Added 8/7/24 and revised 8/27/24: I have published the 2024 editions of the Federal Tax Procedure Book, here. The section dealing with the Demise of Deference as of 8/27/24 is viewable and downloadable here. In the FTPB 2024 discussion I have added to and refined some of the points in this blog entry.
In Loper Bright Enterprises v. Raimondo, 603 U. S. ____, 144 S. Ct. 2244 (2024), SC Slip Op. here & GS here, the Court (per Chief Justice Roberts) held (Slip Op. 35):
Chevron is overruled. Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires. Careful attention to the judgment of the Executive Branch may help inform that inquiry. And when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it. But courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.
I provide in this blog several points about this holding. I divide my discussion into (i) the implications of the demise of deference and (ii) some key points going to the correctness of some claims made in the opinions. I try in this blog entry to address major points. Given the short amount of time I have had to devote to the blog, I may have missed or even misstated some things which I may need to supplement or correct later. I apologize in advance to readers, but this is just too important a development not to do my best to provide in this one place my discussion of key points.
IMPLICATIONS OF DEMISE OF
DEFERENCE.
1. First, we need clear definitions of key terms used in the discussion.
a. Deference. Deference is--well, was--a court accepting an agency statutory interpretation that is not, in the court’s opinion, the best interpretation of the statute.
b. Chevron deference. The discussion of deference has been framed by the 1984 Chevron decision. However, deference with essentially the same features as Chevron was in the law well before Chevron, going back to before the new deal and the enactment of the APA in 1946. See John A. Townsend, The Tax Contribution to Deference and APA § 706 (SSRN December 14, 2023), pp. 5-23) https://ssrn.com/abstract=4665227 That is not how the Loper Bright Opinion of the Court imagines the pre-Chevron landscape so I will only address this further in the section below dealing with some of the things the majority erred. And, when I use the term Chevron deference, I include that pre-Chevron Chevron-like deference.
2. The Opinion of the Court justifies deference’s demise based on both the APA and the role of courts in the constitutional scheme, as exemplified by Justice Marshall's claim (judicial soundbite) “[i]t is emphatically the province and duty of the judicial department to say what the law is.” Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803).
3. The definition of deference I offered does not help if the court is in legal interpretive equipoise and thus cannot decide the best interpretation of the statute. The Court’s opinion does not appear to even recognize the possibility of legal interpretive equipoise. For example, the Court states (Slip Op. 22, emphasis), that “Courts instead understand that such statutes, no matter how impenetrable, do—in fact, must—have a single, best meaning.” (See Slip Op.22 (emphasis supplied); see also 23 and 31 (“The statute still has a best meaning, necessarily discernible by a court deploying its full interpretive toolkit.”) Whether legal interpretive equipoise is a possibility is a key point of Justice Kagan’s dissenting opinion. (See e.g., Dissenting opinion Slip Op. 7 (stating that sometimes there is no “fixed single best meaning” (cleaned up) of the statute text).
a. Query: Is the majority’s key assumption of the absence of the possibility of legal interpretive equipoise correct?
b. I urge readers to do the following thought experiment: If, after deploying all the tools of statutory construction (sans deference, of course), a court is still unable to determine which of two or more possible reasonable interpretations are the “best,” how does it resolve the case? Flip the proverbial coin? Consult a soothsayer? Ouija board? Or, more likely, just follow its policy preferences? Which, since different judges will have differing policy preferences, is unlikely to promote stability in the law, requiring ultimately uniform application only with the Supreme Court’s pronouncing the one final interpretation for every close statutory interpretation issue.
c. This point of legal interpretive equipoise may be semantic as the Court frames it. The Court thus says (Slip Op. 23) the “best reading” is “the reading the court would have reached if no agency were involved.” (cleaned up and quoting Chevron.) If no agency interpretation were considered, the court in a dispute would have to apply the statute which necessarily self-defines as the best interpretation because it is the one the court applies. But that requires either only one best interpretation with no legal interpretive equipoise or, if there is legal interpretive equipoise, some way to break the tie. I discussed this problem in the prior paragraph, but reiterate it here only to say that some tie-breaker is required if legal interpretive equipoise is possible. I do ask the question whether, if indeed, legal interpretive equipoise does not exist, why there are even such rules as lenity, the sole function of which is to break the tie (equipoise) in legal interpretation? Does this opinion foreshadow the overruling of lenity because a court should be able to reach a best interpretation without equipoise? See Justices Discuss Limited Ambiguity Role for Lenity and by Analogy Chevron Deference (Federal Tax Procedure Blog 3/11/22), here
d . I collect at the bottom of this blog certain prior blogs discussing legal interpretive equipoise.
