Fourth Circuit Applies Auer/Kisor Deference to Include in Guidelines "Loss" the Commentary Inclusion of "Intended Loss" (8/24/24)

In United States v. Boler, 115 F.4th 316 (4th Cir. 2024), CA4 here and GS here [to come], the Court held that the term loss included the pecuniary loss that Boler intended from filing false refund claims with the IRS. Boler filed six returns claiming false refunds; the IRS paid refunds on only four of the returns. Boler wanted the loss to be calculated using only the amounts actually refunded and thus to exclude the refund amounts claimed but not refunded. The district court held that Sentencing Guidelines inclusion of loss included intended loss. Since the pecuniary loss is a principal driver of the Sentencing Guidelines calculations, the inclusion of the intended loss increased the advisory Guidelines sentence and factored into the resulting sentence. On appeal, Boler argued that the Guidelines required inclusion of the loss, which facially does not include intended loss and that, the Guidelines Commentary interpretation of “loss” to include intended loss was an invalid interpretation of the Guidelines term “loss.” The Court of Appeals held that loss included the intended loss. (This is perhaps a moot issue in the future, because the definition of loss in the Guidelines was changed effective November 1 to include intended loss.)

The issue, as framed by the majority, turned on the application of Auer/Kisor deference. So, what is Auer/Kisor deference? As interpreted in Kisor v. Wilkie, 588 U.S. 558 (2019), GS here, the Court updated and constricted Auer deference, but, as constricted, held that in some cases courts should defer to agency interpretations of ambiguous agency legislative regulations. The majority in Loper Bright did not mention Auer/Kisor deference, although it cited Kisor several times; the dissent said (S.Ct. at 2306-2307) that Kisor approved Auer deference “which requires judicial deference to agencies' interpretations of their own regulations.” (Hereafter, whenever I use the term regulations, I mean agency notice and comment regulations required for legislative regulations and permitted for interpretive regulations.) The Loper Bright opinions make no statement that Auer/Kisor deference is affected.

I should note that, in my thinking, the Court analogized Auer/Kisor deference to Chevron deference which applied to agency regulations’ interpretations of ambiguous statutory text. The analogy is logical: Chevron deference applied to agency regulations interpretation of law (there statutory law); Auer deference applied to agency interpretations of law (legislative regulations that function like statutes to impose the law); so both forms of deference apply to agency interpretations of law.

One question raised by this analogy of legislative regulations to statutory law for purposes of applying Auer/Kisor’s Chevron-like framework is whether the interpretation for Auer/Kisor deference would have to be in a notice and comment regulation that Chevron usually required. In United States v. Mead Corp., 533 U.S. 218, 230-31 (2001) the Court suggested that a notice and comment regulation was not required for Chevron deference, but the courts usually looked to notice and comment regulations as indications that the agencies intended to invoke their Chevron interpretive authority. Indeed, on that theme, the only benefit of notice and comment regulations under the Chevron regime was the potential for Chevron deference to apply to have the courts adopt agency reasonable but not best agency interpretations; stated otherwise, best interpretations neither needed nor received deference. That was true under Chevron and is now true in this post-Chevron era where only the best interpretations prevail; the outcome determinative delta for Chevron deference was only reasonable but not best agency interpretations. (How big that delta was in affecting actual outcomes is debatable, but I won’t side-track on that issue here.) 

So the question is whether, for Auer/Kisor deference to apply, would the interpretation of the legislative regulation have to be in a notice and comment interpretive regulation rather than in subregulatory guidance? I think the consensus is that Auer deference could apply to subregulatory interpretations. See Auer Deference and Treasury and IRS Policy Statement on the Tax Regulatory Process (7/6/19), here (discussing the IRS Policy Statement confirming that, although Auer/Kisor deference might apply to IRS subregulatory guidance, the IRS would not assert Auer/Kisor deference for subregulatory interpretations).

The larger question in light of Chevron’s demise announced in Loper Bright Enterprises v. Raimondo, 603 U. S. ____, 144 S.Ct. 2244 (2024) is whether so-called Auer/Kisor deference remained viable in any form. Given the analogy of Chevron and Auer/Kisor deference, there does not seem to me to permit any space for Auer/Kisor deference. I base this conclusion on the following:

If a statute has no interpretive space for ambiguity (as the Loper Bright Court expressly said), then why would there be interpretive space for ambiguity in a legislative regulation which, as the courts have repeatedly said, are statute-like. Although not expressed the same way, others have also concluded that nothing should be left for Auer/Kisor deference. E.g., Charles F. Capps, Does the Law Ever Run Out? 8-11 (July 29, 2024), Available at SSRN: https://ssrn.com/abstract=4908863 (describing Loper Bright as a formalism interpretive strategy and concluding that “Thus, if formalism is true, then Auer and Overton Park [Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402 (1971)] are also void in the sense that they should never affect the outcome of a case,” and “If formalism is true, then it is plausible that all three doctrines must land in either the frying pan of irrelevance or the fire of unconstitutionality.”)

Yet, it appears, that the Fourth Circuit in United States v. Boler, ___ F.4th ___ (4th Cir. 2024) concluded that Auer/Kisor deference survived intact (at least as constricted by Kisor). The majority opinion says (Slip op. 8 n. 4):

   n4 The Supreme Court’s recent ruling in Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024), calls into question the viability of Auer deference. In Loper Bright, the Court rejected the long-standing notion that “ambiguities” in statutory language act as “implicit delegations to agencies.” Id. at 2265. Since Loper Bright dealt specifically with ambiguities in statutory directives to agencies and did not address the issue of agency interpretations of their own regulations, we will apply the Supreme Court’s recent guidance in Kisor to address the issue before us today.

Question: Is that reasoning for ducking the issue persuasive to readers?

This should be an issue that could or should be raised either in a petition for rehearing en banc or a petition for certiorari. The issue will certainly ultimately land in the Supreme Court anyway.

For other discussion on the issue of the application of Loper Bright to the Sentencing Guidelines, see Doug Berman, Hoping admin law gurus will help us all understand what Loper Bright might mean for federal sentencing law (Sentencing Law & Policy 7/3/24), here.

This blog was cross-posted on my Federal Tax Crimes Blog, here.