Key Points in Oral Arguments on 1/17/24 in the Supreme Court Cases Considering the Future of Deference (1/18/24)

I have now had the time to read the transcripts of oral arguments in the cases challenging Chevron deference:

• Loper Bright Enterprises v. Raimondo (SEC) (Sup. Ct. Dkt. 22-451, here.) (“Loper Bright”), transcript here,
• Relentless, Inc. v. Department of Commerce (Sup. Ct. Dkt 22-1219, here ) (Relentlesss transcript here),

Relentless was argued before Loper Bright. I infer that was because Justice Jackson recused herself in Loper Bright.

I will discuss what I think are the key points of the oral arguments. There is a lot more in the transcripts, including both somewhat important points and some nit-picky points. I will consider later posting the transcripts with pdf highlights with discussion behind the highlights as comments for readers to review if they wish.

With apologies for readers that may not have some introduction into the jargon of administrative law, I will often just use that jargon without further citation. For example. I refer to (i) Chevron deference which refers to the deference approved in the case of that name and (ii) Brand X which is the deference approved in a Supreme Court opinion with that name. I do not give the cites for these common administrative law shorthand before having any understanding of the issues involved.

In my discussion, I do not attempt to predict whether the Court will pronounce the demise of deference (whether with the Chevron label or not) or the constriction of Chevron deference, or whatever. I note, that  the three Trump appointees (Justices Gorsuch, Kavanaugh, and Barrett) almost certainly will vote for the demise or substantial restriction of deference (at least in its traditional formulation), because of their prior anti-Chevron musings and that anti-Chevron was a litmus test for their respective appointments as Justices.  See Jeremy W. Peters, Trump’s New Judicial Litmus Test: ‘Shrinking the Administrative State’ (NYT 3/26/18) (noting administrative state angst with anti-Chevron as a litmus test for Trump’s judicial, particularly Supreme Court Justice, nominees). And, Justices Thomas and Alito have expressed disdain for Chevron. Justices Kagan, Sotomayor, and Jackson seem pro-Chevron, although they might agree to some constriction (such as doubling down on Chevron Footnote 9). I think Chief Justice Roberts can go either way, but being an institutionalist may be inclined to lean toward stare decisis without terminating (but with constricting) Chevron in futuro.

What Are the Perceived Evils in Chevron? (Herein of The Deference Concept)

Deference is now called Chevron deference, although deference with the same features existed before Chevron and before the APA. I will thus use the common convention of calling it Chevron deference, although that is a mislabeling of the concept causing many to think that deference was created whole-cloth by the Chevron case decided in 1984. 

The tenor of the arguments is that outcome-determinative Chevron deference is rampant in the lower courts, although missing from the Supreme Court in recent cases. Is outcome-determinative Chevron deference really rampant in the lower courts? 

In an outcome-determinative sense, deference means applying the “not-best” agency interpretation over the “best” nonagency interpretation of the statute. Deference does not mean applying the agency interpretation that the court would apply in the absence of a Chevron-entitled agency interpretation; that agency interpretation is the “best” interpretation. An agency best interpretation does not need nor does it obtain deference. In other words, any claimed abuse created by Chevron deference only arises when a court actually defers to--applies to determine the outcome--the agency interpretation over another nonagency best interpretation. However, as commonly articulated, Chevron deference implies that it applies to agency best interpretations (or agency interpretations at least in equipoise with other interpretations). This commonsense understanding that Chevron deference only applies to agency not-best interpretations seems to have not received the attention of the parties or the Court.

Loper Bright Counsel, Paul Clement, however, suggested (Loper Bright Tr. 4) this phenomenon in claiming that Loper Bright contested only “Chevron’s methodology” but had “no beef with Chevron's Clean Air Act holding.” That can be viewed as implying the agency interpretation in Chevron was the best interpretation. (In this sense, of course, Chevron’s adoption of deference would be dicta, albeit persuasive dicta, and further emphasizes the point that the methodology was already inherent in deference before Chevron; I develop this in detail in my article The Tax Contribution to Deference and APA § 706 (December 14, 2023 SSRN), here, which I refer to as “Townsend Deference APA”).)

