Chevron Deference: Much Ado About Not Much (8/15/21)

This is my third offering on the most recent D.C. Circuit opinion in Guedes v. ATF, 920 F.3d 1 (D.C. Cir. 8/9/22), DCCir here,  and GS here. My prior offerings are (chronological order):  Important DC Circuit Opinion That Chevron Deference is Irrelevant if Agency Interpretation is Best Interpretation (Federal Tax Procedure Blog 8/9/22; 8/10/22), here; and § 7805(b) Time Limits Do Not Apply to Agency Best Interpretations of the Statute (Federal Tax Procedure Blog 8/11/22), here.  (Note that I omitted from my original discussion the parallel Fifth Circuit opinion in Cargill v. Garland, 20 F.4th 1004 (5th Cir. 12/14/21), CA 5 here and GS here; see Fifth Circuit Affirms Agency Best Interpretation of Statute, thus Not Applying Chevron (Federal Tax Procedure Blog 12/20/21; 12/21/21), here.)

The point I want to make here explicit that which may be only implicit in my prior offerings. When courts defer (or parties (usually the Government) argue that a court should defer) to a “reasonable” agency interpretation, they often do not differentiate between (i) those reasonable agency interpretations that are the best interpretations and (ii) those agency interpretations that are not the best interpretations but are only reasonable agency interpretations qualifying for Chevron deference.  Thus, by chanting "reasonable" and Chevron and appearing to defer, many (I think most) cases involve agency interpretations that are the best interpretations so there is no deference at all.  That is the key point of this new Guedes opinion (and the Cargill opinion). 

And, that is why courts should, as did the court in the new Guedes and in Cargill opinions, make clear what the best interpretation is so that they can either (i) apply that interpretation without any nonsense about Chevron or (ii) apply Chevron only when Chevron deference is outcome determinative – i.e., when the agency interpretation is not the best interpretation.  Keep in mind that, in making the determination as to the best interpretation, courts should give Skidmore respect (not deference) to the agency's interpretation because the agency, not the courts, has been assigned to administer the administrative scheme and is in a better position to deal with subtleties in administration than a court is.  See Really, Skidmore "Deference?" (Federal Tax Procedure Blog 5/31/20; 2/14/21).

As to the latter applying Chevron deference only when the agency interpretation is not the best interpretation, I point readers to some discussion in my article John A. Townsend, The Report of the Death of the Interpretive Regulation Is an Exaggeration  (SSRN December 14, 2021), https://ssrn.com/abstract=3400489:

In the postscript to the article (pp. 122-123) I offer the following reformulation of steps preserving Chevron's basic teaching but isolating when it is outcome determinative (footnotes omitted):

I think much of the commotion and angst about Chevron deference is driven by political ideology. Chevron is the bogeyman proxy for the evils of the  administrative state. The notion is that the administrative state is inconsistent with freedom (whatever exactly that is in a large and diverse democracy where some freedom constraints are required), and Chevron is the poster child because it empowers the administrative state by taking away “rights” that should be in the legislature or the courts rather than evil administrators out to screw citizens. I  think that claim is overblown, as I discuss in the Categories above showing the limits of Chevron deference. To avoid the hyperbole to which Chevron has been subjected in political and legal discourse, I suggest reformulating Chevron into four steps which do not change the substance of the Chevron two step formulation but isolates when a court is actually deferring to an agency interpretation:

1. Is the statute ambiguous?  If no, stop here and apply the unambiguous text without deferring to the agency interpretation (if any). If yes, go to Step 2.

2. Is the agency interpretation reasonable within the scope of ambiguous statutory text? If no, stop here, with the court applying its best interpretation without deferring to the agency interpretation. If yes, go to Step 3.

3. Is the agency interpretation the best interpretation within the scope of the ambiguous statutory text? If yes, stop here, with the court applying the best interpretation without deferring to the agency interpretation. [Note this is Guedes and Cargill] If no, go to step Four.

4. Is the agency interpretation a reasonable interpretation (but not best) within the scope of the ambiguous statutory text?

a. If the answer is yes, the court defers to the less persuasive agency interpretation. (Readers should note that this is the only circumstance that a court defers to the agency interpretation in an outcome determinative sense.)

b. If the answer is no, the court does not defer to the less persuasive agency interpretation.

Outcome determinative deference only occurs at Step 4a. I suggest that, if the courts went through these Steps, there would be clarity as to how pervasive actual deference to agency interpretations really is. I suspect there is not as much real outcome determinative deference as claimed by the critics of Chevron. And, to state that conversely, using these steps might show to fans of Chevron how infrequently it actually applies.

There are other formulations of steps that could isolate when Chevron deference is really applied, so there is no particular pride of authorship here.

For my later anecdotal analysis of actual Chevron deference in the Circuit Courts, see Is Chevron on Life Support; Does It Matter? (Federal Tax Procedure Blog 4/2/22; 4/3/22), here. 

Finally, I think that any reformulation of Chevron to isolate when it is truly outcome determinative will help also the refute the claim that agency interpretations in regulations have the "force or law" in the APA sense.  I offer this excerpt from the discussion addressing that claim in the article (pp. 42-43, footnotes omitted):

Let’s test the foregoing under some hypothetical but instructive examples to show how fallacious it is to claim a regulation [interpretation] qua regulation has the force of law and is therefore legislative. Assume in all examples that the regulation is a Notice and Comment regulation:

Example 1: The agency regulation merely states the requirements of the statute without adding anything. Which has the force of law – the statute or the  regulation? Is the regulation legislative which requires that the regulation add something not fairly derived from the text of the statute? The answer to that should be obvious.

Example 2:The regulation adopts the best interpretation of ambiguous statutory text within the scope of the text ambiguity. By best interpretation, I mean the interpretation that any court would have applied from the date of enactment of the statute. Which has force of law–the statute or the interpretation in the regulation? If the regulation has the force of law, thus alchemizing the regulation into a legislative regulation, can the interpretation apply from the date of the statute’s enactment?  The answer to that should also be obvious.

Example 3: Same as Example 2 except that a court post hoc believes that the interpretation in the regulation is not the best interpretation but is reasonable within the scope of the text ambiguity. As I discuss in detail in Section III, that phenomenon may permit a court to defer in some cases to the agency interpretation. Does that mean that the interpretation via the regulation has the force of law rather than the statute having the force of law? I hope readers will recognize that only by deference in such a situation would an interpretation possibly have some characteristic that even superficially could be called the force of law.

And, as I develop in the rest of that section of the article, the claim is superficial.

Added 8/15/22 8:00 pm:

My original title when drafting this blog entry was: "Chevron Deference: Much Ado About Nothing" taking off from the Shakespeare play of the same name.  But then, on reflection, I have to acknowledge that Chevron applies for real deference in some limited number of cases, although far less than people think (mostly motivated fueled by politics or seeking academic reputation).  As I have said before, most of the claims of tax exceptionalism were nonsense.  Most of the claims about the evil effects of deference or the administrative state are nonsense or hyped-up hyperbole.  I suppose that, on that hyperbole scale, I could have titled the blog "Chevron Deference: Much Ado About Nothing".  That would have been hyperbole.  But not much.

Remember that Judge Newman, one of the giants of the Circuit Courts of Appeals, said about the reasonable standard in Chevron:

    It is difficult to know how the Supreme Court or other federal courts determine whether an agency’s interpretation of an ambiguous statute is “reasonable.” No weighing process appears to be involved. It would probably be too cynical to suggest that the courts are just accepting agency interpretations with which they agree and rejecting those they disfavor, but in some cases that almost seems to be what is happening. Clearly there is no one meaning of “reasonable” in the context of Chevron deference. Perhaps this is simply a context where there is a narrow range of acceptable agency interpretations, on either side of the disputed issue, that courts are willing to uphold, but they are ready to assert the power to reject others that, for stated, or more often unstated, reasons, they deem beyond an amorphous notion of “reasonable.”

 Jon O. Newman, On Reasonableness: The Many Meanings of Law’s Most Ubiquitous Concept, 21 J. App. Prac. & Process 1, 83 (2021).

In short, what courts do is try to get their interpretations and fact-finding right as best they can.  If the agency interpretation is wrong (which a “not best” interpretation is as compared to the best interpretation), they likely will apply the best interpretation, using Chevron to get there.  I think Chevron is capacious enough to get to the right result for judges who usually believe the right interpretation is the best result.