4. As I have argued, I think the claims of Chevron deference as being outcome-determinative in many cases are overblown. E.g., Chevron Deference: Much Ado About Not Much (Federal Tax Procedure Blog 8/15/21), here; Is Chevron on Life Support; Does It Matter? (Federal Tax Procedure Blog 4/2/22; 4/3/22), here; Chevron Step Two Reasonableness and Agency Best Interpretations in Courts of Appeals (Federal Tax Procedure Blog 2/9/23), here; and Overlap Between Chevron Deference and Skidmore Respect; Chevron Deference Masking Skidmore Respect (Federal Tax Procedure Blog 3/25/23), here. If that is right, then deference demise will not affect many outcomes and thus hardly justifies the hyperbolic commotion about its existence or demise.
5. Skidmore’s admonition that courts consider respectfully agency interpretations in determining the best interpretation is, for now, unscathed by Loper Bright’s rejection of deference. To remind readers, Skidmore was never deference although sometimes, even most often, called deference. Skidmore was and is simply one consideration in the court determining the best interpretation and has been properly called respect rather than deference. See Really, Skidmore "Deference?" (Federal Tax Procedure Blog 5/31/20; 2/14/21), here. So, Skidmore as not ever deference, seems to be alive and well to use agency interpretations as guides to determining the best statutory interpretation. See Opinion of the Court Slip Op. 16 (“In exercising such judgment, though, courts may—as they have from the start—seek aid from the interpretations of those responsible for implementing particular statutes. Such interpretations “constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance” consistent with the APA. Skidmore, 323 U. S., at 140.”); and Kagan dissent Slip Op. 29.) See also Overlap Between Chevron Deference and Skidmore Respect; Chevron Deference Masking Skidmore Respect (Federal Tax Procedure Blog 3/25/23), here.
Added 7/4/24 12:pm: I thought readers might like a little more on Skidmore as not deference but simply a tool to consider in reaching the best interpretation without any deference. In McCutchen v. United States, 14 F. 4th 1355, 1366-1367 (Fed. Cir. 2021), here, the Court explained (cleaned up, here):
If Chevron is inapplicable, validity entails that the Final Rule's interpretation is the "best interpretation." See Chudik v. Hirshfeld, 987 F.3d 1033, 1039 (Fed. Cir. 2021) ("Where the Chevron framework is inapplicable, we determine the best interpretation of the statute for ourselves, while giving the agency's position such weight as warranted under [Skidmore v. Swift & Co., 323 U.S. 134, 139-40 (1944)]." Similarly, if Chevron [Framework] applies but validity is resolved at Chevron Step 1, then validity entails that the Final Rule's interpretation is the unambiguous meaning.Uanmbiguous meaning is the best meaning or interpretation. Under the former Chevron Framework, no deference could occur at (i) Chevron Step 0 [Framework does not apply] or (ii) Chevron Step 1 where the best interpretation applied. (Stated another way, deference was only applied at Chevron Step 2.) Skidmore then applied in determining the best interpretation without deference; now, of course, since the drill is to determine and apply the best interpretation without deference, Skidmore is available for consideration in determining the best interpretation.
Justice Kagan's dissenting opinion (Slip Op. p. 29) at least suggests that Skidmore may achieve something more than respectful consideration of agency interpretation in determining the best interpretation:
First, the majority makes clear that what is usually called Skidmore deference continues to apply. See ante, at 16–17. Under that decision, agency interpretations “constitute a body of experience and informed judgment” that may be “entitled to respect.” Skidmore v. Swift & Co., 323 U. S. 134, 140 (1944). If the majority thinks that the same judges who argue today about where “ambiguity” resides (see ante, at 30) are not going to argue tomorrow about what “respect” requires, I fear it will be gravely disappointed.
It is perhaps worth noting that Justice Kagan is the only Justice with deep scholarly experience on administrative law. Previously, Justice Breyer was also an administrative law scholar; Justice Breyer's views on administrative law subjects were generally aligned with Justice Kagan's. Of course, the Justices all claim administrative law expertise and expertise in all other aress in which they hold forth. (I am reminded of a Texas lawyer who never qualified as a specialist by taking and passing any of the Texas specialist exams advertised that he was not a specialist because the Texas bar has said he is qualified to pracitce in all law areas; that is a similar phenomenon for Justices weighing forth outside their respective areas of expertise.)
