Symposium: Reverse Seminole Rock and Auer
on Jan 30, 2019 at 1:40 pm
Elizabeth Murrill is the solicitor general of Louisiana, which joined Utah and 17 other states in a cert-stage amicus brief urging the court to grant Kisor v. Wilkie and overrule Seminole Rock and Auer.
To build support for the proposed Constitution, Alexander Hamilton in Federalist No. 17 reassured the people of New York that “[i]t will always be far more easy for the State governments to encroach upon the national authorities, than for the national government to encroach upon the State authorities.” Such assurances were critical to obtaining the states’ support and willingness to ratify what was then an experiment in self-governance. Bowles v. Seminole Rock and Auer v. Robbins judicially created power to bind the states to a federal agency’s ad hoc interpretations of the agency’s own ambiguous regulations. This not only belies Hamilton’s promise but also fundamentally reshapes the bargain between the states and the federal government.
Seminole Rock and Auer allow federal agencies to bind the public to informal rules adopted without following the Administrative Procedure Act. The public is then governed by agency caprice, with no prior notice of an agency’s views or any opportunity to shape them or address their impact. It is hard to think of a better deal for regulators, who can unilaterally relieve themselves of the hassle of complying with the APA. But allowing agencies to modify their policies through informal guidance can dramatically alter long-settled expectations and fundamentally change federal-state partnerships, creating special problems for the states.
When policies and conditions that apply to spending clause legislation change, millions in taxpayer dollars and state infrastructure spending may be affected. Billions of federal dollars are distributed annually by the Department of Education under Title IX and the Individuals with Disabilities Education Act. Congress is authorized to spend these funds under the spending clause. Virtually every university, technical school, public school system, some private schools, and afterschool programs receive these funds, directly or indirectly, and are affected by changes to DOE guidance. Medicaid is another important federal spending clause program, as are many federal highway programs. State legislatures take into account the receipt of these funds from long-established programs when they construct state budgets and draft state laws. Withdrawing Title IX and IDEA funds would shut down a state’s entire public-school system. Loss of federal highway funds could trigger defaults on bond obligations. And loss of health-care funding would shut down state Medicaid programs, leaving hundreds of thousands of people without a safety net for health care.
Besides threatening states with unilateral changes to well-established programs, Seminole Rock and Auer deference also create broad separation of powers concerns. When courts blindly defer to an agency’s interpretation of its own vague or ambiguous regulations, they not only deepen a legal defect created by the agency but create a new one by setting in motion an executive branch power loop that cannot be breached. Executive branch agencies have no legislative powers – the power to make law is reserved to the legislative branch, a rule so basic we all learned it in middle school. But an agency exercises a limited measure of lawmaking power when it is permitted to issue rules and regulations. The purpose of such a legislative delegation is to allow the agency to further clarify how it will implement laws and establish ground rules the agency applies to those it regulates. It furthers the goal of transparency between those in power and those subjected to it.
Changes in agency rules can bankrupt a state, a business, or an entire industry. When an agency promulgates vague or ambiguous rules, then it has failed to achieve — and has instead actually defeated — the purpose of a legislative delegation. After all, the entire purpose of a legislative delegation is for the agency to give the regulated community more clarity on how broad laws are going to be applied or policies implemented – not to muddy the water or arrogate more power to itself. Vague or ambiguous rules are a symptom of deeper problems – an overly broad delegation of legislative power, perhaps, or defective rulemaking.
When an issue is significant enough to justify deference, then it is significant enough to require promulgation. Rules for rulemaking exist for good reason. They create a mechanism for legislative oversight of legislatively delegated power, notice and adequate opportunity for comment, and objectively reviewable guardrails. It is not a shock to our constitutional system for courts to recognize agency expertise and experience when agency action is under scrutiny. But courts abdicate their most fundamental duty to say what the law is and also destabilize the balance of power embodied in the Constitution when they defer to an agency that issues ambiguous rules and then seeks deference to informal practices or guidance.
Defenders of Auer tout its efficiency gains, but such gains are illusory at best. If an agency has an incentive to be intentionally vague, it may never provide a clear answer to the public and the parties it regulates. That sounds less efficient than the grinding wheels of the judicial process, even if those wheels grind slowly. Moreover, as Justice Antonin Scalia pointed out in his 2013 opinion concurring in part and dissenting in part in Decker v. Northwest, any efficiency gains derived from Auer deference “cannot justify a rule that not only has no principled basis but contravenes one of the great rules of separation of powers: He who writes a law must not adjudge its violation.”
Kisor v. Wilkie is a good example of arbitrary agency behavior Seminole Rock and Auer encourage. The Department of Veterans Affairs handles hundreds of thousands of claims for veterans’ disability benefits. It has a process for evaluating previously denied claims, of which there certainly must be many — hence the need for clear standards and procedures. James Kisor, a Marine veteran of the Vietnam War who the agency does not dispute suffers from service-related post-traumatic stress disorder, followed the procedure to have the VA re-evaluate his previously denied claim. He presented evidence from his service record that further documented the nature of the conflict to which he was exposed during his service, which (in his view) was relevant to whether he had service-related PTSD. But he has been denied retroactive benefits.
The agency’s decision turns on the meaning of the term “relevant” as used in 38 C.F.R. § 3.156(c)(1). The U.S. Court of Appeals for the Federal Circuit expressly acknowledged that both Kisor and the VA advanced reasonable but irreconcilable constructions of the regulation. The VA’s view, through the Board of Veterans Appeals, is that service records are not “relevant” for purposes of Section 3.156(c)(1) when they are not “outcome determinative in that they do not manifestly change the outcome of the decision.” That interpretation not only limits such claims’ likelihood of success but significantly affects the veteran’s burden of proof.
Nothing in that scenario justifies judicial deference from the courts, and the VA’s failure to promulgate clear regulations in the first place should not default to its advantage. The entire purpose of issuing regulations was for the agency to advise veterans what standards apply to previously denied claims and claims for retroactive benefits. The agency failed. The interpretation offered by the board meets the APA’s definition of a rule, which means it should be promulgated to be binding. If it hasn’t been promulgated, the court should review the board’s final adjudication under the appropriate standard (usually it’s an arbitrary-and-capricious standard, which is already quite deferential), but without additional deference to the agency’s gloss on its poorly written regulations.
Agencies routinely “apply” laws and regulations. They make intermediate, preliminary, procedural and final decisions. But Kisor, who appears to have submitted information under a reasonable reading of the existing regulation, was blindsided with an unpromulgated, ad hoc interpretation (one which, notably, really is not clear either – what does “manifestly change” mean?). His case is a good vehicle because it aptly demonstrates the risk inherent in Seminole Rock and Auer: If courts continue to apply judicially created doctrines that defeat meaningful review, then one leg of the three-legged constitutional stool has been cut off, threatening the whole structure’s stability.
By giving controlling weight to informal agency action that conflicts with contrary state law, Seminole Rock effectively expands the federal government’s power under the supremacy clause, deprives states of constitutional safeguards from federal overreach, and undermines the states’ APA protections. Seminole Rock also allows agencies to retroactively change the terms of federal-state agreements in spending clause legislation, which threatens states with the loss of hundreds of millions of dollars without any means of redress. For all of these reasons, the Supreme Court should overrule Seminole Rock and Auer.
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Past cases linked to in this post: