Of Interest

Commentary from Professor Hickman, as it occurs to her

Did Little Sisters of the Poor just gut APA rulemaking procedures?

For many Supreme Court watchers, the decision in Little Sisters of the Poor v. Pennsylvania was about a contraceptive mandate. As I noted in a prior post, however, for some of us, the case was about interim-final rulemaking and the procedures for agency rulemaking imposed by the Administrative Procedure Act (APA). At least at first blush, Justice Thomas’s opinion for the Court turns APA notice-and-comment rulemaking procedures into a pro forma exercise of procedural box-checking that will allow agencies to curtail meaningful public participation in the agency rulemaking process. Agency rulemaking will be much easier to accomplish, but the resulting regulations will be poorer in quality and thus less effective.

APA § 553(b) and (c) generally contemplate that, when the government wants to adopt legally-binding regulations, it must (1) issue a notice of proposed rulemaking (NOPR) that contains certain information, most specifically the legal authority for and general content of the proposed rule; (2) “[a]fter notice,” offer the interested public “an opportunity to participate in the rule making through submission of written data, views, or arguments”; and (3) “[a]fter consideration of the relevant matter presented” issue the final rules accompanied by a “concise general statement of their basis and purpose,” known more colloquially as the preamble. APA § 553(b) contains a limited “good cause” exemption from these requirements. Although the text does not say so explicitly, the import is obvious: as a default proposition, legally-binding legislative rules should be adopted only after notice and opportunity for public participation, not before.

The Little Sisters case concerned legally-binding interim-final regulations (IFRs) that the federal government adopted without first giving the public an opportunity to submit comments. The government asked for comments in conjunction with the IFRs, and it arguably took those comments into account when it replaced the IFRs with final-final regulations, but the final-final regulations did not make many changes. At least prior to today’s decision, many scholars (and the Administrative Conference of the United States) perceived this sort of post-promulgation notice and comment process, absent a valid statutory exemption, to be contrary to the text of APA § 553 by putting the opportunity for public participation after rather than before the agency adopts legally-binding regulations. Although APA § 553 does not say explicitly that notice and legally-binding regulations cannot occur in the same document, the APA’s text does signal an assumption of “notice first, binding regulations later” through its ordering of the different procedural steps (complete with repeated use of the word “after”), and for good reasons.

As the D.C. Circuit has observed repeatedly, the goals of notice-and-comment rulemaking procedures are “to reintroduce public participation and fairness to affected parties after governmental authority has been delegated to unrepresentative agencies and to assure that the agency will have before it the facts and information relevant to a particular administrative problem, as well as suggestions for alternative solutions.” American Hosp. Ass’n v. Bowen, 834 F.2d 1037, 1044 (1987) (internal citations, quotation marks, and brackets omitted). As a practical matter, it is well understood that, the further that agencies go down the road of the rulemaking process, the more committed they are to the regulations they have drafted, and the less likely they are to make changes in response to comments received. Consequently, the assumption and concern is that parties who might otherwise be interested in commenting will see a request for post-promulgation comments as insincere, designed to placate potential reviewing courts, so those parties will be discouraged from participating. I am not aware of any empirical studies that say so, but anecdotally through observation and conversations with agency officials and regulated parties alike, this has been my experience.

In Little Sisters, the government justified its action in a couple of ways that were more particularized to the case at bar. First, the government claimed that the Affordable Care Act specifically authorized the use of interim-final rules — which it did, unlike most statutes. Second, the government claimed good cause for foregoing pre-promulgation notice and comment, which may or may not have been the case (the Third Circuit did not think so), but which APA § 553(b) recognizes as a potential statutory exemption. Justice Thomas’s opinion for the Court completely ignored the first of these arguments and, regarding the second, declared in a footnote that addressing the government’s good cause claim was unnecessary given the Court’s broader conclusions regarding the procedural validity of interim-final rulemaking.

Indeed, sweeping much more broadly, Justice Thomas’s opinion for the Court is pretty close to a full-throated endorsement of interim-final rulemaking (i.e., binding rules first and last) as procedurally equivalent to the more standard notice-and-comment rulemaking process (i.e., notice only first and binding rules later). He reduced the challengers’ complaint to being about the labels of the IFRs rather than their relative timing and binding effect.

Respondents point to the fact that the 2018 final rules were preceded by a document entitled “Interim Final Rules with Request for Comments,” not a document entitled “General Notice of Proposed Rulemaking.” They claim that since this was insufficient to satisfy § 553(b)’s requirement, the final rules were procedurally invalid. Respondents are incorrect. Formal labels aside, the rules contained all of the elements of a notice of proposed rulemaking as required by the APA.

