Baldwin Cert Denied with Justice Thomas' Rant on Chevron and My Rant on His Rant (2/24/20; 2/27/20)

Today, the Supreme Court denied the taxpayer’s petition for certiorari in Baldwin v. United States, 921 F.3d 836, 840 (9th Cir. 2019), cert. denied (U.S. Feb. 24, 2020) (No. 19-402), here.  For my prior discussion of the issue see Cert Petition Filed in Baldwin re Timely-Mailing, Timely Filing Regulations and Chevron (Federal Tax Procedure Blog 10/30/19), here.

The issues presented in the cert petition were:

(1) Should Brand X be overruled?
(2) What, if any, deference should a federal agency’s statutory construction receive when it contradicts a court’s precedent and disregards traditional tools of statutory interpretation, such as the common-law presumption canon?

The petition limited its focus to Brand X deference permitting an agency to adopt an interpretation of an ambiguous statute, at least in some cases, inconsistent with a prior judicial interpretation.  See National Cable & Telecommunications Association v. Brand X Internet Services, 545 U.S. 967, 984 (2005).

Justice Thomas, the author of Brand X, filed a dissent to the denial of certiorari.  His dissent is with the denial and is linked above.  Justice Thomas confesses that he was wrong in the Brand X opinion, saying:

Although I authored Brand X, “it is never too late to ‘surrende[r] former views to a better considered position.’” South Dakota v. Wayfair, Inc., 585 U. S. ___, ___ (2018) (THOMAS, J., concurring) (slip op., at 1) (quoting McGrath v. Kristensen, 340 U. S. 162, 178 (1950) (Jackson, J., concurring)). Brand X appears to be inconsistent with the Constitution, the Administrative Procedure Act (APA), and traditional tools of statutory 7interpretation. Because I would revisit Brand X, I respectfully dissent from the denial of certiorari.

Setting aside Justice Thomas' complaint about Brand X, Justice Thomas starts his dissent with skepticism about Chevron, the foundation for Brand X.  Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837, 844 (1984).  Justice Thomas asserts: “Chevron is in serious tension with the Constitution, the APA, and over 100 years of judicial decisions.”

In my opinion, Justice Thomas is wrong. I have written at length about the history of Chevron.  Townsend, John A., The Report of the Death of the Interpretive Regulation Is an Exaggeration (January 25, 2020). Available at SSRN: https://ssrn.com/abstract=3400489. See particularly par. III.B. of the article, captioned “Deference to Agency Interpretations Before Chevron” and beginning on p. 68, here.

As I note in the article, courts deferred to agency interpretations long before Chevron and before the APA.  Indeed, the APA says nothing about deference which was well known to everyone working on and commenting on the APA.  Given the history, and the trajectory of deference after the APA, deference is not inconsistent with the APA.  Now, I did not address in the article Justice Thomas' claims for constitutional violations via deference (whether Chevron or its pre-Chevron predecessors).  But, I am not persuaded by Justice Thomas’ broad stroke claims that Chevron deference is inconsistent with the sharing of power among the three branches of Government.

At a very practical level, agencies have special expertise in their area of delegated responsibilities and can certainly deal more holistically with the regulatory scheme.  So permitting the agencies to make reasonable interpretations of ambiguous statutory text, within the zone of reasonable ambiguity seems to me a whole lot better than courts could do on episodic, limited vision forays into interpreting the statutory text for an administrative scheme that they have no special competence in.

And, it is interesting that Justice Thomas persuaded no one else to join his dissenting opinion. Not even the Justices who have expressed skepticism, such as Justice Gorsuch (remember his concurring opinion in Gutierrez-Brizuela v. Lynch, 834 F.3d 1142 (10th Cir. 2016), where he (as then Circuit Judge) wrote the panel opinion but then went off on a tear in a concurring opinion to his own panel opinion that none of his fellow panel members would sign onto.

And, keep in mind that the Court's two recognized administrative law experts--Justices Breyer and Kagan--express no such reservations about Chevron.  Basically, it is only the Court's dilettantes who express this genre of concern, and not surprisingly the concern seems to be an extension of their conservative/libertarian leanings, fueled significantly by Federalist Society, Wikipedia here, notions.

Added 2/27/20:

Kristin E. Hickman, a force in the academic world on administrative law and, particularly, its interface with tax law, has this piece in Notice and Comment (of the Yale Journal of Regulation):  Justice Thomas, Brand X, and Baldwin (Notice and Comment 2/26/20), here.  It is a short blog entry, so I recommend all interest in Chevron and Brand X (and even Auer) read the entry.