Also, in view of this refinement of Chevron deference, consider a mind game of how often a judge who determines the nonagency interpretation is best will not find some way to avoid applying the agency “not-best” interpretation (e.g., by simply finding the nonagency best interpretation discernible at Step One or unreasonable at Step Two, or taking another out from Chevron deference, such as Major Questions). And as a further mind-game, consider the same question when the court is of the conservative/libertarian bent as many now are with some distrust of the administrative state.

Justice Gorsuch illustrated his confusion about Chevron deference (Relentless Tr. 21) by saying that Chevron means that, in light of ambiguity, the “the agency always wins. That--that's what I understood Chevron to mean at least coming in here today.” Maybe it is picky, but Justice Gorsuch certainly knows that statement, with all the Chevron avoidance outs from actually deferring to a “not best” agency interpretation, is false.

My anecdotal examination of two large courts of appeals datasets indicates that, in many (probably most) of the Step Two noisings about Chevron, the courts were really applying the agency interpretation that was best within the scope of the statute’s ambiguity or, in any event, was not deferring to an agency “not-best” interpretation. In other words, the claims of Chevron’s abuses are hyperbole, so that, if the Court were to eliminate Chevron deference, outcomes likely would not be materially different except that conservative and libertarian judges will feel emboldened to find nonagency interpretations not-best to strike at the evils of the administrative state. See Chevron Step Two Reasonableness and Agency Best Interpretations in Courts of Appeals (2/9/23), here; and Is Chevron on Life Support; Does It Matter? (Federal Tax Procedure Blog 4/2/22; 4/3/22), here.

Justice Kavanaugh asked (Loper Bright Tr. 41-42) a question of Paul Clement Loper Bright Counsel: “do judges really rely on Chevron?” Clement answered that courts often get to Step Two and cited Cato Institute statistics that were in the datasets I analyzed above. (See also Martinez argument Relentless Tr. 32-34.) But, getting to Step Two doesn't mean that courts then apply the not-best agency interpretation. Within the class of Step Two resolutions are agency best interpretations of the statute. Resolution at Step Two merely means that the court applied the agency interpretation, not that it deferred to the agency not-best interpretation. My analysis of that dataset discussed above is that they do not actually defer as much as those statistics purport to show (the old statistics as lies, damned lies and statistics thing; of course, my conclusions are statistics based on my own interpretation of the data underlying those statistics).

Added 1/18/24 10pm: Based on my intuition that judges would usually avoid having to apply a not-best agency interpretation and my analyses of the datasets, I earlier suggested that the assumption of rampant real deference to not-best agency interpretations was grossly overstated and recommended that a good interim measure before tossing deference altogether would be to get a better fix on when real deference occurs in the courts. The Court thus could require that lower courts in invoking Chevron Step Two (or seeming to do so) state specifically whether they have determined that the agency interpretation is not best and are applying it anyway (that's the only real deference). That would likely encourage courts to find an out in the current Chevron framework (probably stopping at Step One or finding the agency interpretation unreasonable at Step Two). (I think the Court could also limit Chevron to the range of uncertainty where, within the range, the court cannot determine that the nonagency interpretation is the best; where it can determine outside the uncertainty range that the nonagency interpretation is the best, then it could apply the nonagency  best interpretation rather than the not-best agency interpretation. (Actually that should be a Step One determination that would not be deference.)

Finally, I should say something about the potential role of legal interpretive equipoise in Chevron. Equipoise means that the court cannot determine a “best” interpretation (with the agency and a competing interpretation equally persuasive) and could use Chevron deference as a tie-breaker to resolve the case. The tie-breaker role is not deferring to the agency interpretation over another best interpretation. At the oral arguments, some of the discussion seemed to state the tie-breaker role for Chevron. For examples:

Relentless counsel (Tr. 13, bold-face supplied):

I don't think Chevron is a doctrine that only applies to tie-breaker 50/50 scenarios.

