Supreme Court Could Limit Agency Power

Monday, the U.S. Supreme Court decided to hear a case that could have far reaching implications in agency law—including for government contractors. The Court granted certiorari to a case that could greatly diminish the amount of deference given to agencies interpreting their own regulations. 

For contractors, a Supreme Court decision to curtail agency deference could lead to increased success rates in bid protests and other disputes.  

The case, Kisor v. Wilkie, involves a veteran seeking disability benefits dating back the 1980s. According to the petition, the outcome turns on what the word “relevant” means a Department of Veterans Affairs regulation.

The lower court found that both the agency and the veteran provided reasonable interpretations of an ambiguous regulation, but previous case law—which Kisor may overturn—required the court to defer in such circumstances to the agency’s interpretation. In other words, when an agency and a party both offer reasonable interpretations of an ambiguous regulation, the tie goes to the agency. 

The cases establishing this level of deference are 1997’s Auer v. Robbins and 1945’s Bowles v. Seminole Rock & Sand Co. The Auer case articulated that an agency’s interpretation of its own regulation would stand, so long as the interpretation is not “plainly erroneous or inconsistent with the regulation.” This new case could overturn Auer and Seminole, thereby limiting federal agencies’ power across the board. 

Such a decision could have significant impact in the federal contracting world. For example, last year in Veterans Contracting Group, Inc. v. United States, the U.S. Court of Federal Claims relied in part on Auer to determine that the SBA’s service-disable veteran-owned small business ownership rules were legal, resulting in a business being eligible for the VA’s SDVOSB program, but not the SBA’s SDVOSB program. In a lamenting tone, the court said that the SBA’s interpretation “produces draconian and perverse results in a case such as this one.” But, nevertheless, Auer meant the court had to defer to the SBA’s interpretation, even though the court obviously disagreed. 

This is not the first time that the Supreme Court has been asked to overturn these cases. As Amy Howe notes on SCOTUSblog.com, “[t]he Auer doctrine has been a target for conservatives and business groups for some time[.]”  A 2016 petition asking basically the same thing was denied.

So what’s new? Twenty-two percent of the Court is. Since that denial, Justices Gorsuch and Kavanaugh have joined the high court. And if you allow yourself to read the tea leaves, the future of Auer does not look bright. 

For one thing, the Federal Circuit has a high rate of cases reversed or vacated (83 percent, according to one accounting). And the Federal Circuit itself noted ealier this year, that several Supreme Court justices had already indicated a willingness to revisit Auer, including Justices Alito, Roberts, and Thomas. That’s already three of the five needed to overturn. Thus, the future of Auer may rest on the shoulders of the two newest members of the Court.

In other words, Auer may not be long for this world.

While its little more than rampant speculation at this point, it is interesting to consider what an overturn would mean. Would that put agencies on equal footing with other parties when interpreting their own regulation? Would the most reasonable interpretation win out? Or would agencies be given some other level of deference?

For contractors, one likely result would be an increased level of success in certain bid protests and other disputes. The Veterans Contracting Group protest, for instance, almost certainly would have been sustained if the court hadn’t felt its hands were tied.  

We’ll soon find out. The case is expected to be argued some time next year.