The APA requires that the notice of proposed rulemaking contain “reference to the legal authority under which the rule is proposed” and “either the terms or substance of the proposed rule or a description of the subjects and issues involved.” § 553(b)(2)-(3). The request for comments in the 2017 IFRs readily satisfies these requirements. That request detailed the Departments’ view that they had legal authority under the ACA to promulgate both exemptions, as well as authority under RFRA to promulgate the religious exemption. And respondents do not — and cannot — argue that the IFRs failed to air the relevant issues with sufficient detail for respondents to understand the Departments’ position. Thus, the APA notice requirements were satisfied.

Slip. op. at 22-23.

Justice Thomas next turned to the harmless error rule contained in the APA’s judicial review provisions. But rather than merely finding the agency’s use of IFRs in this case to be harmless error, he declared the use of IFRs more or less categorically to be nonprejudicial so long as they are sufficiently thorough in their explanation of the agency’s thinking.

Even assuming that the APA required an agency to publish a document entitled “notice of proposed rulemaking” when the agency moves from an IFR to a final rule, there as no “prejudicial error” here. § 706. We have previously noted that the rule of prejudicial error is treated as an “administrative law … harmless error rule.” Here, the Departments issued an IFR that explained its position in fulsome detail and “provide[d] the public with an opportunity to comment on whether [the] regulations … should be made permanent or subject to modification.” … “The object [of notice and comment], in short, is one of fair notice,” and respondents certainly had such notice here.

Slip op. at 23 (internal citations omitted and emphasis added).

Together these paragraphs suggest that two things: (1) so long as the agency at some point in the rulemaking process provides the information required by APA § 553(b) and includes language inviting public comments, the order in which the steps outlined in APA § 553(b) and (c) occur is unimportant; and (2) the Court sees the principal function of APA rulemaking procedures as facilitating communication from the agency to the public regarding what the agency is thinking, with little or no regard for the importance of communication in the other direction. Justice Kagan’s concurring opinion also recognizes that the government must explain itself sufficiently to satisfy the reasoned decisionmaking requirements of the Supreme Court’s 1983 State Farm decision — but again, that communication is from the agency to the public about what the agency is thinking, rather than the other way around. In short, notice to the public is all that really matters; communications from the public to the agency (i.e., public participation), and the resulting benefits to agency expertise and the rulemaking process more generally are left out of the analysis.

A vision of agency rulemaking procedures that focuses principally on notice to the public rather than collaboration and engagement with the public would be more efficient. As the lower courts have construed the APA over the past fifty years, notice-and-comment rulemaking has become procedurally cumbersome and time-consuming. Agencies often have regarded the APA’s procedural requirements as obstacles to accomplishing what they regard as worthy regulatory goals. But efficient is not necessarily the same thing as effective, and it is worth thinking for just a few moments about why the courts interpreted the APA to make notice-and-comment rulemaking so complicated in the first place.

When the APA was adopted, agencies did not adopt many legally-binding regulations. When they did, the general understanding was that they were required to use formal rulemaking procedures contained in APA §§ 556 and 557, which are cross-referenced in APA § 553, and which contemplate live witness testimony in open hearings as well as written submissions, cross-examination of those witnesses, and a transcript of the proceedings to generate a record supporting the rule. Given that understanding, extensive interpretation of APA § 553(b) and (c) to flesh out the requirements of a written hearing process simply was not required. NOPRs and preambles under APA § 553 could be (and were) quite skimpy because APA §§ 556 and 557 did all the procedural heavy lifting.

The Supreme Court did away with formal rulemaking for almost all agencies in 1973 in United States v. Florida East Coast Railway Co., right around the same time that the incidence of agency rulemaking dramatically expanded. Formal rulemaking was notoriously burdensome and inefficient; informal notice-and-comment rulemaking was perceived by many to be a more efficient alternative. But without the record that formal rulemaking produced, how could courts ensure that agencies were taking public participation seriously and not acting arbitrarily? They interpreted APA § 553(b) and (c) as requiring agencies to do things like disclosing the data on which the agency relied as part of the NOPR, not changing the final regulations so drastically as to make public participation meaningless, and responding to all significant comments received in the preamble to the final rule. In the aforementioned State Farm decision, the Supreme Court also interpreted APA § 706(2)(A) as requiring agencies contemporaneously to explain and justify their regulatory choices in their regulatory preambles.

