05 Aug 2019 in Newsletter
Supreme Court Curtails Judicial Deference to Agency Interpretations of Their Own Regulations
By David Forman
Regulations promulgated by administrative agencies sometimes have more than one reasonable interpretation. For example, a regulation may be ambiguous due to circumstances that were not anticipated when the regulation was originally written. When confronted with an ambiguous regulation, Federal courts accept (“defer to”) an agency’s interpretation of its own regulations as long as the interpretation is based on a permissible construction of the statute, under the authority of Auer v. Robbins, 519 U.S. 452 (1997). As we wrote in our last newsletter regarding the prelude to Kisor v. Wilkie, 588 US __ (2019), several commentators (including new Supreme Court Justices Gorsuch and Kavanaugh) have been critical of Auer deference. Moreover, abolishing deference to agency interpretations could have a major impact on patent law. The USPTO often must interpret questions raised by the patent statute and its own regulations, and courts have usually accepted its interpretations.
Turning to Kisor, James Kisor was a Marine during the Vietnam War, who lost an appeal for benefits at the Federal Circuit based on Auer deference to the Department of Veterans Affairs interpretation of its regulations. The Supreme Court took his case to consider the question “[w]hether the Supreme Court should overrule Auer v. Robbins . . ., which direct[s] courts to defer to an agency’s reasonable interpretation of its own ambiguous regulation.” In June, the Supreme Court answered this question.
The Supreme Court ruled that Auer deference survived, but just barely. Justice Kagan wrote a plurality opinion upholding Auer, which was joined by Justices Ginsburg, Breyer, and Sotomayor. Although upholding Auer, the decision listed several requirements and limitations that apply to that doctrine. Under one requirement, for example, a court should not afford Auer deference unless, after exhausting all the “traditional tools” of construction, the regulation is found to be genuinely ambiguous. If genuine ambiguity remains, the agency’s reading must still fall “within the bounds of reasonable interpretation.” Moreover, Auer deference only applies to the agency’s authoritative or official position, not merely an ad hoc or informal statement. As an additional requirement, the agency’s interpretation must in some way implicate its substantive expertise. The Supreme Court also concluded that stare decisis, the legal doctrine that obligates courts to follow legal precedents set by previous decisions in similar cases, cuts strongly against overruling Auer. Overruling Auer would overrule a long line of precedents, each one reaffirming the rest and going back 75 years or more. This would cast doubt on many settled constructions of rules and would allow relitigation of any decision based on Auer.
A lengthy opinion filed by Justice Gorsuch (joined by Justices Alito, Thomas, and Kavanaugh) is not classified as a dissent, because they concurred in the judgment (vacating the Federal Circuit judgment and remanding the case for more review). However, it is a de facto dissent. It strongly criticizes the rationale and justifications for Auer, and argues that deciding such cases based on recognized tools of law would be better than the procedures laid out by the majority. “[T]he majority proceeds to impose so many new and nebulous qualifications and limitations on Auer that . . . . the doctrine emerges maimed and enfeebled—in truth, zombified.”
Key to the survival of Auer was Chief Justice Roberts. Although the Chief Justice did not join in the majority’s analysis of the justifications for Auer nor its rebuttal of the attacks on Auer, he joined in the majority’s procedures for applying Auer and its argument that stare decisis argues against overruling it. Thus, courts will continue to defer to an agency’s interpretation of its own regulations if it applies the procedures and limitations set forth in this decision. Mr. Kisor’s case was vacated and remanded to the Federal Circuit for more review following this guidance.
An interesting summary of the effect of Kisor v. Wilkie was written by Justice Roberts:
I write separately to suggest that the distance between the majority and Justice Gorsuch is not as great as it may initially appear. The majority catalogs the prerequisites for, and limitations on, Auer deference: The underlying regulation must be genuinely ambiguous; the agency’s interpretation must be reasonable and must reflect its authoritative, expertise-based, and fair and considered judgment; and the agency must take account of reliance interests and avoid unfair surprise. Justice Gorsuch, meanwhile, lists the reasons that a court might be persuaded to adopt an agency’s interpretation of its own regulation: The agency thoroughly considered the problem, offered a valid rationale, brought its expertise to bear, and interpreted the regulation in a manner consistent with earlier and later pronouncements. Accounting for variations in verbal formulation, those lists have much in common.
More importantly for patent applicants and patent holders, courts will continue to accept the USPTO’s interpretation of its regulations if all of the limitations and procedures in Kisor v. Wilkie are applied.