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Wednesday, July 17, 2024 | Back issues
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Big High Court Reversal on Agency Rulemaking

WASHINGTON (CN) - Overturning nearly two decades of D.C. Circuit precedent, the Supreme Court on Monday directed federal agencies on reinterpreting regulations.

It was in the 2007 opinion Paralyzed Veterans of America v. D.C. Arena LP that the D.C. Circuit announced a rule for federal administrative agencies in issuing new interpretations of their regulations.

Though agencies are "generally not required" when they first issue an interpretative rule to use the notice-and-comment procedures of the Administrative Procedure Act, Paralyzed Veterans says the use of such procedures are required when an agency "wishes to issue a new interpretation of a regulation that deviates significantly from one the agency has previously adopted," the Monday opinion states.

The high court was mostly unanimous Monday in holding that this rule is inconsistent with the APA, or Administrative Procedure Act.

Justice Sonia Sotomayor, the author of the lead opinion, noted that "the absence of a notice-and-comment obligation makes the process of issuing interpretive rules comparatively easier for agencies than issuing legislative rules."

"But that convenience comes at a price: Interpretive rules 'do not have the force and effect of law and are not accorded that weight in the adjudicatory process,'" she wrote.

Mortgage Bankers Association, a trade group, set the wheels for Monday's reversal in motion by filing two challenges to the Labor Department's classification of mortgage-loan officers.

Though the Department of Labor issued an opinion letter in 2006 that said mortgage loan officers with archetypal job duties fell within the administrative exemption, Deputy Administrator Nancy Leppink's 2010 interpretation of that opinion declared otherwise.

If the officers are found to be "employed in a bona fide executive, administrative, or professional capacity," they are exempt from a federal requirement that they earn overtime wages if they work longer than 40 hours a week.

A federal judge nevertheless granted the agency summary judgment, rejecting the trade group's claim that the Administrative Procedures Act requires notice-and-comment before an agency can change its "definitive interpretation.

The D.C. Circuit reversed in 2013, directing the lower court to vacate DOL's 2010 administrator interpretation, and the Supreme Court took up the case last year.

In reversing Monday, Sotomayor said that "the Paralyzed Veterans doctrine is contrary to the clear text of the APA's rulemaking provisions, and it improperly imposes on agencies an obligation beyond the 'maximum procedural requirements' specified in the APA."

Five justices joined the opinion in full but a sixth, Justice Samuel Alito, withdrew from a section that enumerates the options available to regulated entities wwhen an agency is apparently using interpretative rules rather than legislative rules "to skirt notice-and-comment provisions."

In a separate opinion, Alito touched briefly upon the issue of deference courts must pay agency interpretations under the 1945 U.S. Supreme Court decision Bowles v. Seminole Rock & Sand Co.

The need to readdress agency-deference doctrine has long been a point of many Supreme Court opinions of late, and Monday's proved no different.

"I await a case in which the validity of Seminole Rock may be explored through full briefing and argument," Alito wrote.

Justices Antonin Scalia and Clarence Thomas issued separate opinions as well, concurring only in the judgment.

Scalia's complains in five pages about the "elaborate law of deference to agencies' interpretations of statutes and regulations" that the Supreme Court has created.

"I would therefore restore the balance originally struck by the APA with respect to an agency's interpretation of its own regulations, not by rewriting the act in order to make up for Auer, but by abandoning Auer and applying the act as written."

The 1997 case Auer v. Robbins also dealt with agency deference.

Scalia said agencies are free to interpret their "own regulations with or without notice and comment; but courts will decide - with no deference to the agency - whether that interpretation is correct."

At 23 pages, Thomas' concurring opinion is just a hair shorter than that of the majority.

"By my best lights, the entire line of precedent beginning with Seminole Rock raises serious constitutional questions and should be reconsidered in an appropriate case," he wrote.

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