None of these requirements (including the demands of State Farm) are spelled out explicitly in the APA’s text. But although the Court’s 1978 Vermont Yankee decision counsels against imposing procedural burdens not contemplated by the APA’s text, the APA’s textual silence also should not be taken too literally. Enacted in a much less textualist era (1946), the APA’s text occasionally offers specific details but also uses undefined, open-ended, and ambiguous terms that necessitate interpreting the words in their larger context as well as construing them to give them legal content and effect. (Larry Solum helpfully explains construction versus interpretation here and here.) For example, what does it mean to “give interested persons an opportunity to participate in the rule making through the submission of written data, views or arguments,” as APA § 553(c) requires? Arguably notice and an opportunity for participation means something more than merely saying “send in your comments” after the rules are in place, but how much more, and in what ways? The APA on its face is not explicit. Thus, unfortunately, the bare terms of APA § 553(b) and (c) are susceptible of the Court’s hyperliteralist interpretation in Little Sisters. But textualist methodology anticipates reading a statute’s words not in isolation but rather in context, and expects courts not to parse statutory text so closely as to render it a mere nullity.

And with its decision in Little Sisters, the Court has come pretty close to, if not writing APA § 553(b) and (c) out of the statute completely, then at least minimizing those provisions to the point of irrelevancy in most instances. Under the reasoning of Little Sisters, even without a claim of good cause, an agency can issue legally-binding IFRs that include the requisite citations to legal authority and invite public comments, then wait and see what happens. If someone challenges the IFRs as procedurally invalid, then the agency can hurry up and issue final-final regulations with a preamble that responds to comments received, if any, without making changes, and the Court likely will say “good enough” so long as the agency otherwise is thorough enough in communicating its own thoughts. But if no one bothers to challenge the IFRs, then the agency can just leave them on the books as-is without further action. Since most agency regulations go unchallenged in court (for many reasons unrelated to their compliance with the APA), most agency regulations can now be issued in legally-binding form without needing to engage with the public at all. And when regulations are challenged, State Farm is the only real protection left against agency arbitrariness.

Most agency regulation drafters are dedicated public servants who pursue rulemaking based on a genuine desire to accomplish what they perceive as good and desirable policy goals. Leaving aside good faith disagreements over what those policy goals ought to be, agency regulation drafters are not omniscient. Agency officials will concede that, often, they need the public’s input to fill gaps in their own knowledge. And on some occasions, agency regulation drafters simply don’t know what they don’t know. Public participation in the rulemaking process enhances agency expertise and improves the quality of agency regulations. The Court’s analysis in Little Sisters downgrades the statutory relevance of engagement and collaboration between agency officials and the public and, consequently, devalues and undermines public participation as a part of agency rulemaking. We likely will get more agency regulations faster, but in the end, we may not like the cost.

Cross-posted at Yale Journal on Regulation’s Notice & Comment Blog.

Correcting the Record: Taxes, Penalties, and the Anti-Injunction Act

As a professor, I talk with reporters often. I consider it part of my job, and I like doing it. But occasionally mistakes happen. This week, in reporting about the Supreme Court’s grant of certiorari in CIC Services v. IRS, a reporter misattributed to me an argument that wasn’t mine and with which I disagree. The reporter quickly and graciously admitted error and has fixed the article. But I want to address the argument at stake in a blog post, to be clear about where I stand. I have never argued and do not believe that whether the Anti-Injunction Act bars pre-enforcement judicial review of tax regulatory actions turns on a finding that penalties under the Internal Revenue Code are not taxes as the Anti-Injunction Act uses that term. My arguments for reading the Anti-Injunction Act to allow pre-enforcement judicial review of tax regulatory actions under the Administrative Procedure Act are entirely different and do not depend at all on a distinction between taxes and penalties.

The Anti-Injunction Act, 26 U.S.C. s. 7421(a), provides that, except as provided elsewhere in the Internal Revenue Code, “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.” CIC Services and other cases challenging rules and regulations that impose reporting requirements do not directly concern the computation of anyone’s tax liability. And, at first blush, it might seem reasonable to argue that the penalties that the Code imposes for noncompliance with reporting requirements are not taxes, and thus challenges to those reporting requirements cannot be limited by the Anti-Injunction Act. After all, in NFIB v. Sebelius, the Supreme Court decided that the Anti-Injunction Act did not apply because the “shared responsibility payments” at issue were penalties rather than taxes.

As with many arguments that seem sensible at first, however, just a little digging uncovers substantial weaknesses. Drawing a distinction between taxes and penalties in the Internal Revenue Code has always been tricky. Congress has often used “additions to the tax” and “penalty” more or less interchangeably in imposing civil penalties across various Code provisions, and Congress’s choice of label has not always been outcome determinative before the Supreme Court. For those who are interested in learning more about the history of the tax/penalty distinction and the Anti-Injunction Act, Jerry Kerska and I wrote about it at some length and with extensive footnotes here.

But whether penalties are taxes for Anti-Injunction Act purposes, while perhaps not entirely irrelevant, nevertheless does not decide the question about pre-enforcement judicial review that is before the Court in CIC Services. Whatever one chooses to label the exaction for noncompliance with IRS Notice 2016-66 or other pronouncements like it, as I see things, the issue before the Court is whether pre-enforcement judicial review under the Administrative Procedure Act restrains that exaction’s assessment and collection. My answer, grounded in statutory text, history, and purpose, is no, pre-enforcement review doesn’t do that.