Justice Sotomayor (Tr. 18), in which she adopts some type of range for tie-breaker rather than 50-50 equipoise:

And if the Court can—can disagree reasonably and comes to that tie-breaker point, and it could be 51/49, it could be 52/53, if it's that close, why shouldn't the person with all of the qualities you spoke about, the entity with all of the qualities, expertise, experience, on-the-ground execution, knowledge of consequences, why shouldn't deference be given to that entity? [JAT Note: she treats equipoise in this example as a range rather than 50-50.]

Loper Bright Counsel Paul Clement:

There is no justification for giving the tie to the government or conjuring agency authority from silence. (Loper Bright Tr. 4)

 Loper Bright Counsel Paul Clement and Justice Kagan:

Clement: “I would say at that point let's give the tie to the citizen. Let's not give the tie to the agency.” (Loper Bright Tr. 16.)

Justice Kagan:  “you would give the tie to the citizen and I would give the tie to the agency.” (Loper Bright Tr. 16.) 

My only point here is that Chevron as interpretive tie-breaker is not deferring to an agency interpretation over a best nonagency interpretation.

 Chevron Strawman--Policy Preferences

Much ink has been spilled on the issue of making policy via interpretation. The issue was discussed at in the oral arguments. E.g. Relentless Transcript 3-4 “it forces courts to adopt inferior agency constructions that are issued for political or policy reasons. In doing so, Chevron blocks judges from serving as faithful agents of Congress.” But, in that ambiguity Chevron space where there is no discernible direction from Congress, isn’t there the possibility that courts can use interpretation for their only policy preferences rather than "faithful agency;" are courts’ policy preference through interpretation better or more judge-appropriate than agencies’ policy preferences through interpretation? That’s the bogeyman. I am not sure this is a topic that deserves any discussion other than to state it, for it ends up going nowhere to contribute to the discussion. I suggest, though, that in the tax arena, many tax regulations take confusing statutory text and give some coherency to it in a way that Congress could do but won’t and courts cannot do at all. Musings on Proposed § 6751(b) Regulations and the Potential Demise of Chevron Deference (1/8/24; 1/15/24), here.

Deference and Ranges of Interpretive Confidence

I have argued before that legal equipoise—inability to determine a best interpretation—comes in ranges of certainty or confidence as to the interpretation. For example, I first encountered this issue in the ubiquitous abusive tax shelter context where aggressive taxpayers bought penalty insurance by enablers paying handsomely for more likely than not (MLTN) legal opinions. The MLTN opinion in theory states that the author was at least 51% certain of the legal interpretation or even 50.000001% certain. This state of certainty is a fantasy. It just doesn’t happen. There is a range on either side of 50% that confidence in the interpretation is not sufficiently certain to render a MLTN opinion. For anyone to say that they had a 51% (or 50.000001%) confidence in the outcome is not truthful in the legal environment in which abusive shelters were promoted.  For example, I would think that given the uncertainty in outcome, the MLTN could be rendered only if the professional was above 66% (or some other high percentage) confident; otherwise in the 35%--67% confidence level range there is sufficient uncertainty that there would be effective equipoise in the legal interpretation. I think that has to be the type of analysis for any deference discussion. There has to be some range of confidence in which a “best” interpretation cannot be found, whether the range is 51/49, 55/45, 60/40, 65/35, 66/34 or some other. Within that range, a tie-breaker rule is required and Chevron could be that rule, for as I have noted, there is no deference to a lesser agency interpretation when there is no discernible best interpretation.

While arguing that Chevron is not a tie-breaker (say 50-50 likelihood either interpretation is correct), Martinez seems to invoke the range concept (Tr. 13-14)):

this is a really hard case, it's a really close statute. Fifty-two percent likely, I think --you know, I have 52 percent confidence that X is right -

JUSTICE KAGAN: I'll give you -

MR. MARTINEZ: --48 percent likely –

But they do not follow through on the range concept. 

