Supreme Court Review

In the 35 years since Justice John Paul Stevens penned the Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc.1 decision, agency deference has been a bedrock principle of administrative law. This term, the US Supreme Court began to closely cabin whether and when deference is due to agency decisions. The cases of Kisor v. Wilkie 2 (retroactivity of disability benefits from the Department of Veteran Affairs), Azar v. Allina Health Services3 (retroactivity of Medicare payment reductions), and Department of Commerce v. New York 4 (citizenship question on the US Census forms) signal new scrutiny for agency decision making.

Under Chevron, an agency's interpretation, enacted through formal rulemaking, is entitled to "controlling weight" unless "arbitrary, capricious, or manifestly contrary to the statute."5 The Court in Chevron noted that it was "entirely appropriate for this political branch of the Government to make such policy choices – resolving the competing interests that Congress itself either inadvertently did not resolve, or intentionally left to be resolved by the agency charged with the administration of the statute in light of everyday realities."6 The Court had also long held (perhaps not too remarkably) that agencies are entitled to deference when their reasoning is persuasive (referred to as Skidmore7 or Mead8 deference). In Auer v. Robbins,9 the Court went a step further and found that an agency's interpretation of its own regulations is controlling so long as it seemed to be the "fair and considered" judgment of the agency and was not "plainly erroneous or inconsistent with the regulation." 10

These principles of agency deference presuppose that administrative agencies (1) have greater subject-matter knowledge than courts; (2) are better equipped to make policy choices than judges; and (3) have been delegated by Congress the authority to enact regulations and adjudicate disputes. A growing chorus of agency skeptics – who include the newest members of the Court, Justices Brett Kavanaugh and Neil Gorsuch – have questioned the assumptions about whether and when agencies really know best.

Deference skeptics thus highly anticipated the decisions of this term, and they waited in particular for the Kisor decision, which directly presented the question of whether Auer should be overturned. It was widely believed that this would be the first step to dismantling the "headless 'fourth branch'"11 of government, as some agency skeptics have called it.

The deeply divided Court showed just how fraught the Court's view of the administrative state has become, but it fell short of starting the administrative-law revolution that some predicted (or hoped for). The majority opinion in Kisor, authored by Justice Elena Kagan, essentially affords agencies deference where deference is due, but says that it is up to the judiciary to decide whether the agency's decision was reasonable, fair, and based on clear rules.

The majority maintains Auer in name, but in practice, the decision may yet "neuter"12 the doctrine. The dissent, in contrast, stakes out its opposition to judicial deference to (informal) agency decision making. Instead of imagining a reasonable, orderly, expert agency, like that envisioned by Justice Stevens in Chevron, the four dissenting justices (Gorsuch, Kavanaugh, Clarence Thomas, and Samuel Alito) issue an indictment of the "administrative state."13 Harkening back to Justice Louis Brandeis and even Marbury v. Madison,14 the dissenters believe it is the judges' job to interpret the law, including an agency's own regulations. Chief Justice John Roberts wrote his own opinion, which suggests that the majority and dissent are basically saying the same thing: judges, not agencies, are charged with interpreting the law.

The skepticism of informal agency "interpretation[s]" was underscored in Allina Health Services, where the Court rejected the government's view that it could "interpret[]" the Medicare rules to retroactively reduce reimbursements to hospitals by posting the new mode of reimbursement on its website. The Court (per Justice Gorsuch), made clear that the reimbursement rules affect "substantive standard[s]" such as "rights" and must be enacted by formal notice-and-comment rulemaking procedures.15

And the Court's view of administrative agencies darkened further when it considered the Secretary of Commerce's announcement, by memo, that he had decided to add a citizenship question to the Census. In Department of Commerce, the majority, led by Chief Justice Roberts, would have affirmed the agency's decision. Applying familiar arbitrary-and-capricious review, the Court concluded that the agency had the power and a reasonable basis to add a citizenship question if the reason offered – to have accurate citizenship data to enforce the Voting Rights Act (VRA) – was offered in good faith.

But here is where the case took a new turn: the Chief Justice found that the Secretary's explanation of "the VRA enforcement rationale . . . seems to have been contrived." 16 In other words, the Supreme Court of the United States accused the Secretary of Commerce of lying about the reasons for the agency's decision. The Court went on: "we cannot ignore the disconnect between the decision made and the explanation given. Our review is deferential, but we are 'not required to exhibit a naiveté from which ordinary citizens are free.'" 17 The Court struck down the Secretary's citizenship question.

This term signals new possibilities for challenging administrative agencies' actions. We can expect that the Supreme Court will continue to question the underpinnings of administrative deference, may more frequently require agencies to use their formal processes for rulemaking and adjudications, and may now consider reversing agency decisions on grounds of pretext and bad faith.