The Anti-Injunction Act was adopted in 1867 as part of a comprehensive statutory scheme for administering the Civil War income tax, with “assessment” and “collection” as functions defined in some detail by the early revenue laws and, later, within the Internal Revenue Code. Proper interpretation of the Anti-Injunction Act requires an understanding of the history of the assessment and collection functions, and tax administration more generally, as they have evolved over the past 150 years, as well as the events that prompted Congress to adopt the Anti-Injunction Act in the first instance and how they compare with contemporary circumstances. In the same article, Jerry Kerska and I painstakingly track the text, history, and purpose of the Anti-Injunction Act as part of the early revenue laws, the Internal Revenue Code, and the system of tax administration they established to demonstrate that Congress intended the word “restraining” in the Anti-Injunction Act to reflect a greater temporal proximity to actual enforcement efforts than one typically sees with pre-enforcement challenges under the Administrative Procedure Act. We also explain how our reading of the Anti-Injunction Act reconciles it with the Administrative Procedure Act and the Supreme Court’s decisions in Abbott Labs v. Gardner and Direct Marketing Ass’n v. Brohl, rather than placing the Anti-Injunction Act at odds with them. My amicus briefs before the Sixth Circuit and the Supreme Court on this issue have made these same arguments.

In law and in academia, people are known for their ideas and arguments. Those who have read my academic work and amicus briefs are familiar with my ideas and arguments regarding Anti-Injunction Act interpretation, but not everyone reads those sources. The Internet being what it is, errors in news articles tend to stick around, despite best efforts to correct them. Hopefully this post will help in this instance.

County of Maui & Chevron Waiver — Let’s Not Get Carried Away

The Supreme Court’s decision in County of Maui v. Hawaii Wildlife Fund has prompted a flurry of discussion on Twitter and elsewhere about whether Justice Breyer’s majority opinion in the case adopted the position that the government can waive or forfeit eligibility for Chevron deference by failing to argue for it, and thus overturned the D.C. Circuit’s rejection of Chevron waiver last year in Guedes v. Bureau of Alcohol, Tobacco, Firearms & Explosives. Chevron waiver is a topic of some debate these days. The D.C. Circuit has addressed the issue most prominently and extensively, in Guedes and elsewhere. The Tenth Circuit endorsed it just last week in Hays Medical Center v. Azar, arguably in dicta, but also arguably establishing a circuit split with the D.C. Circuit. Law reviews at Harvard, Stanford, and Chicago all published short notes or essays last year discussing the issue. I have given the issue its own subsection in the Administrative Law Treatise. In my view, however, it would be premature to claim that the Supreme Court has embraced the Chevron waiver argument.

County of Maui is not the first time the Chevron waiver question has arisen in a Supreme Court opinion. Just last month, Justice Gorsuch rather overtly signaled his support for Chevron waiver in a statement respecting the Supreme Court’s denial of certiorari in Guedes. I discussed that statement in another blog post. Justice Gorsuch’s treatment of the issue in Guedes was unequivocal but brief, and he wrote for himself alone.

Justice Breyer’s reference in County of Maui, though on behalf of five Justices, was much less clear — a mere observation that the Solicitor General had not asked for Chevron deference. But the EPA “Interpretive Statement” at issue would not have been eligible for Chevron deference in any event, as Justice Breyer seems to have recognized by citing Mead and Skidmore:

"Neither the Solicitor General nor any party has asked us to give what the Court has referred to as Chevron deference to EPA's interpretation of the statute.  See Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844 (1984).  Even so, we often pay particular attention to any agency's views in light of the agency's expertise in a given area, its knowledge gained through practical experience, and its familiarity with the interpretive demands of administrative need.  See United States v. Mead Corp., 533 U.S. 218, 234-235 (2001); Skidmore v. Swift & Co., 323 U.S. 134, 139-140 (1944).  But here, as we have explained, to follow EPA's reading would open a loophole allowing easy evasion of the statutory provision's basic purposes.  Such an interpretation is neither persuasive nor reasonable."

As I have documented elsewhere, Justice Breyer has always held a fairly idiosyncratic view of Chevron and Skidmore as a single standard, with Chevron‘s emphasis on the exercise of delegated power merely adding another factor to be considered in deciding whether or not to defer. For that matter, minor disagreements regarding Chevron‘s operation and scope abound among the Justices. Because Chevron, Skidmore, and Mead are “meta-standards,” the Justices may disagree over how these standards work or even which to apply but still agree to accept or reject an agency’s particular statutory interpretation in a given case. Whereas commentators may analyze and critique every snippet of Supreme Court rhetoric, the Justices seem more willing to let minor disagreements over dicta go unremarked, rather than write separately over every questionable turn of phrase. For this reason alone, one should always be leery of overreading an ambiguous turn of phrase about Chevron in a single Supreme Court opinion.