Here key points:

1.  The rumblings about Chevron and its iterations in Brand X and Auer continue.  Hickman thinks that the anticipated demise of Chevron and its iterations are overstated, although they may be scaled back.  I have previously said that, with some of the most recent rumblings, perhaps repeal, reversal or other demise of Chevron is a bad idea whose time has come.  Hopefully, that bad idea will continue to just float as bad idea, with no action, as a shorthand expression of displeasure with perceived evils of the administrative state and its road to socialism or communism or whatever other evils proponents of the bad idea can imagine.

2.  I do pick a point with Hickman on the way she phrases interpretive regulations.  Consider this sentence at the opening that the Court in Brand X considered “administering agency acting with the force of law — e.g., through notice-and-comment rulemaking — [adopting] an interpretation of a statute it administers.”  She makes that comment in the Brand X setting but it would equally apply in a Chevron setting.  She and others seem constantly to refer to interpretations of a statute as having force of law making the interpretations legislative rules.  (In the article, I quote a Hickman claim that interpretive regulations are legislative rules, making interpretive regulations a noncategory under the APA.)  At core, that claim rests on some combination of the Chevron deference given an interpretation or the fact of notice and comment rulemaking for an agency interpretation, which separately or together makes the interpretation a legislative rule.  I address that erroneous notion in detail (perhaps even ad nauseum) in my article linked above.  Here is a summary of my conclusions about that erroneous notion:

• Force of law (or its longer version force and effect of law) has meaning in APA discourse from its inception as applied to legislative rules under the APA.  Legislative rules are not interpretations of a statute but are, within the scope of the legislative authority delegated, the law just as if they were  statutes.  In that sense, Congress delegated the law making power to the agency and thus legislative regulations have the force of law just as if they were statutes.  Legislative regulations are tested only for procedural regularity under the arbitrary or capricious standard under 5 U.S.C. § 706(2)(A); and Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (“State Farm”),  But, legislative regulations are not tested as interpretations of the statute because, for practical purposes, they are the statute (i.e., law).  So, as I ask my colleagues and have asked my students, how exactly do you defer to a statute or its equivalent, a legislative regulation?  I get no answer or, at least, no answer that makes any sense to me. (Of course, I could be the problem, but I am not there yet.)

• Interpretations (whether in notice and comment regulations or otherwise) are not legislative regulations and do not have the force of law in APA discourse.  Interpretations may be given Chevron deference but that is not the same as force of law in APA discourse.  Interpretations, if given Chevron deference are tested for reasonableness of the interpretation of the law (the statute), just as they were before Chevron and before the APA.  Interpretations adopted in notice and comment regulations can be tested for procedural regularity as to the regulations adoption process under the arbitrary or capricious standard, but the interpretation itself is tested under the reasonableness standard that applied for deference since long before Chevron and the APA.  (As to deference not according interpretations receiving deference the force and effect of law, see Justice Kagan's plurality opinion in Kisor v. Wilkie, 588 U.S. ___, 139 S. Ct. 2400, 2420 (2019), here (rejecting the argument that according outcome determinative Auer deference gives the interpretations the force and effect of law; the strong inference is that the same must be true for Chevron deference, for, like Auer deference, all Chevron deference does is to apply an outcome determinative interpretation; I think it informative in this respect that, although this portion of Justice Kagan's plurality opinion commanded four votes, the four votes included the two administrative law experts on the Court--Justices Kagan and Breyer).)

That pretty much is the argument.  And the complaint I make is that those asserting force of law statute for interpretations, whether in notice and comment regulations or otherwise, that are given deference have contributed mass confusion to this area of law, a confusion that then leads other commentators and even courts into error.  My favorite poster child for this type of confusion / error is the Tax Court opinion in Altera Corp. v. Commissioner, 145 T.C. 91 (2015), rev’d 926 F.3d 1061(9th Cir. 2019), reh. en banc den. 941 F.3d 1200 (9th Cir. 2019), pet. for cert filed 2/20/20.  (On the Tax Court's misstep, see article above, beginning on p. 111, here.)

For those wanting to plumb this issue further in my article, of course, I recommend the whole article.  But portions of the article that I think would be particularly helpful to readers on the issue discussed here are:

1.  The concept of force of law under the APA (article beginning on p. 38, here).

2.  The role of notice and comment under the APA (article beginning on p. 44, here).

3.  In the context of Chevron deference (article beginning on p. 102, here).