Between 40 and 60% (or some other range) confidence levels, I would argue that a court is not sufficiently confident that either interpretation is right and therefore defaults to the agency interpretation under Chevron. 

Consider Justice Sotomayor's range discussion (Relentless Tr. 17-18):

But putting that aside --but putting that aside, in those situations, there are two plausible --not nearly plausible. There are two best answers. And the question is who makes the choice or helps you make the choice. 

And if the Court can --can disagree reasonably and comes to that tie-breaker point, and it could be 51/49, it could be 52/53, if it's that close, why shouldn't the person with all of the qualities you spoke about, the entity with all of the qualities, expertise, experience, on-the-ground execution, knowledge of consequences, why shouldn't deference be given to that entity?

I am sorry that this facet of Chevron deference did not receive more attention in the briefs or oral arguments.

Deference and the APA

With that predicate understanding of what real deference is, I now start first with the APA issue—whether APA § 706 precludes, permits, or requires deference?  I rely significantly in my comments on this issue on Townsend Deference APA (linked above).

All seemed to agree that § 706 requires de novo review, but did not deal meaningfully with the refinement of whether de novo review includes deference or not. Loper Bright’s and Relentless’ respective counsel assumed that de novo review required by § 706 did not include deference. Solicitor General Prelogar (“SG”) assumed that de novo review could include deference. (See Loper Bright Tr. 57-58.) Tellingly no one mentioned that key point of Townsend Deference APA that, in fact, § 706 includes language permitting set aside of the agency interpretation only if it is “not in accordance with law,” a statutory standard interpreted to require deference to Tax Court legal interpretations in Dobson v. Commissioner, 320 U.S. 489 (1943), reh. den., 321 U.S. 231 (1944). In Townsend Deference APA, I trace the history of the ”not in accordance with law” standard applied in Dobson ; that statutory standard was inserted into § 706 during Congress’ consideration in 1945 and 1946; that standard was drawn from the statutory standard applied in Dobson which interpreted that text to include deference.

The SG does mention the long history of deference before Chevron and the APA. (Loper Bright Tr. 58-59). As I note in Townsend Deference APA, that long history included many statements of deference that were the same as Chevron deference—(i) ambiguous statute and (ii) reasonable agency interpretation without the scope of the ambiguity. (See also the descriptions of deference in the AG Final Report 1941.) Further, in enacting § 706, Congress was informed that during consideration of the APA that § 706 was merely a restatement of then-existing law (which included deference), and that was the description of § 706 in the Attorney General’s Manual on the Administrative Procedure Act (1947), said to be the most authoritative discussion of the APA.

A key point I make with respect to the APA is that the leading article on deference Aditya Bamzai, The Origins of Judicial Deference to Executive Interpretation, 126 Yale L.J. 908 (2017) missed key deference authority in setting up his claim that there was limited deference preceding the APA in 1946, from which he extrapolated beyond the evidence (particularly the evidence he missed) that § 706 excludes deference. Specifically, Professor Bamzai missed the key tax deference authority cited in the Final Report of the Attorney General's Committee on Administrative Procedure, S. Doc. 77-8, (1941) ("AG Comm Final Report 1941") which is the start of the legislative history of the APA. So at least the players in the enactment of the APA knew that robust Chevron-like deference was the law when the APA was enacted. This probably explains why § 706 was not an issue in deference cases from enactment of the APA until well after Chevron decided in 1984.

Straw man argument

Martinez sets up a straw man argument by saying that the same dilemma of the uncertain interpretive confidence levels happens in court cases requiring a legal interpretation where that is no agency interpretation. (See Relentless Tr. 14-15.) Conceptually, the controlling statute could have the same type of ambiguity required for Chevron deference and, in order to resolve the case, has to make a determined the best interpretation regardless of uncertainty. Of course, the court has to take its best shot to resolve the case. If the courts can do that in the absence of an agency interpretation, why not with an agency interpretation? Chevron assume courts’ ability to interpret granularly in the absence of an agency interpretation, but that is not an argument to forego the benefits that gave rise to deference.