Moreover, none of the briefing before the Court mentioned the Chevron waiver concept. Neither the Petitioners nor the Solicitor General as amicus said anything at all about deference doctrine. The Respondents said only that, as mere “guidance,” the EPA’s Interpretive Statement was “not an exercise of congressionally delegated authority to fill an interpretive gap in the statute” and thus “was not entitled to deference under Chevron” in light of Mead. Given the complete lack of briefing on Chevron waiver in this case, the mere observation that the Solicitor General did not ask for Chevron deference in a case where it wasn’t available anyway is pretty slim evidence that the Court has suddenly embraced a new requirement that the government actively argue in favor Chevron deference before its interpretations will be Chevron-eligible.

Indeed, the idea of Chevron waiver itself seems to have emerged initially more from inartful judicial rhetoric and inadequately-reasoned analytical leaps than from deliberate arguments. Consider the experience of the D.C. Circuit, which seems to be where the doctrine originated, and which to date has made the most definitive statement on the subject. In Peter Pan Bus Lines v. Federal Motor Carrier Safety Admin. (2006), the D.C. Circuit declined to evaluate the reasonableness of an agency regulation under Chevron step two after the agency had contemporaneously justified its decision in the regulation’s preamble by declaring the statute unambiguous. Separately, in Intercollegiate Broadcasting System v. Copyright Royalty Board (2009), which had nothing to do with agency statutory interpretation or Chevron, the D.C. Circuit noted “the axiom” that nonjurisidictional issues may be waived. Several years later, in Lubow v. Department of State (2015), after observing that the challenging party had accepted without argument that Chevron applied, the D.C. Circuit cited Intercollegiate and Peter Pan in suggesting that Chevron is nonjurisdictional and that “a party can forfeit an argument against deference by failing to raise it.” Finally, in Neustar, Inc. v. FCC (2017), the D.C. Circuit cited Lubow in holding that the FCC had waived any entitlement to Chevron deference by not expressly advocating for it. The FCC in Neustar had cited Chevron and recited its two steps as the relevant standard of review, but the court deemed that “nominal[] reference[]” inadequate. The court offered little reasoning, however, beyond a parenthetical to the Lubow citation — “Chevron deference is not jurisdictional and can be forfeited” — even though Lubow involved a challenger failing to raise an objection to Chevron deference, rather than a government failure to claim Chevron deference.

Almost immediately — perhaps having realized it had made a significant doctrinal statement with little supportive reasoning — the D.C. Circuit walked back its Neustar holding regarding Chevron waiver. In SoundExchange v. Copyright Royalty Board (2018), and then in the aforementioned Guedes decision (2019), the D.C. Circuit discussed Neustar and Chevron waiver at great length and expressly rejected the proposition that the government can waive Chevron deference by failing to argue for it adequately in a legal brief. First, in SoundExchange, the court noted that the government did not claim Chevron deference because it did not frame the case as involving statutory interpretation at all. Nevertheless, the court insisted that its opinion in Neustar “did not indicate a ‘magic words’ requirement for Chevron deference”; what mattered was whether the agency, in the action being challenged, clearly “exercis[ed] its lawmaking authority.” The SoundExchange court then contended that “Chevron is a standard of judicial review, not of agency action” and that “we can apply Chevron deference to the agency’s interpretation even if there is no invocation of Chevron in the briefing in our court.”

In Guedes, the D.C. Circuit went even further in repudiating Chevron waiver. The court first distinguished waiver from forfeiture: “A waived claim or defense is one that a party has knowingly and intelligently relinquished; a forfeited plea is one that a party has merely failed to preserve.” The court described SoundExchange as holding “that an agency’s lawyers cannot forfeit the applicability of Chevron deference” except by failing to exercise delegated power as described in Mead. The Guedes court then went on to hold the same with respect to Chevron waiver. The court’s analysis was extensive — too long to cover fully in an already-overlong blog post. The general gist of the court’s reasoning, however, was that Chevron is “a doctrine about statutory meaning” akin to a canon of construction, advising “how courts should construe a statute” when that statute is ambiguous and Congress has given an agency responsibility to utilize its expertise to fill statutory gaps. Just as courts “give no mind to a litigant’s failure to invoke interpretive canons such as expressio unius or constitutional avoidance,” it is up to courts rather than litigants to decide whether Chevron applies. The court also made the point that Chevron is rooted in “the expertise of the agency, not its lawyers” — in other words, that courts defer to the exercise of agency expertise in the first instance, not to the litigation strategies pursued by agency lawyers later on.

