Perez v. Mortgage Bankers: The Odyssey of the Paralyzed Veterans Doctrine and Auer’s Predicted Demise

Courtesy of University of Michigan
Courtesy of University of Michigan

By Jeff Elkin

In Vermont Yankee Nuclear Power v. Natural Resources Defense Council, a unanimous Supreme Court reversed the D.C. Circuit’s ungrounded imposition of procedural requirements on the Nuclear Regulatory Commission, explaining that judges may not impose procedural requirements above those prescribed by Congress in the Administrative Procedure Act. In Mortgage Bankers Association v. Perez, the Supreme Court again rebuked the activist D.C. Circuit for imposing procedures not warranted by the APA on agency action. The Court’s also-unanimous holding in Mortgage Bankers reaffirmed longstanding limits on judicial power over agency action. However, the Mortgage Bankers concurrences of three conservative Justices indicate that the Court’s own activists are planning to excise seventy years of precedent mandating judicial deference to an agency’s interpretation of its own regulations. The Court properly reproached judicial activism when it overruled the Paralyzed Veterans doctrine and should resist pressure from its activist Justices to abrogate generations of deference to agency interpretations of their own regulations.

The Paralyzed Veterans (aka Alaska Hunters) Doctrine

On July 1, 1997, the D.C. Circuit decided in Paralyzed Veterans of America v. D.C. Arena that each wheelchair seating section in the then-under-construction Verizon Center must have a line of sight to the performance area below. In dicta, Judge Silberman stated that once an agency has issued an interpretation of its regulation, the agency may only modify that interpretation as it would modify the regulation itself: via the notice-and-comment rulemaking procedures of the Administrative Procedure Act (APA), 5 U.S.C. §§ 551 et seq., 553 (notice-and-comment rulemaking) Though APA § 553(b) explicitly exempts “interpretative rules” (most often called “interpretive rules”) from notice-and-comment rulemaking, Judge Silberman reasoned that an agency must undergo notice-and-comment rulemaking when changing a sufficiently fundamental interpretation because the act of changing a fundamental interpretation is not an “interpretation.” Rather, it constitutes an amendment or repeal of the interpreted regulation and must be treated as an act of regular (legislative) “rulemaking” as defined in APA § 551(5). Judge Silberman’s rationale became known as the Paralyzed Veterans doctrine.

On June 4, 1999, the Paralyzed Veterans doctrine formally became law in the D.C. Circuit. In Alaska Professional Hunters Association v. FAA, the D.C. Circuit relied on Paralyzed Veterans to hold that the FAA violated the APA when it changed a longstanding interpretation of its regulation without notice-and-comment rulemaking. In so holding, the D.C. Circuit articulated the elements of the Paralyzed Veterans doctrine (aka the Alaska Hunters doctrine): notice-and-comment rulemaking is required for a change in an agency’s interpretation of its own regulation if the interpretation is (1) authoritative and definitive, and (2) that the plaintiff substantially and justifiably relied upon.

Mortgage Bankers

On July 2, 2013, the D.C. Circuit decided Mortgage Bankers Association v. Harris, striking the Department of Labor’s replacement of its definitive interpretation of its regulation without notice-and-comment procedures as invalidly promulgated under the Paralyzed Veterans doctrine. The element of the plaintiff’s reliance on the interpretation was eliminated as an independent, stand-alone element. Rather, reliance was held relevant as only one factor in determining whether a rule is “definitive.” Thus, the D.C. Circuit in Mortgage Bankers bucked its trend of narrowing the Paralyzed Veterans doctrine, instead moving it toward a categorical rule requiring notice-and-comment rulemaking for any change in an agency’s interpretation of its own regulation.

