Added 7/11/24 4:00 pm: Caveat: My blog post below was an
attempt to hammer Corner Post into the interpretive system as I
understood it. Within that parameter, I think I got it right. But, since
posting the blog below (after this update in red), I went back to basics to try
to understand what this all means in the real world. So, here is another way to
think about the interpretive regime we now have as a result of the confluence
of Loper Bright (deference gone) and Loper Bright. Here are the
key bullet points:
- Loper Bright teaches that the best interpretation of
the statute controls. The best interpretation gains or loses nothing (i) by
being adopted in an agency regulation or (ii) whether the regulation is
procedurally valid.
- The best interpretation issue is substantive and can be raised
at any time (i.e., upon application or enforcement to the particular person).
- Ergo, Corner Post is the proverbial tempest in a teapot.
To extend the analysis:
- The best interpretation (whether or not in a regulation) is
the interpretation applicable from the effective date of the interpreted statute.
That means that the § 7805(b) constraints on retroactivity are meaningless if
the IRS includes the best interpretation in a regulation.
- The adoption of the best interpretation in a regulation adds
nothing of interpretive value to the regulation. However, perhaps at the
theoretical margins, a procedurally regular notice and comment regulation interpretation
might add some Skidmore oomph (whatever that is) to the persuasive value
of the agency interpretation in the regulation.
If that makes sense and—dare I say—is persuasive to readers,
there is no need to read the older portion of this blog below (but I think if one were to wallow around in the concepts presented below (as have I), one might get to the same point).
___________________________________
In Corner Post, Inc. v. Board of Governors, FRS, 603
U. S. ____ (2024), SC here
and GS here,
the Court (Justice Barrett) held that cause of action “accrues” for purposes of
the fallback 6-year statute of limitations in 28 U. S. C. § 2401(a), here, when the
particular plaintiff first suffered injury from an agency action. The agency
action was a regulation promulgated well
before the 6-year period prescribed by § 2401(a). Corner Post, a new entity,
suffered injury once it was created, thus its judicial challenge to the
Regulation was timely under § 2401(a).
The gravamen of the Court’s holding is its focus on §
2401(a)’s text starting the statute of limitations when “the right of action
first accrues.” That requires that the Court determine “the right of action” in
the context.
The majority held that Corner Post’s claim was that the agency
acted without statutory authority, an ultra vires claim. A party is injured and
can challenge an invalid interpretation when the agency action applies to that
party. This permitted the challenge by Corner Post, an entity created within
the 6-year period before filing the challenge.
But, there is another type of APA challenge, a procedural challenge, that can be
asserted to invalidate a regulation. The procedural challenges arise upon
promulgation regardless of whether the regulation is otherwise substantively
valid. Procedural challenges include the claim that notice and comment regulations
have been promulgated without the agency having engaged in the APA procedural requirements of considering
and responding to material comments. In such a procedural foot-fault case, the
regulation can be within the authority conferred (e.g., offer the best interpretation
of the statute) but might be invalid qua regulation solely for an alleged
procedural defect. In such a case, of course, the interpretation (as opposed to
the regulation) can still be valid and still be applied in a judicial
proceeding despite the procedural invalidity of the regulation.
An aside: Prior to Chevron’s demise, the only effect
of a procedurally invalid regulation was that the interpretation did not
qualify for Chevron deference, so the court could still apply the best
interpretation. See Oakbrook Land Holdings, LLC v. Commissioner, 28
F.4th 700 (6th Cir. 2022), CA6 here
and GS here
(rejecting Hewitt’s procedural invalidity holding but in any event
holding that the agency interpretation was the best interpretation thus valid even
without Chevron deference); see also Sixth Circuit Creates Circuit
Conflict with Eleventh Circuit on Conservation Easement Regulations (Federal
Tax Procedure Blog 3/15/22), here.