The Tenth Circuit’s opinion last week in Hays Medical Center v. Azar, which arguably established a circuit split with the D.C. Circuit, more closely resembled the D.C. Circuit’s Neustar opinion than either SoundExchange or Guedes in the depth of its analysis of the Chevron waiver issue. The merits of Hays Medical Center concerned whether HHS’s methodology for calculating Medicare reimbursements is arbitrary and capricious under APA s. 706(2)(A) and State Farm. Apparently, in its Hays Medical Center brief, the government attempted briefly to recast the argument as concerning Chevron rather than State Farm. The Tenth Circuit in Hays Medical Center rejected this reframing in a long footnote, saying that the government’s arguments about “reasonableness” were “relevant” for both State Farm and Chevron. The court then proceeded to analyze the agency’s regulation under State Farm. But the footnote went on to contend that the government’s “perfunctory and fleeting invocation of Chevron waives [its] argument for Chevron deference.” The court cited the D.C. Circuit’s Neustar decision for this proposition, but did not acknowledge that court’s more recent and more extensive analysis rejecting Chevron waiver in SoundExchange and Guedes. The Tenth Circuit’s footnote is arguably dicta, and one wonders if the Tenth Circuit would reach the same conclusion if forced to confront the Chevron waiver question squarely. Given that footnote, however, one anticipates the Tenth Circuit will have the opportunity to do just that in the not-so-distant future.

In summary, despite somewhat hazy and under-theorized origins, the Chevron waiver issue seems to have legs. Although the D.C. Circuit has now repudiated Chevron waiver, its flirtation with the idea means that arguments for and against the doctrine are multiplying. The Supreme Court may find it necessary eventually to take up the Chevron waiver question. Justice Gorsuch appears to be receptive to it. Maybe Justice Breyer is as well, although I do not think that Justices Gorsuch and Breyer view judicial deference doctrine very similarly. Still, given the robustness with which the issue is being explored in the circuit courts, along with the realities of the Supreme Court’s often-ephemeral Chevron musings, contentions that a single paragraph — really, a single sentence — in Justice Breyer’s County of Maui opinion adopted Chevron waiver and overruled the D.C. Circuit’s rejection of the same in Guedes seem vastly overblown.

Cross-posted at Yale Journal on Regulation’s Notice & Comment Blog.

Will the Supreme Court Tackle Interim-Final Rules and Post-Promulgation Procedures?

It’s always of interest when the Supreme Court takes up an issue on which one has expended substantial scholarly ink. Such is the case for me with Trump v. Pennsylvania and its companion, Little Sisters of the Poor v. Pennsylvania. The Court in this case granted certiorari to address three separate and distinct questions. As a result, for some, this case is about the Affordable Care Act and its associated contraceptive coverage mandate, whether cast as a question of reproductive rights or religious freedom. For others, this case is about nationwide injunctions and represents an opportunity for the Court to provide some much-needed guidance regarding their use by the lower courts. Both are important questions, but I have little to contribute to the debate over those issues. For me, this is a case about interim-final rulemaking — specifically, whether an agency can issue an interim-final rule without notice and comment based on an inadequate claim of good cause, and then go on to “cure” that procedurally-invalid interim-final rule by accepting and taking into account comments on a post-promulgation basis in finalizing the rule.

In this case, a Third Circuit panel considered the validity of interim-final rules that broadened exemptions to the requirement that group health insurance plans cover contraceptive services, as well as whether post-promulgation notice and comment procedures used in finalizing those rules cured the interim-final rules’ procedural deficiencies. The agencies issuing the interim-final rules asserted the APA’s good cause exception on three grounds: “(1) the urgent need to alleviate harm to those with religious objections to the [preexisting] regulations; (2) the need to address ‘continued uncertainty, inconsistency, and cost’ arising from ‘litigation challenging the previous rules’; and (3) the fact that the [a]gencies had already collected comments on” the preexisting regulations. The Third Circuit panel found none of those justifications sufficient to constitute good cause for foregoing notice and comment prior to the issuance of the interim-final rules. Recognized that the issuing agencies had used post-promulgation notice and comment in subsequently finalizing the interim-final rules, the panel noted circuit precedent holding that “post-promulgation notice and comment procedures cannot cure the failure to provide such procedures prior to the promulgation of the rule at issue.” The panel additionally accused the government of lacking “the ‘flexible and open-minded attitude’ the notice-and-comment process requires,” and said that the near-identical content of the interim-final rules and the final regulations “suggest[s] that the opportunity for comment was not a ‘meaningful one’ in the way the APA requires.” Thus, according to the panel, the procedural defects of the interim-final rules rendered the final regulations procedurally invalid as well.