Deference and Stare Decisis

Much of the discussion concerned stare decisis and, if Chevron deference were overruled, the systemic effect would be to cases and issues of law settled under the Chevron deference regime. (E.g., Relentless Tr. 38-39; 52; 59-62; 80-81; 118-120; Loper Bright Tr. 4-5; 20; 22-24; 34-36 (Kagan discussing court humility and stare decisis); 49 (SG arguing “I think all of the stare decisis factors counsel in favor of retaining Chevron.”); 76 (SG arguing that Congress has not changed Chevron). Questions thus were asked whether those who lost by application of Chevron or even those affected by a loss of Chevron can now find a basis for reversing their losses if Chevron deference is terminated . (Statutes of limitations or some such time or laches limitations may limit most of these, but there might be situations where the statute of limitations might be open.) My sense is that there was not sufficient substantive engagement on this subject. Hopefully, if the Court decides to terminate deference, it will deal in a more satisfactory way with this issue

Although not discussed, the same issue would also affect the pre-Chevron deference regime(s) which had the essential characteristics of Chevron deference—statutory ambiguity and reasonable agency interpretation within the scope of the statutory ambiguity; although that has not been part of the discussion, I think it would be folly to ignore it.

What is ambiguity?

There was much discussion about ambiguity and how the ambiguity concept itself is ambiguous—meaning that it cannot be stated in a formulaic way to resolve all or many cases. That comes with the turf for concepts such as ambiguity, reasonableness, etc. Cf. Jon O. Newman, On Reasonableness: The Many Meanings of Law’s Most Ubiquitous Concept, 21 J. App. Prac. & Process 1, 83 (2021) (the article is on reasonableness generally, but the cited page discusses its application in Chevron Step Two).

During opening argument by Roman Martinez, counsel for Relentless (Tr. 4-5.):

          The government says that even if all nine of you agree with us that the agency's construction is worse than ours, you should nonetheless defer to that construction and uphold their program under Chevron. 

JAT Comment: This is wrong because unanimous interpretation would stop at Chevron Step One with no deference to the agency interpretation.

Brand X.

Brand X came into predictable scorn from conservative/libertarian Justice for its blessing of deference to agencies changing interpretations and even overriding judicial interpretations. However, as the SG said (Relentless Tr. 94-95), Brand X is a logical outgrowth of the interpretive discretion agencies have under Chevron. As Justice Thomas, the author of Brand X and now a Chevron opponent surely knows, the bogeyman is not Brand X but Chevron). As an aside, one can imagine that conservative or libertarian judges who imagines his or her own amazing abilities of interpretation would chafe at the notion that an agency might interpret differently and override their judicial opinions. I don’t know that I can add anything material here on that subject.

On Skidmore.

As I have argued in my blogs, Skidmore, although commonly labeled deference, is not deference because the Court must be persuaded that the agency interpretation is the best interpretation at Step One. E.g., Really, Skidmore "Deference?" (5/31/20; 2/14/21), here (including comments by Justices Gorsuch, Roberts and Kavanaugh). The oral argument comments about Skidmore seem to echo that theme. (See e.g., Relentless Tr.  16, 25 (arguing some consideration of agency interpretation but does not require a court to “defer to an interpretation that is not persuasive.”), 52-54 (including Kavanaugh “Skidmore was about the power to persuade, not the power to control”); Loper Bright Tr. 30-32 (Kavanaugh, Gorsuch and Kagan agreeing Skidmore is not deference). 

One other note: Missing from the discussion was any attempt to grapple with the difference between legislative and interpretive regulations, although the focus of the discussion was all about interpretations.