Executive Summary

On the last day of its term, the Supreme Court handed down a reminder that Chevron deference has its limits. In Cuomo v. Clearing House Association, L.L.C., No. 08-453 (Sup. Ct. 6/29/09), the Court reemphasized that an agency's claim to deference on an interpretation of a statute it administers cannot prevail where the interpretation exceeds the permissible bounds of statutory language. If a court finds that Congress limited the range of the agency's discretion, it must enforce that limitation. Moreover, the limitation may be explicit or, as in Cuomo, may be imposed implicitly through the use of a bounding term ("visitorial powers") that has a fixed meaning that the agency cannot change.

The Cuomo Opinion

The Court's opinion was written by Justice Scalia, in a rather odd alignment with Justices Stevens, Souter, Ginsburg and Breyer joining the majority.

The case concerned letters "in lieu of subpoena" sent to various national banks in New York by the New York Attorney General. The letters sought non-public information about the banks' lending practices to determine whether the banks had violated New York's fair lending laws. The banks, through a trade group, and the Office of the Comptroller of the Currency brought suit to enjoin the information requests, claiming that a regulation promulgated by the Comptroller under the National Bank Act and purporting to implement a statutory limitation on state exercises of "visitorial powers" prohibited such information requests and related state law enforcement efforts against national banks. An injunction was entered and affirmed by the lower courts.

As stated by the Court in its opinion, the dispositive question was "whether the Comptroller's regulation purporting to pre-empt state law enforcement can be upheld as a reasonable interpretation of the National Bank Act." Slip op. at 1-2. This question, in turn, was governed by the question of whether the Attorney General's law enforcement efforts were an exercise of "visitorial powers." The National Bank Act provides that national banks are not subject to "any visitorial powers" except, as pertinent here, those authorized by federal law. In implementing this provision, the Comptroller had adopted a regulation providing that only the Comptroller could exercise visitorial powers over national banks and defining those powers to include "prosecuting enforcement actions." Thus, the Comptroller contended that the New York Attorney General's information gathering efforts, with an eye toward enforcement of a state statute, constituted an exercise of visitorial powers prohibited by the Act and regulation. Slip op. at 2-3.

The Court recognized that the Comptroller's interpretation of a statute it is charged with administering is entitled to deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Slip op. at 3. The Court also recognized that there is "necessarily some ambiguity" as to the term "visitorial powers" and that the Comptroller "can give authoritative meaning to the statute within the bounds of that uncertainty." Id. Nevertheless, the Court emphasized that "the presence of some uncertainty does not expand Chevron deference to cover virtually any interpretation of the National Bank Act." The Court concluded that the "outer limits" of the term visitorial powers "do not include, as the Comptroller's expansive regulation would provide, ordinary enforcement of the law." Id.

The Court held that "'visitorial powers' in the National Bank Act refers to a sovereign's supervisory powers over corporations" and includes any form of administrative oversight that allows a sovereign to inspect books and records on demand. Slip op. at 14. The Court distinguished this from a situation in which "a state attorney general brings suit to enforce state law against a national bank," where the attorney general "is not acting in the role of sovereign-as-supervisor, but rather in the role of sovereign-as-law-enforcer." Id. The law enforcement function is not an exercise of visitorial powers and, as a consequence, the Comptroller could not extend the definition of visitorial powers to include prosecuting enforcement actions in state courts.

Since the letter demand "in lieu of subpoena" in Cuomo was issued pursuant to the Attorney General's executive authority, rather than through a court in connection with an enforcement proceeding, the Court affirmed the injunction as applied to the threatened issuance of executive subpoenas but vacated the injunction "insofar as it prohibits the Attorney General from bringing judicial enforcement actions." Slip op. at 15.

Corporate Options in Agency Proceedings

Cuomo again supports the suggestion in our first issue of Administrative Law Bulletin (May 7, 2009) that a company's best option in an agency proceeding may well be to identify and develop arguments demonstrating that the agency's statutory mandate constrains its discretion, thereby limiting the area in which the agency will be entitled to Chevron deference. Once an issue is deemed to be within the scope of an agency's permissible discretion under the governing statute, the outlook for any respondent is necessarily somewhat bleak. Cuomo reminds us, however, that well reasoned statutory arguments can overcome the impact of Chevron deference.