My interest in interim-final rulemaking and post-promulgation procedures stems partly from a longstanding and frequent Treasury Department practice of issuing what it labels as “temporary” tax regulations with only post-promulgation notice and comment and without a valid, contemporaneous assertion of the APA’s good cause exception. I have written at length criticizing this practice as contrary to the Administrative Procedure Act. I am pleased to say that Treasury announced last year that it would no longer issue temporary regulations without also claiming good cause, although the one instance of Treasury issuing temporary regulations and asserting good cause since then has its own issues. Regardless, whenever Treasury puts out a temporary regulation without notice and comment, it is required by statute also to issue a notice of proposed rulemaking and finalize the regulations within three years, taking into account the comments it receives in that post-promulgation procedure. Hence, the question has arisen: if temporary Treasury regulations historically have violated the APA’s procedural requirements, then do Treasury’s post-promulgation notice and comment procedures fix the problem? This was a background issue in the litigation culminating in the Supreme Court’s decision in United States v. Home Concrete & Supply, LLC, which was resolved in 2012 on other grounds, with the circuits below disagreeing over how to handle the procedural problem.

The issue of interim-final rules with post-promulgation procedures is not limited to the tax context. According to a 2012 GAO study and report, a significant plurality of agency regulations from 2003 to 2010 (35% of major rules and 44% of nonmajor rules) were issued without notice and comment, and most of those regulations (77% of major rules and and 61% of nonmajor rules) relied on the good cause exception when doing so. There is no reason to believe that agencies have changed that practice since then. Consistent with a 1995 ACUS recommendation regarding agency use of interim-final rulemaking, the GAO observed that agencies more often than not used post-promulgation notice and comment when finalizing regulations issued initially as interim-final or temporary rules. When an agency validly asserts good cause for foregoing notice and comment when issuing interim-final or temporary rules, post-promulgation notice and comment procedures are not required by the APA. But an agency that voluntarily pursues those procedures demonstrates good faith and good governance. The circuit courts have struggled, however, with what to do with final regulations promulgated in this way when the issuing agency’s good cause claim is later found to be inadequate.

A few years ago, Mark Thomson and I published an article in Cornell Law Review identifying four main approaches adopted by circuit courts regarding the implications of post-promulgation notice and comment procedures for the validity of final rules originating as procedurally-invalid interim-final or temporary rules:

  • Rejecting post-promulgation notice and comment procedures categorically as an adequate substitute for pre-promulgation notice and comment, meaning that final rules based on procedurally-invalid interim-final or temporary rules are themselves categorically tainted;
  • Treating post-promulgation notice and comment categorically as curing or mooting procedural defects in interim-final rules;
  • Evaluating final rules adopted in this way case by case and upholding such rules when the court is convinced that the agency kept an “open mind” with respect to comments it received during the post-promulgation comment period; and
  • Acknowledging that post-promulgation notice and comment is an inadequate substitute for pre-promulgation procedures, but applying harmless error analysis, including requiring the challenging party to demonstrate prejudice, in deciding whether to give the agency a pass and uphold the final rule anyway.

All of these approaches have their pros and cons. Categorically invalidating all such rules fails to take into account the murkiness of the good cause exception and risks wasting government resources and discouraging good faith efforts of agency officials. Categorically allowing post-promulgation notice and comment to cure agency procedural failures gives agencies free rein to ignore the APA and upend pre-promulgation notice and comment procedures altogether. The open mind standard and particularly harmless error analysis, as applied to date, ask little of the agency at fault and overly burden challengers seeking to effectuate their procedural rights. In our article, Mark and I advocated a different, middle-of-the-road approach that would not categorically reject all rules of this ilk but that nevertheless would embrace a stronger presumption of invalidity and force the agency to bear the burden of demonstrating the harmlessness of its error based on a set of factors, including its responsiveness to post-promulgation comments received and its motives in foregoing pre-promulgation procedures and asserting the good cause exception in the first instance.

Unfortunately, the Supreme Court may never get around to resolving this issue in Trump v. Pennsylvania. It could decide instead that the Affordable Care Act did not give the issuing agencies the authority to expand the conscience exemption to the contraceptive coverage mandate. Alternatively, and substantially more likely, the Court could decide that the statute specifically authorized the use of interim-final rulemaking with only post-promulgation notice and comment and without a simultaneous assertion of the good cause exception. Indeed, the Affordable Care Act expressly authorized “interim final rules as the Secretary determines are appropriate.” The Third Circuit panel found that statutory language insufficiently explicit to excuse compliance with APA notice and comment requirements. But although agencies occasionally will use an alternative term like temporary regulations, “interim-final rule” is practically an administrative law term of art, used across the regulatory state to describe rules issued with only post-promulgation procedures. Since agencies already have the authority under the APA to adopt interim-final rules with good cause, the language in the Affordable Care Act would be redundant unless it meant something else–e.g., the authority to adopt such rules without asserting good cause. Reading the Affordable Care Act as authorizing interim-final rules without a good cause claim would allow the Supreme Court to find the contraceptive coverage regulations at issue here to be procedurally valid without resolving the current jurisprudential mess regarding interim-final rules and post-promulgation notice and comment. Still, one can hope that the Court will take the opportunity to offer at least a little guidance regarding this extremely consequential — if perhaps a little dry when compared to reproductive rights, religious freedom, and nationwide injunctions — procedural question.

