Tenth Circuit Wobbles on Legislative / Interpretive Distinction (5/13/20)

In Aposhian v. Barr, 374 F. Supp. 3d 1145 (D. Utah 2019), here, the Court consider a challenge to the bump-stock rule similar to the challenge rejected in Guedes v. Bureau of ATF, 920 F.3d 1 (D.C. Cir. 2019), cert. den. 589 U. S. ____ (2020), ___ S.Ct. ___ (2020).  In part relevant to what I want to discuss, the district court said (pp. 1150-1151, footnote omitted and emphasis supplied):

Mr. Aposhian argues that the Final Rule was issued in excess of statutory jurisdiction because the NFA does not vest the Attorney General or the ATF with rulemaking authority. In response, the defendants argue, and the court agrees, that the Final Rule does no more than interpret undefined statutory terms. Although the Attorney General and ATF promulgated their interpretations through the more laborious, formal notice-and-comment process, the use of that procedure does not alter the Final Rule's interpretive character. And Mr. Aposhian does not dispute that the ATF, under the direction of the Attorney General, is empowered to interpret and administer both the NFA and the GCA. See Pl.'s Mot. for Prelim. Inj. (ECF No. 10 at 6); 18 U.S.C. § 926(a); 26 U.S.C. § 7801(a)(2); Guedes v. ATF, 356 F.Supp.3d 109, 129 n.3 (D.D.C. 2019) (rejecting challenges to the Final Rule's interpretations and the ATF's interpretive authority, noting the "ATF's clear authority to interpret and administer" the relevant statutes).

I think the district court was correct in its understanding that using the notice and comment procedure for interpretative rulemaking (as opposed to legislative rulemaking) does not transform an interpretive rule into a legislative rule.

Aposhian has been affirmed on appeal.  Aposhian v. Barr, 958 F.3d 969 (10th Cir. 5/7/20), GS here.  But in a way that seems to reject the reasoning of the district court that I discuss above.  Here is where I think the Court of Appeals wobbles in its analysis (958 F.3d at 980-981):

Initially, the applicability of Chevron depends on what kind of rule the Final Rule represents. There is a "central distinction" under the APA between legislative rules and interpretive rules. Chrysler Corp. v. Brown, 441 U.S. 281, 301 (1979); see 5 U.S.C. § 553(b), (d). Legislative rules generally receive Chevron deference, whereas interpretive rules "enjoy no Chevron status as a class." United States v. Mead Corp., 533 U.S. 218, 232 (2001). 

A legislative rule is one that "is promulgated pursuant to a direct delegation of legislative power by Congress and . . . changes existing law, policy, or practice." Rocky Mountain Helicopters, Inc. v. F.A.A., 971 F.2d 544, 546 (10th Cir. 1992). A legislative rule affects individual rights and obligations, and, if it is "the product of certain procedural requisites," it has the force and effect of law. Chrysler Corp., 441 U.S. at 301-02. An interpretive rule, on the other hand, "attempts to clarify an existing rule but does not change existing law, policy, or practice." Rocky Mountain Helicopters, 971 F.2d at 546-47. An interpretive rule simply "`advise[s] the public of the agency's construction of the statute and rules which it administers.'" Sorenson Commc'ns, Inc. v. F.C.C., 567 F.3d 1215, 1222 (10th Cir. 2009) (quoting Shalala v. Guernsey Mem. Hosp., 514 U.S. 87, 99 (1995)). 

The government contends—and the district court found—that the Final Rule is merely interpretive. See Aple. Br. at 37-38; Aplt. App. at 176. But "[t]he agency's own label for its action is not dispositive." Sorenson, 567 F.3d at 1223. Instead, "[t]he court must rely upon the reasoning set forth in the administrative record and disregard post hoc rationalizations of counsel." Id. at 1221. Here, "[a]ll pertinent indicia of agency intent confirm that the [Final] Rule is a legislative rule." Guedes v. Bur. of Alcohol, Tobacco, Firearms & Explosives, 920 F.3d 1, 18 (D.C. Cir. 2019) (reviewing the Final Rule under the Chevron framework).

First, the Final Rule demonstrates that ATF intended to change the legal rights and obligations of bump-stock owners. The Final Rule directed bump-stock owners to either destroy or surrender to ATF any bump stock in their possession and stated that "[t]he rule would criminalize only future conduct, not past possession of bump-stock-type devices that ceases by the effective date of this rule." Final Rule at 66,525. The Final Rule announced that a person "in possession of a bump-stock-type device" in fact "is not acting unlawfully unless they fail to relinquish or destroy their device after the effective date of this regulation." Id. at 66,523 (emphasis added). This effort to "`directly govern[] the conduct of members of the public, affecting individual rights and obligations'" is "powerful evidence" that ATF intended the Final Rule to be a binding application of its rulemaking authority. Guedes, 930 F.3d at 18 (quoting Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 172 (2007)). 

