Legal Alert: Supreme Court Upholds Auer Deference for Agencies’ Interpretation of Their Own Regulations, But Reinforces Limits to Its Applicability (Kisor v. Wilkie)

In Kisor v. Wilkie, a splintered Supreme Court ruled 5-4 to uphold its prior decision in Auer v. Robbins, under which courts have given deference to federal agencies’ reasonable interpretations of their own ambiguous regulations. However, in the holding penned by Justice Kagan—and joined in full by Justices Ginsburg, Breyer, and Sotomayor, and in part by Chief Justice Roberts—the Court relied largely on the principle of stare decisis and attempted to clarify and limit the applicability of Auer deference (also referred to as Seminole Rock deference). The decision has potentially far-reaching effects for regulated entities by narrowing the occasions in which courts will give deference to agencies’ interpretations of their own regulations and likely signals an increased ability for regulated entities to challenge agencies’ informal interpretations of their regulations.

While the Court’s ruling upheld Auer deference, noting its “important role in construing agency regulations,” the majority recounted the instances in which deference was not appropriate and took the opportunity to “restate and somewhat expand upon, those principles… to clear up some mixed messages.” Observing that courts have often given agencies’ interpretations deference without sufficient consideration of the underlying regulations, the majority proceeded to clarify when Auer deference was appropriate:

• The regulation in question must be deemed “genuinely ambiguous” after a court has exhausted all the traditional tools of construction
• The agency’s interpretation must be reasonable, meaning it falls “within the zone of ambiguity the court has identified after employing all its interpretive tools”
• The interpretation must be the agency’s “official position” from those “understood to make authoritative policy in the relevant context”
• The “agency’s interpretation must in some way implicate its substantive expertise,” rather than falling more naturally within the purview of the judiciary
• Finally, the agency’s interpretation must reflect “fair and considered judgement,” not a “post hoc rationalization” in response to litigation, and must not constitute an unfair surprise on affected parties

Although the Court acknowledged that Auer deference gives agencies leeway to construe a regulatory scheme passed by Congress “when it applies,” given the limitations summarized above, the Court stated bluntly that it “often doesn’t.”

Nonetheless, the Court declined to overrule Auer based on the principle of stare decisis. To do so would draw into question not a single case, but a “long line of precedents” regarding otherwise well-settled determinations about numerous agency rules. Moreover, unlike a case presenting a Constitutional question, Congress has the power to alter the Court’s ruling by curbing its delegation of rule-making power to administrative agencies. In sum, Mr. Kisor failed to provide “special justification” for the overruling of Auer. Accordingly, the Court remanded the case to the Federal Circuit to determine whether the meaning of the word “relevant” was genuinely ambiguous and, even still, if Auer deference should apply in light of the limitations articulated by the majority.

The Court’s holding that only an agency’s “authoritative” interpretation should be afforded deference may make informal interpretations more vulnerable to legal challenges. Examples of informal interpretations provided by the Court included the speech of a mid-level official and a memorandum recounting a telephone conversation between employees. On the other hand, this ruling may encourage agencies like the Department of Education to issue more “authoritative” or official positions in order to benefit from Auer deference in litigation.

HMBR’s Higher Education Group will continue to monitor the effects of this ruling. Should you have any questions or concerns about possible implications for your postsecondary institution, please feel free to contact us at 312-946-1800.