Businesses Target Scalia Opinion in Supreme Court Regulatory Fight

(Bloomberg) -- A U.S. Supreme Court ruling written by conservative icon Justice Antonin Scalia has become an unlikely target for business groups. And now the court may be poised to overturn it.

Scalia’s 1997 opinion requires judges generally to defer to federal agencies’ interpretations of their own regulations. Industry trade associations say the decision gives agencies too much power, fostering onerous and unpredictable rules. The groups will ask the court to jettison the ruling in a case set for argument Wednesday.

Such a ruling could give home builders, manufacturers and miners more confidence their business decisions won’t leave them exposed to penalties when a change in party control of the White House leads to a shift in agency thinking. Courts have deferred to fresh federal agency interpretations on subjects including animal habitat, drugmaker exclusivity and workers’ wages.

“What we are really looking for here is regulatory certainty,” said Peter Tolsdorf, vice president of litigation at the National Association of Manufacturers. The Scalia-written ruling gives agencies “the deference of a king to say what a regulation does or doesn’t mean.”

Under current practice, companies are at risk even if they are following longstanding agency guidance, says Katie Sweeney, general counsel for the National Mining Association.

‘Upside Down’

“Ultimately, it would very much help the regulatory framework here where people can know that they’re going to be given notice of changes in the government position and the opportunity to deal with that before their world is turned upside down,” Sweeney said.

The 1997 ruling, known as Auer v. Robbins, involved a Labor Department regulation on overtime pay. The court said administrative agencies are entitled to deference unless their interpretations of their regulations are clearly wrong.

There were few signs at the time the ruling would become so controversial. Scalia’s opinion was unanimous and required barely 3,000 words to explain. It extended a 1945 ruling, known as Bowles v. Seminole Rock, that deferred to a World War II price-control board in its interpretation of a regulation that governed building materials.

Opposition has grown since then. Business and conservative advocates now see Auer as undermining the constitutional separation of powers and giving agencies unfettered authority to change their positions without notice.

Short-term Disruption

Overturning Auer might hurt some business interests in the short term, undermining efforts by President Donald Trump’s administration to roll back rules governing pollution, drilling and the workforce. The Environmental Protection Agency could find it harder to ease Obama-era limits on mercury emissions from power plants and write new rules defining what bodies of water are protected under a federal pollution law. Agencies and project developers alike would have to recalibrate, according to Kevin Ewing, a natural resources lawyer at Bracewell LLP.

But critics say the long-run benefits of restraining agencies are worth the short-term disruption.

“If they know that they’re no longer going to get deference from the courts in interpreting regulations, they’re going to have to put more precision into the regulations at the outset,” said Adam White, an administrative-law expert who teaches at George Mason University’s Antonin Scalia Law School.

Defenders of Auer say it gives agencies flexibility to account for changing circumstances. That’s especially important with “very complicated, technical regulatory regimes,” said Gillian Metzger, a Columbia Law School professor who teaches administrative law.

One-Sided Argument

“The attack on Auer deference then will simply make it harder for agencies to develop coherent, consistent well-functioning regulatory regimes,” Metzger said.

That perspective is one the Supreme Court won’t hear in the hour-long argument Wednesday. In an unusual arrangement, neither of the two arguing lawyers will be fully defending Auer.

One of them will be Solicitor General Noel Francisco, whose office normally defends federal power, including the authority of administrative agencies. Francisco is urging the court to scale back the Auer and Seminole Rock rulings without tossing them out altogether.

Deference should apply “only after exhausting all the traditional tools of interpretation and determining that the agency has reasonably interpreted any genuine ambiguity,” Francisco wrote in court papers.

Vietnam Veteran

The case before the court involves James Kisor, a Vietnam War veteran who says he suffers from post-traumatic stress syndrome and is seeking retroactive benefits.

Kisor says the U.S. Department of Veterans Affairs should reconsider its denial of his 1982 claim for benefits because it didn’t consider important evidence about his combat service. The case turns on a VA regulation that requires reconsideration if “relevant” service records come to the department’s attention.

All signs indicate the court is poised to cut back on deference. Chief Justice John Roberts and Justices Clarence Thomas, Samuel Alito, Neil Gorsuch and Brett Kavanaugh have all questioned the Auer ruling. Thomas has twice written that Auer deference was “on its last gasp.”

“I’d be shocked if they don’t at least scale back on the deference,” said Brendan Collins, a lawyer at GKG Law. “I think the odds are they are just going to strike it down, even though it’s pretty well established.”

A victory could embolden agency critics to turn their attention to a better-known legal doctrine, known as Chevron deference, which requires courts to yield to agencies on the interpretation of federal statutes. The Kisor case is “part of this broader conservative attack on the administrative state that has really taken hold,” Metzger said.

Trimming Auer deference also would mean more work for federal judges, who would be forced to“dig into these administrative records more deeply,” said Vermont Law School professor Pat Parenteau.

“All of these district judges are now going to have to roll up their sleeves and learn more about the cases that come before them,” Parenteau said. “With Auer, they could just look at what the government said and say, ‘Oh, it looks OK; we’re done.”’

Scalia’s Doubts

Scalia himself came to regret the Auer ruling, airing his doubts in his opinions and, according to Thomas, in private. Speaking at the conservative Heritage Foundation after Scalia’s death in 2016, Thomas described an exchange the two once had on the bench.

Thomas said Scalia leaned over and said, “Auer is one of the worst opinions in the history of this country.”

“You wrote it!” Thomas said he responded, bringing the Heritage Foundation audience to laughter. “Oh, my goodness. He couldn’t remember what he had done.”

The case is Kisor v. Wilkie, 18-15.

To contact the reporters on this story: Greg Stohr in Washington at gstohr@bloomberg.net;Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Laurie Asséo, John Harney

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