6. The Court recognizes that Congress can delegate interpretive authority to an agency. See Opinion of the Court pp. 17-18. The delegation of authority cannot be an implicit one such as Chevron deference implicit assumption as a justification for deference. (Some such delegations may go beyond merely interpretive authority and be legislative authority for the agency to actually make the law rather than just interpret the law.) Surely, in such cases where a court will recognize a congressional delegation of interpretive authority, something like a Chevron deference framework will necessarily apply to test the validity of the agency interpretation.
7. Will Loper Bright’s laying deference to rest moot much of the commotion around the distinction between legislative and interpretive regulations and whether the category of interpretive regulations even continues to exist? I doubt it.
Added 7/5/24 2:00pm: Chevron deference was the linchpin for some to argue that regulations (such as Treasury Regulations) only interpreting statutory text were law-making rather than merely interpreting (remember that such law-making occurred only where the court deferred to an agency interpretation that was not the best interpretation). Now that deference is eliminated, that potential distraction (always a distraction) is now eliminated and the traditional understanding of the difference between legislative and interpretive regulations applies. The most immediate area in which this return to basics without distraction may be important is when, as applicable to tax, Treasury adopts an interpretation that it applies retroactively (although Treasury has discretionary authority to apply prospectively). The traditional rule for all agencies is that, generally absent some signal from Congress to the contrary, interpretations (whether by courts or agencies) apply retroactively to the enactment of the statute, whereas new law by agency rulemaking could only apply prospectively (either from the final rule or an interim final rule (such asa Treasury Temporary Regulation) with good cause). Section 7805(b) now limits retroactivity for interpretations of Code provisions enacted after 1996, but the general rule for retroactivity applies for interpretation of pre-1996 Code provisions. This is a larger subject than can be explored here, but I refer readers to the following blog posts: Regulations Interpreting Pre-1996 Code Provisions; Fixing Hewitt (Federal Tax Procedure Blog 1/6/22; 5/12/23), here; Regulations Interpreting Pre-1996 Code Provisions; Fixing Farhy (Federal Tax Procedure Blog 5/11/23; 5/12/23), here; and § 7805(b) Time Limits Do Not Apply to Agency Best Interpretations of the Statute (Federal Tax Procedure Blog 8/11/22), here.
PROBLEMS WITH THE COURT’S REASONING TO ITS HOLDING
1. The Court incorrectly states the pre-Chevron deference history and the meaning of the APA. John A. Townsend, The Tax Contribution to Deference and APA § 706 (SSRN December 14, 2023), https://ssrn.com/abstract=4665227.
2. On the latter, I am still stunned that the Court quotes but then ignores APA 706(2)(A) standard of to test whether the agency interpretation is “not in accordance with law.” That “not in accordance with law” standard meant something in 1946 when the APA was enacted; its meaning to require deference was established in Dobson v. Commissioner, 320 U.S. 489 (1943), reh. den., 321 U.S. 231 (1944). So far as I can tell, everyone has missed that connection to the proper interpretation of APA § 706 except me. That I am a lone wolf on the point should make readers skeptical, but I just urge readers to read the article which makes the connection inescapable. In this regard, the Opinion of the Court says (pp. 13-14):
As relevant here, Section 706 directs that “[t]o [*14] the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action.” 5 U. S. C. §706. It further requires courts to “hold unlawful and set aside agency action, findings, and conclusions found to be . . . not in accordance with law.” §706(2)(A).
But the Court then says nothing about the meaning of “not in accordance with law,” the precise words interpreted in Dobson to require deference. I am surprised at such incuriosity over something it recognized as important by including it in the quote above.
MORE ON LEGAL INTERPRETIVE
EQUIPOISE
ADDED 7/1/24 12:00pm:
• An important aside on Dobson is that the author of the Dobson opinion, Justice Robert Jackson, was probably the most knowledgeable Justice ever on both the tax system and the practicalities of the administrative system; focusing on the former, he served as IRS Chief Counsel and as Assitant Attorney General for Tax; focusing on the latter, he served on the Attorney General’s Committee on Administrative Procedure and was then Attorney General for its authoritative report in 1941 (a report that acknowledges deference to agency interpretations). Hence when his unanimous Dobson decision describes agency interpretations and deference, Justice Jackson spoke from deep knowledge of the subject.2. Beyond the state of deference to agency interpretations, Dobson had to deal with the express statutory command that Tax Court review is limited to “not in accordance with law.” 1939 Code § 1141(c)(1). Dobson interpreted those words to mean deference to Tax Court interpretations of law. (This takes actual reading of Dobson, but with actual reading, the point is unmistakable; if one needs a guide to Dobson, please see my article linked here.)
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