Circuit Conflict in Important Cases that Allow the Supreme Court to Take Cert and Pronounce on the Difference between Legislative and Interpretive Regulations (3/30/21; 12/6/21)

I have thrashed around on this blog about the APA distinction between legislative and interpretive rules, focusing principally on regulations.  Briefly, the key points I have asserted in the blogs and elsewhere are:

• The APA distinction between legislative and interpretive regulations continues to be viable despite claims from some scholarly quarters that they are not.

• The distinction between the two categories is:  Legislative rules (must be by regulation) are like statutes; they are the law; they do not interpret the law.  Interpretive rules (can be by regulation) are not the law but are interpretations of the law (here the statute).

• A legislative regulation like the consolidated return regulations authorized by specific delegation under § 1502 is the law just as if it were a statute.  A legislative regulation does not interpret the statute.

• An interpretive regulation does interpret the statute.  Interpretations of statute can be tested for the reasonableness of the interpretation.  That is what Chevron does in the context  of agency interpretations in interpretive regulations.

• An agency may adopt interpretive rules, at its choice in the form of notice and comment regulations, pursuant to the authority in “general authority” statutes (such as § 7805 of the IRC) or implied authority in the agency’s formative legislation.  

• For example, § 482 which shares a provenance with § 1502 under the Revenue Act of 1928 when the prior version of the two statutes were split, with the 1928 predecessor of § 1502 conferring express delegated authority to Treasury to make the law in statute-like legislative regulations and the 1928 predecessor of § 482 not having that authority.  Can you imagine the howls from scholars, the practitioner community and the courts if the IRS asserted the authority to make legislative rules like the consolidated return rules under § 482 via its general authority in § 7805?

• Adopting interpretive rules in notice and comment format does not make the interpretive rule legislative for purposes of the APA distinction.

• Legislative rules (must be by regulation) are not entitled to Chevron deference because legislative rules are the law and are not interpretations of the law.  Chevron only tests reasonableness of interpretation against the text of a statute.  Chevron cannot test the reasonableness of either a statute or a legislative regulation (said to be statute-like).  Chevron can and does test interpretations in interpretive regulations to determine if the interpretations are reasonable within the scope of the statutory ambiguity.

Some, perhaps many, of these claims are not mainstream.  For example, some claim that Chevron applies only to legislative regulations.  This claim could be partially truth if their further claim that the legislative regulations category has taken over the interpretive regulation category, so that all notice and comment regulations are legislative even if all they do is to reasonably interpret ambiguous statutory text.  It is my claim that the interpretive regulation category continues viable (has not been taken over by the legislative regulation category) and that Chevron deference applies to interpretive regulations and does not apply to legislative regulations.

Under the law as I have stated it, others’ claims that Chevron deference applies only to legislative regulations is nonsense because a legislative regulation is the law and is not an interpretation of the law.  Chevron only tests reasonableness of an interpretation of a statute.  Just as courts do not defer to statutes, so they also do not defer to legislative regulations which are like statutes--they are the law.  Of course, a totally unreasonable regulation would likely flunk the test that does apply to legislative regulations.  That test is based on APA § 706’s arbitrary and capricious test (subsuming reasoned decisionmaking), sometimes referred to as State Farm, for procedural regularity in the promulgation of the legislative regulation.  But 706/State Farm is not a Chevron reasonableness of the interpretation test.  (Again, despite claims to the contrary.)

The competing claims (of which mine are not mainstream now) may get tested as the result of a decision just this past Thursday.  In Gun Owners of America, Inc. v. Garland, 992 F.3d 446, 2021 U.S. App. LEXIS 8713 (6th Cir. 3/25/21), CA6 here and GS here, the Court held, in a contest of the ATF’s Bump Stock Rule interpreting the statute's applications to "machineguns" as including bump stocks, that plaintiffs had shown likelihood of prevailing on the mainstream theories opposing my claims above.  In a previous decision, Guedes v. Bureau of ATF, 920 F.3d 1 (D.C. Cir. 2019), cert. denied, 589 U. S. ___, 140 S.Ct. 789 (2020), DC Cir. here and GS here, the D.C. Circuit held otherwise.  Basically, the courts split over whether the ATF regulation inclusion of Bump Stocks in the definition of machineguns passed muster under Chevron or not (with the Sixth Circuit also raising lenity concerns in rejecting the application of Chevron).  Both Courts got to Chevron deference by asserting that the regulation was legislative (it was not, but my difference with that claim is not outcome determinative) and differed on whether the interpretation qualified under Chevron. 

In Gun Owners, the Court said that “this will create a circuit split on the meaning of § 5845(b) [application to machineguns].”  Slip Op. 26.  That means that, if the Government chooses to seek certiorari, the Supreme Court may take it to resolve the split.  So, we may get more learning in this general area of administrative law.  

If the Supreme Court were to wade into this quicksand field of administrative law I hope it will realize that both courts got to the same place in applying Chevron deference, but only split as to whether Chevron’s test was met.  That is, both courts applied Chevron deference, with one finding that the agency interpretation passed the reasonableness test and the other finding that it did not pass that test.  Both Courts got to Chevron deference claiming that the regulation was legislative and that Chevron deference applies to legislative regulations.  My quibble is that the regulation was interpretive and Chevron properly applies only to interpretive rules.  My only claim is that Chevron makes no sense for real APA qualified legislative regulations.  Chevron involved an interpretive regulation; as Justice Scalia noted “Chevron in fact involved an interpretive regulation.”  Christensen v. Harris County, 529 U.S. 576, 589-90 (2000) (concurring in part and concurring in the judgment).  (I have substantially more on that issue in an article I hope to publish on SSRN shortly.)

However once each of the Courts go to the application of Chevron test of reasonableness of the interpretation, they just reached different conclusions as to reasonableness.  That was an interpretive exercise within the same interpretive scope that agencies have under Chevron and that Courts have to interpret the law.  Stated otherwise, if as the Gun Owners panel opinion held, the agency exceeded the scope of the interpretive ambiguity, then so did that panel.  Was the panel legislating by interpreting? Of course not.

[JAT Note:  The last two paragraphs were revised on 12/6/21 at 12:00pm.]