The Supreme Court recently issued its long-awaited decision in Kisor v. Wilkie, No. 18-15.  In a deeply divided decision generating four separate opinions spanning almost eighty pages, the Court announced a new multi-part framework for determining when courts should apply Auer deference—that is, when courts should defer to federal agencies in interpreting their own regulations.  A five-justice majority of the Court—through an opinion by Justice Kagan, joined in relevant part by Justices Ginsburg, Breyer, and Sotomayor and Chief Justice Roberts—rejected the challenger's invitation to expressly overrule the Court's highly contentious admin law precedents Auer v. Robbins and Bowles v. Seminole Rock & Sand Co. 

In doing so, however, the majority "restate[d], and somewhat expand[ed] on" the admittedly "mixed messages" contained in previous case law addressing the scope of Auer deference.  The resulting test largely answers the Solicitor General's request that the Court "clarify and narrow" Auer deference in response to concerns that federal courts were reflexively giving agencies carte blanche to interpret their own regulations.  The end result: a narrowed scope of deference that Justice Gorsuch described in a concurring opinion as "maimed and enfeebled – in truth, zombified."  (His preferred approach: "say goodbye to Auer.")  Nonetheless, as both Chief Justice Roberts and Justice Kavanaugh emphasized in separate concurrences, "the distance between the majority and [Justice Gorsuch] is not as great as it may initially appear."  Indeed, the one thing that everyone was able to agree upon is that courts should not reflexively defer to an agency's interpretations of its own regulations.  

A New(ish) Framework For Determining Agency Deference.

So how does it now work?  The Kisor majority outlined the following approach for determining when and how to apply Auer deference:

Genuine Ambiguity—"First and foremost," no Auer deference can be given unless a court determines that the regulation at issue is "genuinely ambiguous, even after a court has resorted to all the standard tools of interpretation."  These tools include considerations of a regulation's language, purpose, context, and history, as well as judicial interpretive canons.  If, as a result of that effort, "the law gives an answer—if there is only one reasonable construction of a regulation—then a court has no business deferring to any other reading, no matter how much the agency insists it would make more sense."  This is not meant to be an easy test to pass; the majority predicted that it "will resolve many seeming ambiguities out of the box, without resort to Auer deference."

Reasonableness—Say we have genuine ambiguity.  What then?  Courts next must ask whether the agency's reading of its regulation is "reasonable," meaning that "it must come within the zone of ambiguity the court has identified after employing all its interpretive tools."  This test appears to mirror the familiar Chevron Step Two inquiry applicable to agencies' interpretations of their governing statutes.  But the test has teeth:  As the majority put it, "[L]et there be no mistake:  [This] is a requirement an agency can fail."

Character and Context—But wait!  There's more.  Even if a regulation is genuinely ambiguous, and even if an agency puts forth a reasonable interpretation, courts still must inquire whether "the character and context of the agency interpretation entitles it to controlling weight."  The majority made clear that this inquiry "does not reduce to any exhaustive test."  But it did lay out some "especially important markers for identifying when Auer deference is and is not appropriate," drawing on past Court decisions and aggregating their holdings:

First, an interpretation "must be one actually made by the agency," meaning that it reflects the agency's "authoritative" or "official" position rather than a "more ad hoc statement not reflecting the agency's views."  Put another way, the interpretation "must at the least emanate from those actors, using those vehicles, understood to make authoritative policy in the relevant context." 

In addition, the agency's interpretation must "in some way implicate its substantive expertise."   The basis for deference ebbs when the subject matter of the dispute is "distant" from the agency's ordinary duties or "falls within the scope of another agency's authority."  The same is true where an agency's rule merely "parrots the statutory text."  Yet still other "interpretative issues may fall more naturally into a judge's bailiwick."  The logic behind this group of exceptions is simple: "When the agency has no comparative expertise in resolving a regulatory ambiguity, Congress presumably would not grant it that authority."   

Finally, an agency's interpretation must reflect the "fair and considered judgment" of the agency. That means that the interpretation is neither a "post hoc rationalization" advanced merely to justify the action's actions or a "convenient litigating position."  Nor may a court defer to a new interpretation that creates "unfair surprise" for regulated entities, whether because it conflicts with a prior interpretation or because it upends reliance interests.  In such circumstances, the majority noted, the lack of "fair warning" typically outweighs the reasons for applying Auer

The Implications For Agencies And Regulated Entities.

What does this all mean for regulated entities?  While the Court has previously expressed at least some support for many of these principles, this comprehensive framing of the test should narrow, potentially substantially, the universe of cases that will trigger Auer deference. 

 

It remains to be seen precisely how far, exactly, Kisor narrows Auer.  But at the very least, the Government can no longer reflexively invoke deference to agencies' interpretations of their own regulations.  And the Kisor ruling provides a useful roadmap for challengers seeking to cabin agencies' discretion:  The Government must now meet each part of the new multi-layered standard to warrant deference; if it comes up short in even one respect, a reviewing court should decline to defer to the agency's position. 

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