Cross-posted at Yale Journal on Regulation’s Notice & Comment Blog.

Justice Gorsuch and Waiving Chevron

The Supreme Court has denied certiorari in Guedes v. Bureau of Alcohol, Tobacco, Firearms & Explosives, also known as the bumpstocks case. The D.C. Circuit relied on Chevron deference in upholding the regulations banning bumpstocks. In a statement respecting the denial of certiorari, Justice Gorsuch objected to the D.C. Circuit’s reliance on Chevron deference.

One of Justice Gorsuch’s reasons for objecting to Chevron deference in Guedes is well known to Chevron observers. Specifically, the interpretation of the relevant statute contained in the regulation could lead to criminal penalties in the future. I wrote about this concern many years ago. Since then, Judge Jeffrey Sutton of the Sixth Circuit has written eloquently about this issue, first in Carter v. Welles-Bowen Realty, and subsequently in Esquivel-Quintana v. Lynch, arguing that the rule of lenity should take precedence over Chevron deference. The Supreme Court dodged that issue in Esquivel-Quintana by concluding that the statute in that case was otherwise clear. Oddly, although Justice Gorsuch in his Guedes statement cited Judge Sutton’s opinion in Esquivel-Quintana, Justice Gorsuch did not mention the rule of lenity by name. The Supreme Court’s statements regarding Chevron, civil cases, and the rule of lenity have been mixed over the years. In 2014, in a statement regarding the Supreme Court’s denial of certiorari in Whitman v. United States, Justice Scalia called upon the Court in future to consider whether courts “owe deference to an executive agency’s interpretation of a law that contemplates both criminal and administrative enforcement,” also citing Judge Sutton. Although Esquivel-Quintana did not yield such consideration, perhaps Justice Gorsuch’s statement in Guedes will prompt litigants to try again regarding the relationship between Chevron and lenity.

Justice Gorsuch’s other point, however, was that the government had waived Chevron deference. He emphasized the government’s statement to the D.C. Circuit that, if the only way that court would sustain the regulation was by extending Chevron deference, then the government would rather the court reject the rule. He then claimed that the Supreme Court “has often declined to apply Chevron deference when the government fails to invoke it.” Well, maybe sort of, but perhaps not exactly.

On numerous occasions, the Supreme Court has ignored or failed to speak of Chevron deference when the Court arguably could have invoked it. Such judicial silence was the case in BNSF Railway Co. v. Loos, which Justice Gorsuch cited, and in which he dissented. Sometimes, even when the Court finds a statute to be clear, it nevertheless will mention that it is viewing the case through the prism of Chevron. But if the Court finds the statute to be clear using traditional tools of statutory interpretation, Chevron has no role to play, so even if the Court would have deferred under Chevron had it found the statute to be ambiguous, the Court need not say so expressly, or even to mention Chevron at all. Judicial silence regarding a doctrine is not precisely the same as expressly declining to apply it. Moreover, judicial silence typically lacks the stare decisis effect of an express statement. To my knowledge, the Court has never expressly declined to apply Chevron deference merely because the government has failed to argue for it. I do not believe that either of the academic articles that Justice Gorsuch cited suggests otherwise.

Nevertheless, beyond Guedes, the issue of Chevron waiver has been sweeping the circuit courts of appeals. Justice Gorsuch’s short statement in Guedes notwithstanding, whether the government actually can waive Chevron deference remains an open question. Richard Pierce and I have been tracking this issue in our bi-annual supplements to the Administrative Law Treatise. As David Hahn and I observe in a forthcoming article entitled Categorizing Chevron, 81 Ohio St. L.J. (to be published in 2020, but unfortunately not quite ready to be posted on SSRN), how one contemplates that question depends largely on whether one thinks of Chevron as rule of decision, a standard of review, or a canon of construction. We believe the bulk of the doctrinal evidence supports categorizing Chevron as a standard of review, and we argue that standards of review cannot be waived, but rather are to be determined by the reviewing court irrespective of the arguments, or the silence, of the litigants. Regardless, as Justice Gorsuch’s statement in Guedes makes obvious, Chevron waiver is yet another issue regarding Chevron‘s scope to watch.

Cross-posted at Yale Journal on Regulation’s Notice & Comment Blog.

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