SCOTUS Declines to Limit Agency Power

In a unanimous decision that read like a 5-4 vote, the Supreme Court handed down its decision in Kisor v. Wilke this week. All nine justices agreed that the case should be remanded to the lower court, but they expressed dramatically different reasoning.

What it means, essentially, is that for now courts will continue to defer to agencies’ reasonable interpretation of their own regulations. For contractors facing off against agencies, it means that the agencies still have the upper hand—however, SCOTUS did try to limit it some.

Kisor asked the Supreme Court to overturn decades of case law requiring courts to defer to an agency’s interpretation of its own regulation, otherwise known as Auer deference—named after the 1997 case Auer v. Robbins. This deferential standard recognizes that an agency’s interpretation is “controlling unless plainly erroneous or inconsistent with the regulation.” Those opposing Auer have argued that it bestowed immense power on agencies. They can basically interpret their regulations however they see fit, so long as the interpretation has a shred of reason to it. The plaintiff in Kisor asked the Court to curb that power.

On June 26, the Court declined to overrule Auer, but it did describe some limitations on its use. Justice Elena Kagan wrote in the opinion that “Auer deference retains an important role in construing agency regulations,” but the doctrine is not limitless nor without restraint. Auer, the Court made clear, should not be applied at the outset. Instead, the doctrine should be a court’s last resort.

Reaching a unanimous result – though divided in its reasoning – the Court remanded Kisor’s case to the Federal Circuit. In the process, the Court refined exactly when and how courts may employ Auer deference.

Justice Kagan emphasized that Auer does not give “agencies expansive, unreviewable authority.” Rather, Auer “gives agencies their due, while also allowing—indeed, obligating—courts to perform their reviewing and restraining functions.” In other words, courts should not automatically apply Auer deference to an agency’s interpretation of its own regulation. It must first ensure that Auer deference is warranted.

First, “a court should not afford Auer deference unless the regulation is genuinely ambiguous.” If a regulation is not ambiguous, then “there is no plausible reason for deference. The regulation then just means what it means—and the court must give it effect, as the court would any law.”

But the analysis does not stop there.

To decide whether a “regulation is genuinely ambiguous . . . a court must exhaust all the traditional tools of construction.” In other words, “a court cannot wave the ambiguity flag just because it found the regulation impenetrable on first read.”

Regulations, the Court said, may be immensely difficult to navigate and understand. But simply because a regulation is dense or poorly written does not make it ambiguous.

(Justice Kagan’s words of regulatory impenetrability surely ring true to federal contractors forced to navigate the Byzantine FAR like Hogwarts students climbing up ever-changing staircases and through password-protected secret passageways, although that may make it sound a bit more fun than it is.)

If the toolbox of statutory construction cannot divine a meaning out of the regulation at issue, next a court must ask if the agency’s interpretation is reasonable. As Justice Kagan emphasized, “let there be no mistake: [This] is a requirement an agency can fail.” 

Finally, the agency’s interpretation must implicate its substantive experience in some way, and the agency’s reading must reflect its “fair and considered judgment.”

Justice Neil Gorsuch, with Justice Clarence Thomas joining him in full and Justices Samuel Alito and Brett Kavanaugh joining in part, added a concurring opinion that reads like a dissent. Justice Gorsuch wrote that the decision was “more of a stay of execution than a pardon,” and his preference would be to “stop this business of making up excuses for judges to abdicate their job of interpreting the law[.]”  

For now, Auer remains good law—but with limitations.

Editor’s Note: thanks to Ariel Rhines for co-authoring this post.