The DOL appealed to the U.S. Supreme Court for a writ of certiorari. On June 16, 2014, the Court granted cert in Perez v. Mortgage Bankers Association (renamed as such when Secretary of Labor Seth Harris was replaced by current Secretary Thomas Perez) and its companion case, Nickols v. Mortgage Bankers Association. The Perez action presented the following question: “Whether a federal agency must engage in notice-and-comment rulemaking pursuant to the Administrative Procedure Act before it can significantly alter an interpretive rule that articulates an interpretation of an agency regulation.” The Nickols action presented this broader question: “Whether agencies subject to the Administrative Procedure Act are categorically prohibited from revising their interpretative rules unless such revisions are made through notice-and-comment rulemaking.” The latter was the de facto focus at consolidated oral argument.

Majority Opinion: Justice Sotomayor

On March 9, 2015, the Court decided the Perez and Nickols cases in a consolidated opinion. For a unanimous Court, Justice Sotomayor explained that the D.C. Circuit had erred in requiring the Department of Labor to undergo notice-and-comment rulemaking prior to changing its interpretation of its regulations because the APA required no such procedure. This holding reaffirms the Court’s also-unanimous opinion in Vermont Yankee Nuclear Power v. Natural Resources Defense Council. There, the Court held that the APA imposes the maximum rulemaking requirements Congress was willing to impose on agencies, so courts violate the separation of powers and fundamental canons of statutory interpretation when they impose additional rulemaking requirements. The Vermont Yankee doctrine was articulated explicitly to end the D.C. Circuit’s recurrent practice of imposing extra-APA requirements on agency action, and the Mortgage Bankers Court used Vermont Yankee in exactly that way. The Paralyzed Veterans doctrine is no longer law.

Concurrences: Justices Alito, Scalia, and Thomas

Justice Alito wrote a concurring opinion solely to express his desire to weaken or overturn the rule of Bowles v. Seminole Rock & Sand and Auer v. Robbins. Under what is usually called the “Auer doctrine” (less commonly, “the Seminole Rock doctrine”), courts will grant controlling deference to agency interpretations of their own regulations. This doctrine pre-dates the APA and was held consistent with the APA in Auer. Justice Alito believes that tempering or eliminating the Auer doctrine will address concerns regarding “(1) the effective delegation to agencies by Congress of huge swaths of lawmaking authority, (2) the exploration by agencies of the uncertain boundary between legislative and interpretive rules, [and] (3) this Court’s cases holding that courts must ordinarily defer to an agency’s interpretation of its own ambiguous regulations.”

Justice Scalia separately concurred in the judgment to opine that the Auer doctrine was contrary to the congressional intent behind the APA. Justice Scalia argued that Congress would not have exempted interpretive rules from notice-and-comment rulemaking if it had known that (1) agencies would issue interpretations that are as binding as the regulations they interpret, and (2) courts would defer to agency interpretations of their own regulations. True to his textualist form, Justice Scalia justified this conclusion by reference to the APA’s command that judges, not agency personnel, “shall . . . interpret . . . statutory provisions, and determine the meaning or applicability of the terms of an agency action.” Despite that text being subject to varying interpretations, Justice Scalia would restore congressional intent by discarding the Auer doctrine and reviewing agency interpretations of their own regulations de novo.

Finally, Justice Thomas wrote a twenty-three page concurrence in the judgment arguing that the Auer doctrine and, by implication, the administrative state violate the separation of powers. Predictably, Justice Thomas relied on no Supreme Court majority opinions — but an extravagance of his conservative colleagues’ minority opinions, as well as law review articles and philosophical theories — to argue that Auer deference unconstitutionally delegates the Judiciary’s “obligation” to safeguard individual liberty. At the end of his radical essay on history and philosophy, Justice Thomas dismissed the doctrine of stare decisis as only mildly persuasive and concluded that he would “reconsider” the seventy-year tradition of deferring to agency interpretations of their own regulations.

Justices Alito, Scalia, and Thomas are surely joined by Chief Justice Roberts in their resolution to overrule the Auer doctrine. Only four Justices are necessary to grant cert, so the Court will surely “reconsider” the Auer doctrine in the near future. As with many other important issues in the past, the fate of the Auer doctrine depends on Justice Kennedy. Hopefully Justice Kennedy will respect the doctrine of stare decisis and refuse to join his activist colleagues in overturning the Auer doctrine.

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