ATF, when promulgating the Final Rule, "further evinced its intent to exercise legislative authority by expressly invoking the Chevron framework and then elaborating at length as to how Chevron applies to the [Final] Rule." Id. at 18-19 (noting that ATF's "exegesis" on Chevron "would have served no purpose unless the agency intended the [Final] Rule to be legislative in character"). Moreover, the Final Rule expressly invoked two separate delegations of legislative power, one under the NFA, 26 U.S.C. § 7805, and one under the GCA, 18 U.S.C. § 926(a). See Final Rule at 66,515. These provisions, according to the Final Rule, give the Attorney General "the responsibility for administering and enforcing the NFA and GCA," which he has delegated to ATF. Id. 

In addition, the Final Rule was published in the Code of Federal Regulations (CFR). By statute, administrative rules published in the CFR are limited to those "having general applicability and legal effect." 44 U.S.C. § 1510. For all of these reasons, it is evident that the Final Rule intends to speak with the force of law. 

Ordinarily, legislative rules are entitled to Chevron deference. See Sinclair Wyoming Refining Co. v. EPA, 887 F.3d 986, 991 (10th Cir. 2017). Nonetheless, the parties assert that Chevron deference is inappropriate here. Mr. Aposhian argues that Chevron deference has been waived by the government because the government has disavowed any reliance on Chevron throughout this litigation. Aplt. Br. at 42-43. Next, the parties (including the government) submit that Chevron deference is inapplicable when the government interprets a statute that imposes criminal liability. See Aplt. Br. at 44; Aple. Br. at 40. Neither of these objections to applying Chevron are likely to succeed in the context of the Final Rule, particularly when one recalls the citation to and reliance on Chevron when the Final Rule was promulgated.

I won’t go into detail on my disagreement with the Tenth Circuit’s discussion because I have done that in the article (The Report of the Death of the Interpretive Regulation Is an Exaggeration (last revised 1/25/20), posted on SSRN, here.).  In summary, my claims are that, under the APA):

(i) deference is an oxymoron for legislative rules (which must be by regulation); legislative rules (regulations) are the law and are not interpretations of the law, so deference which tests a rule against the ambiguity in statutory text is conceptually meaningless.

(ii) legislative rules are subject only to testing for procedural regularity under 5 U.S.C. § 706(2)(A)’s standard of “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” (commonly called arbitrary and capricious even though stated in the disjunctive; also commonly called the State Farm standard, Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983));

(iii) legislative rules are not tested under Chevron’s framework, a framework which tests a rule against statutory text;

(iv) interpretive rules that are promulgated as notice and comment regulations are not legislative rules;

(v) interpretive rules may qualify for testing under the Chevron framework (generally requiring notice and comment promulgation) because Chevron tests an interpretation against statutory text;

(vi) invoking Chevron deference for an interpretive rule (generally with notice and comment promulgation) does not mean that the rule is legislative, for as noted above Chevron has no meaning for a legislative rule;

(vii) adopting an interpretive rule with notice and comment will subject the rule to the requirements for procedural regularity under § 706(2)(A) / State Farm;

(viii) Chevron and arbitrary or capricious / State Farm review may overlap but they are not the same thing because they test two different things – the reasonableness of the interpretation within the scope of statutory ambiguity for Chevron and the procedural regularity under arbitrary and capricious / State Farm review; to be sure courts have muddled the matter and continued to do so (this mischief was afoot before Judulang but more so since because of errant discussion in a footnote); and

(ix) publication in the Federal Register is not a test of whether a regulation is legislative, as the D.C. Circuit has acknowledged in dropping it from its authoritative American Mining Congress test.

One example I have used to show that the Chevron test is not the same.  Let's say that that the IRS, in its original promulgation of Reg. § § 1.1502-1(a) which defines "group" clearly within the scope of the legislative rulemaking authority in § 1502.  But, in doing so, that IRS articulated its reason for the definition as that it has found (such as it is) that the moon is made of green cheese.  That finding would be arbitrary or capricious, thus flunking the legislative rulemaking authority and reasoned-decisionmaking requirements, but Chevron would not be involved.   Assume next that the IRS adopted a regulation as it did in Correll defining away from home under § 162 just as was involved in Correll.  That regulation, as the Court held in Correll is an interpretive regulation entitled to deference.  But, assume the further fact that the IRS in promulgating the notice and comment regulation said that the rule was based on a finding that the moon was made of green cheese as the basis for the interpretation.  Then, presumably, being the same interpretation, it could pass Chevron but it could not pass the reasoned decisionmaking requirement.

Basically, the two tests are not the same even though in application the result may be the same (regulation is invalid if the regulation were to flunk both tests), but they are not the same test.  To repeat deference is a process by which interpretation within the zone of ambiguity in the statute is tested for reasonableness, whereas the § 706(2)(A) arbitrary or capricious / State Farm test tests something else -- procedural arbitrariness or capriciousness.  To be sure, I can articulate a concept that an interpretation outside the zone of ambiguity in the test could be arbitrary or capricious but that is not the way the tests developed during most of the time since the APA.

For my earlier discussion on Guedes, see Guedes Cert Denial on Bump Stock as Machinegun, Justice Gorsuch's Cryptic Statement and My Digression (Federal Tax Procedure Blog 3/2/20; 3/5/20), here.