Deference Unsettled

By Dawn Causey, Thomas Pinder and Andrew Doersam

If you thought deference was settled, think again.

In Kisor v. Wilkie, the Supreme Court had an opportunity to clarify or overrule Auer deference—a principle that commands courts to defer to a federal agency’s interpretation of its own regulation unless the agency’s interpretation is clearly wrong. Faced with this fork in the road, the Supreme Court went straight. Although technically a unanimous decision, because all the justices agreed the Federal Circuit may have “jumped the gun” in applying Auer deference and ordered a remand, only five justices voted to uphold—but dramatically narrow—Auer deference. The Supreme Court’s fractured opinion masquerades as a “unanimous” decision clouding the future application of Auer deference.

The Auer doctrine was first introduced in 1945 in Bowles v. Seminole Rock & Sand Co. and was called Seminole Rock deference until the 1997 case Auer v. RobbinsAuer deference is based on the belief that agencies have more expertise in their respective statutes and are therefore the best suited to craft clarifying regulations.

In 1982, James Kisor, a Vietnam War veteran, sought disability benefits for post-traumatic stress disorder from his military service. The Department of Veterans Affairs denied Kisor’s initial claim. However, his second claim was granted when he reapplied 24 years later and submitted new evidence, including a psychiatrist’s report and additional Vietnam service records. The regulation in question permits the VA to retroactively grant a benefits claim after obtaining “relevant records” that existed, but were never considered, when the initial claim was denied. The VA denied Kisor retroactive benefits because his submitted records were not dispositive. According to the VA, “relevant records” does not mean relevant to an element of the veteran’s claim, but relevant to the outcome of the dispute. Applying Auer deference, the Federal Circuit concluded that the word “relevant” is ambiguous and deferred to the VA’s interpretation.

The issue before the Supreme Court was whether Auer deference is still a viable doctrine. Justice Elena Kagan, joined by Justices Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor and Chief Justice John Roberts, declined to overturn Auer deference on stare decisis grounds, but limited Auer’s applicability. Kagan introduced a new, six-step test for courts to use when applying Auer deference: (1) the regulation is ambiguous, (2) the agency’s interpretation is reasonable, (3) the agency’s interpretation must be an official position, (4) the interpretation involves the substantive expertise from the agency, (5) the interpretation is a fair and considered judgment, and (6) the interpretation creates no unfair surprises to regulated parties.

Roberts did not join two portions of Kagan’s opinion that defended Auer on grounds other than stare decisis. Joined by Breyer, Ginsburg and Sotomayor, the plurality argued that Auer deference is based on a presumption that Congress wants federal agencies to “play the primary role in resolving regulatory ambiguities.” The plurality also took issue with Kisor’s statutory, policy and constitutional arguments for overruling Auer deference.

Justice Neil Gorsuch wrote a blistering concurring opinion, joined by Justices Clarence Thomas, Samuel Alito and Brett Kavanaugh. He emphasized that he would scrap Auer deference altogether and criticized the majority for failing to provide adequate instructions for the lower courts to apply the new standard. As Gorsuch colorfully put it, the majority “transformed Auer into a paper tiger.”

Roberts cast the deciding vote to uphold Auer deference. However, in his concurring opinion, the chief justice declared that “the distance between the majority and Justice Gorsuch is not as great as it may initially appear.” Roberts noted that “the cases in which Auer deference is warranted largely overlap with the cases in which it would be unreasonable for a court not to be persuaded by an agency’s interpretation of its own regulation.” To that end, Kavanaugh, joined by Alito, wrote a concurring opinion emphasizing that most challenges to an agency’s interpretation would be resolved at step one addressing ambiguity.

While the Kisor court narrowly upheld Auer deference, the six-part test is opaque. When is a regulation actually ambiguous, and when is the agency’s interpretation a reasonable one? For the Vietnam veteran Kisor, one would think that papers documenting the combat experience that caused his PTSD are “relevant records” for receiving benefits. But rather than address Kisor’s case head-on, the Supreme Court punted to the Federal Circuit. Now we are left with a “unanimous” decision containing four inconsistent opinions. This unsatisfying ruling may spark inconsistent application and cause circuit splits. Auer deference is anything but settled.

Dawn Causey is general counsel at ABA, where Thomas Pinder is deputy general counsel and Andrew Doersam is a paralegal.