Supreme Court Rebuffs Businesses, Won't Topple Regulation Precedent

(Bloomberg) -- A divided U.S. Supreme Court rejected calls by business groups to overturn two decades-old rulings that have given federal agencies broad power to interpret their own regulations.Voting 5-4 on the central issues, the court on Wednesday reaffirmed rulings from 1945 and 1997 that typically require judges to defer to an agency on the meaning of ambiguous regulations. The court limited that legal doctrine, though, laying out new guidelines for when courts should yield to agencies.Chief Justice John Roberts joined the court’s liberals in the majority. Writing the court’s lead opinion, Justice Elena Kagan rejected contentions that federal agencies have grown too powerful and that judges should have the primary responsibility for interpreting unclear regulations.“It is no answer to the growth of agencies for courts to take over their expertise-based, policymaking functions,” Kagan wrote for the court.The ruling came as the justices near the end of their nine-month term. The court will issue its final opinions Thursday and is expected to rule on partisan gerrymandering and the Trump administration’s plan to ask about citizenship in the 2020 census.The justices may say Friday whether they will consider letting President Donald Trump end a deferred-deportation program for young undocumented immigrants started by President Barack Obama.‘No Fair Hearing’Business groups said deference to agencies on the meaning of regulations leads to onerous and unpredictable rules and leaves companies vulnerable to penalties when an agency shifts its thinking. Trade groups representing the oil, mining, farming and manufacturing industries were among those urging the court to jettison the prior rulings.Four conservative justices said the court should have scrapped the doctrine, known as “Auer deference” after the 1997 Auer v. Robbins ruling. Writing for the group, Justice Neil Gorsuch said Auer deference lets agencies avoid having to amend their regulations through formal notice-and-comment proceedings.“With Auer, there is no fair hearing,” Gorsuch wrote. “Whether purposeful or not, the agency’s failure to write a clear regulation winds up increasing its power, allowing it to both write and interpret rules that bear the force of law.”Kagan said Auer deference should apply only when a regulation is “genuinely ambiguous,” when an agency’s interpretation is reasonable and when its approach stems from its “substantive expertise” and “fair and considered judgment.”“What emerges is a deference doctrine not quite so tame as some might hope, but not nearly so menacing as they might fear,” she wrote.Gorsuch said the majority opinion had rendered Auer a “paper tiger” and is likely to “force litigants and lower courts to jump through needless and perplexing new hoops.”Roberts ConcursRoberts concurred with the majority but didn’t join all of Kagan’s reasoning. In a separate opinion, he wrote that the “distance between the majority and Justice Gorsuch is not as great as it may initially appear.”Roberts said Auer deference generally will apply in cases when a judge would have been persuaded by an agency’s interpretation anyway.Roberts said the decision doesn’t affect a better-known legal doctrine called “Chevron deference.” That requires courts to defer to agencies on the meaning of ambiguous laws -- rather than rules -- as long as the regulators’ interpretation is reasonable.Wednesday’s ruling to a large degree tracks an approach urged by the Trump administration, which had asked the court to narrow the two precedents without directly overturning them.Opponents of Auer deference offered mixed reactions.“The Supreme Court missed an opportunity today to strike down an unconstitutional, judicially created doctrine that gives unaccountable bureaucrats the benefit of the doubt when deciding what their regulations do or do not require of small businesses and, indeed, all Americans,” said Karen Harned, executive director of the National Federation of Independent Business’s Small Business Legal Center.But Paul Hughes, a lawyer with McDermott Will & Emery who argued against Auer deference when the court heard the case in March, called the ruling a victory and said it will “significantly narrow agency authority.”The Justice Department declined to comment.Vietnam VeteranThe issue came to the court in a non-business context. Hughes represented James Kisor, a Vietnam War veteran who says he suffers from post-traumatic stress syndrome and is seeking retroactive benefits.Kisor said the U.S. Department of Veterans Affairs should reconsider its denial of his 1982 claim for benefits because it didn’t consider important evidence about his combat service. The case turned on a VA regulation that requires reconsideration if “relevant” service records come to the department’s attention.A federal appeals court, applying Auer deference, ruled against Kisor. The Supreme Court’s ruling Wednesday told the lower court to reconsider whether deference was warranted.The 1945 ruling, Bowles v. Seminole Rock, deferred to a World War II price-control board in its enforcement of a disputed regulation that governed building materials. The 1997 Auer decision deferred to the Labor Department’s interpretation, expressed in a court filing, of a regulation on overtime pay.Defenders of those rulings said they give agencies flexibility to account for changing circumstances. The 1997 ruling was written by Justice Antonin Scalia, a staunch conservative who later came to consider his opinion a mistake.The case is Kisor v. Wilkie, 18-15.(Updates with reaction starting in 17th paragraph)To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.netTo contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Laurie Asséo, Justin BlumFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

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