APA's rulemaking requirements. Section 553, as Kisor notes, mandates that an agency use notice-and-comment procedures before issuing legislative rules. See 5 U. S. C. §§553(b), (c). But the section allows agencies to issue "interpret[ive]" rules without notice and comment. See §553(b)(A). A key feature of those rules is that (unlike legislative rules) they are not supposed to "have the force and effect of law"—or, otherwise said, to bind private parties. Perez v. Mortgage Bankers Assn., 575 U. S. 92, ___ (2015) (slip op., at 3) (internal quotation marks omitted). Instead, interpretive rules are meant only to "advise the public" of how the agency understands, and is likely to apply, its binding statutes and legislative rules. Ibid. But consider, Kisor argues, what happens when a court gives Auer deference to an interpretive rule. The result, he asserts, is to make a rule that has never gone through notice and comment binding on the public. See Brief for Petitioner 21, 29. Or put another way, the interpretive rule ends up having the "force and effect of law" without ever paying the procedural cost. Mortgage Bankers, 575 U. S., at ___ (slip op., at 3). 

But this Court rejected the identical argument just a few years ago, and for good reason. In Mortgage Bankers, we held that interpretive rules, even when given Auer deference, do not have the force of law. See 575 U. S., at ___, and n. 4 (slip op., at 10, and n. 4). An interpretive rule itself never forms "the basis for an enforcement action"—because, as just noted, such a rule does not impose any "legally binding requirements" on private parties. National Min. Assn. v. McCarthy, 758 F. 3d 243, 251 (CADC 2014). An enforcement action must instead rely on a legislative rule, which (to be valid) must go through notice and comment. And in all the ways discussed above, the meaning of a legislative rule remains in the hands of courts, even if they sometimes divine that meaning by looking to the agency's interpretation. See supra, at 13–18. Courts first decide whether the rule is clear; if it is not, whether the agency's reading falls within its zone of ambiguity; and even if the reading does so, whether it should receive deference. In short, courts retain the final authority to approve—or not—the agency's reading of notice-and-comment rule. See Mortgage Bankers, 575 U. S., at ___, n. 4 (slip op., at 10, n. 4) ("[I]t is the court that ultimately decides whether a given regulation means what the agency says"). No binding of anyone occurs merely by the agency's say-so.

The key point at the opening of the second paragraph is that giving deference--here Auer deference--to an interpretive rule does not give it the force of law for APA purposes.

Now, to be sure this is not clear on the legislative/interpretive issue, so let me interpret.  Justice Kagan notes that interpretive rules are not binding and legislative rules must go through notice and comment.  So far, so good.  Then, apparently addressing Auer deference to ambiguous legislative rules (which must be notice and comment regulations), Justice Kagan says: “And in all the ways discussed above, the meaning of a legislative rule remains in the hands of courts, even if they sometimes divine that meaning by looking to the agency's interpretation.”  In my jargon above, she is talking about subregulatory interpretation of an ambiguous legislative regulation which is a proper Auer application but not the only Auer application.

I noted above, however, that Auer deference may also apply to subregulatory interpretation of a Chevron-entitled interpretive regulation.  Justice Kagan does not speak to that context, although her comments that interpretations entitled to Auer deference does not make an interpretation legislative requiring notice and comment certainly speaks to that issue as well.  Interpretations entitled to deference--Chevron or Auer–are not legislative in character and do not require notice and comment regulations.

3.  The other Justices (Roberts, Gorsuch, Kavanagh, Thomas and Alito) do not join the this aspect of the plurality opinion, Justice Roberts in his sole concurring opinion does not tilt against this portion of the plurality opinion, although he does not join it.  Justice Gorsuch in his opinion (joined by Justices Thomas, Kavanaugh and Alito at least in part) does tilt against it.  As I note in the article, Justice Gorsuch seems to buy into the notion that giving deference thereby making the agency interpretation outcome determinative does give the interpretation the force of law, which I suppose means he thinks an interpretive rule entitled to deference is a legislative rule. For example, Justice Gorsuch says in his concurring  opinion in Kisor (Slip Op. 19 and 139 S.Ct., at p. 2435; note that he uses the term substantive rule which generally means legislative rule and that  I have "cleaned up the quote to strip out the unnecessary stuff).

While an agency interpretation, just like a substantive rule, must meet certain conditions before it gets deference, once it does so Auer makes it every bit as binding as a substantive rule.” n61 To suggest that Auer does not make an agency's interpretive guidance binding on anyone is linguistic hocus-pocus.
   n61 Perez, 575 U. S., at ___ (Scalia, J., concurring in judgment) (slip op., at 3).

All I will say at this point is that I think Justice Gorsuch is confused (which, I suppose, means that Justices Thomas, Kavanaugh and Alito are confused as well).  Legislative rules were commonly called substantive rules at the time of enactment of the APA, and one would think that if Justice Gorsuch were an administrative law scholar (he is not) he would have meant legislative by using the term substantive.  As I note in the article, legislative rules (which must be regulations) do not get interpretive deference (except possibly as to the scope of the delegation of legislative authority).  Put simply, within the scope of the delegation, legislative regulations are the law, just like congressional statutes.  Courts do no defer to the statute or statute equivalents--legislative regulations.  So, if legislative regulations are the focus of Justice Gorsuch's comments, he is certainly confused.  In my article, I addressed Justice Gorsuch's confusion on this genre of issue in his Tenth Circuit opinions, but it is the same genre of confusion he expresses in Kisor.  And, I think, it is the same genre of confusion that scholars often make and that Tax Court made in its unanimous reviewed opinion in Altera Corp. v. Commissioner, 145 T.C. 91 (2015), here, which the Ninth Circuit recently reversed ___ F.3d ___, 2019 U.S. App. LEXIS 17143 (9th Cir. 2019), here.  I discuss the Tax Court's confusion in Ninth Circuit Reverses Unanimous Tax Court in Altera (Federal Tax Procedure Blog 6/7/19; 6/20/19; 6/23/19), here.

I do hold out the possibility that I am the one who is confused; and proof that I am confused would be when Justice Gorsuch's notions muster a majority rather than just 4 Justices.  And with 4 Justices buying into the notions promoted by Justice Gorsuch, perhaps even without a clear 5 Justice group they could still take cert in a case like Altera and sow some serious confusion (as did the unanimous Tax Court) without any corrective mechanism such as the Ninth Circuit in Altera.