On June 26, 2019, in a much-anticipated ruling, the U.S. Supreme Court refused to overturn the long-standing Auer deference standard, which provides that courts should defer to agencies’ interpretations of their own rules if those rules are ambiguous. Kisor v. Wilkie, 588 U.S. __ (2019). The case was brought by a Marine veteran who sought retroactive disability payments from the U.S. Department of Veterans Affairs (VA) dating back to the early 1980s to cover treatments for post-traumatic stress disorder, which he had allegedly developed as a consequence of his service in the Vietnam War. The VA denied the request and the Board of Veterans’ Appeals—an administrative tribunal within the VA— affirmed this decision based on its interpretations of the VA’s rules. The U.S. Court of Appeals for the Federal Circuit concluded that the VA regulation at issue was ambiguous and, citing Auer v. Robbins, 519 U.S. 452 (1997), deferred to the Board’s interpretation of the rule. The Marine veteran argued to the U.S. Supreme Court that it should overrule Auer and abandon the deference that Auer and its progeny gave to agencies interpreting their own rules.
Writing for the majority, U.S. Supreme Court Justice Elena Kagan stated that “Auer deference retains an important role in construing agency regulations.” Justice Kagan emphasized, however, that Auer deference has its limits and is “sometimes warranted and sometimes not.” It is warranted only after “traditional tools” of construction, whereby “a court must ‘carefully consider’ the text, structure, history, and purpose of a regulation, in all the ways it would if it had no agency to fall back on.” Justice Kagan stated that “[d]oing so will resolve many seeming ambiguities out of the box, without resort to Auer deference.” But even where an ambiguity is found, only reasonable agency interpretation will merit deference. The rule being interpreted must also be the “official position” of the agency, rather than an ad hoc statement conveniently tailored to fit a particular situation, and the agency’s interpretation must “implicate its substantive expertise.” Finally, to receive Auer deference, the “rule must reflect fair and considered judgment.”
Justice Kagan relied heavily on stare decisis, a legal doctrine by which courts are obligated to respect the precedent established by prior judicial decisions. She emphasized the broad reach of Auer deference and the chaos that would ensue if reversed: “It is the rare overruling that introduces so much instability into so many areas of law, all in one blow.” Justice Kagan also noted that because the case did not involve a constitutional issue, Congress remains free to amend or enact a law that would effectively overrule Auer.
The case was remanded to the Federal Circuit to determine whether Auer deference applies in light of the Court’s opinion. Though five justices concurred with Justice Kagan’s holding, Justice Neil Gorsuch and Chief Justice John Roberts each offered their own reasoning in support of the holding, with Justice Gorsuch expressing significant skepticism about Auer deference. He explained that while the rule stands, “the doctrine emerges maimed and enfeebled—in truth, zombified.”
Although the facts of the case concerned veterans’ benefits, the Court’s ruling has broader implications for federal agencies, especially those in the environmental and energy regulatory arena. As agencies like the U.S. Environmental Protection Agency and U.S. Department of the Interior continue to reshape policies surrounding issues including climate change, natural resource development, access to public lands, and endangered species, the degree of deference that judges afford to agency interpretations becomes one of the most critical factors in determining the outcome of a court challenge to an agency’s decision on such issues.
The outcome of Kisor v. Wilkie was closely watched, as the case presented an opportunity for the Court to substantially reduce the power of federal agencies by diminishing the deference afforded to them, thereby allowing courts to more frequently second-guess agencies. The case was also was seen as a litmus test of the Court’s appetite to reevaluate the related and similarly controversial doctrine of Chevron deference. Chevron deference applies to agency interpretations of ambiguous statutes. Ultimately, the Court opted to maintain the status quo. On the one hand, the new limits might restrain agencies tempted to stretch their interpretation of certain regulations, and the Court’s refusal to overturn Auer provides continued consistency for agencies and practitioners familiar with the doctrine’s existing bounds and applications. On the other hand, as Justice Gorsuch stated in his concurrence, the opinion serves as “more a stay of execution than a pardon,” thanks to the failure of the Court to find a consensus on why Auer deference should be maintained. This disunity opens the door for future challenges to agency deference, and the Court will almost certainly have to address the agency deference standard again soon. The regulated community should continue to watch this area of jurisprudence carefully, as an erosion of agency deference would have significant implications for their operations.
If you have any questions regarding this decision or how it may affect your business, please contact Randy Dann, Shalyn Kettering, or Lucas Satterlee.