Don't forget who's the boss here.

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Supreme Court's Big Mistake in a Small Case

Noah Feldman is a Bloomberg View columnist. He is a professor of constitutional and international law at Harvard University and was a clerk to U.S. Supreme Court Justice David Souter. His books include “Cool War: The Future of Global Competition” and “Divided by God: America’s Church-State Problem -- and What We Should Do About It.”
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The U.S. Court of Appeals for the D.C. Circuit is often called the second highest court in the land, because its judges decide most of the important cases involving the vast reach of the modern administrative state. Every so often, however, the U.S. Supreme Court likes to remind the D.C. Circuit who’s the boss by reversing one of its administrative law principles. That happened Monday, in a 9-0 decision in which the court repudiated a perfectly serviceable doctrine the D.C. Circuit invented and has used sensibly since 1997. The decision won’t make headlines -- but it’s wrong anyway, and it gives far too much power to administrative agencies.

The decision involves what sounds like a deceptively simple question: When an agency changes its interpretation of a regulation that it has issued itself, does it need to give the public notice and ask for public comment? The Supreme Court said the answer was no. It looked to the Administrative Procedure Act, which functions as the unofficial constitution for the fourth branch of government known as the administrative state. The APA says that ordinary rules must be subject to notice and comment, but that the same requirement doesn't apply to what it infelicitously calls “interpretative” rules.

As far as the Supreme Court was concerned, that was the end of the matter. New interpretations of existing regulations, the court said, count as interpretative rules -- and so don't require notice and comment. Still following the formal structure of the APA, the court added a caveat: the convenience for agencies of adopting interpretative rules without notice and comment “comes at a price,” the court said: Interpretative rules do not themselves have the force of law.

All of this sounds sensible enough on its face. But in so deciding, the court reversed a D.C. Circuit doctrine known mellifluously as the “Paralyzed Veterans” rule, named for a 1997 case in which it was first introduced. According to the now-repudiated doctrine, agencies must engage in notice and comment when they change an existing interpretation.

The D.C. Circuit invented this principle more or less out of whole cloth. Justice Antonin Scalia in a concurring opinion called the effort “brazen.” But the bipartisan panel that invented it had a good functional reason for doing so.

It's all well and good for the Supreme Court to say that interpretative rules technically don't have the force of law. In the real world, however, they do. The reason is that the federal courts, unbidden by the APA, have adopted the rule of systematically deferring to agencies’ interpretations of their own rules. As Scalia noted in his concurrence, this practice is of a piece with the slightly more famous and parallel Chevron doctrine, which says that the courts will defer to an agency’s reasonable interpretation of an ambiguous statute that the agency is charged with administering.

Given that in the real world, interpretative regulations function as laws, it really makes no sense for an agency to be able to change its interpretation -- and therefore change existing law -- without getting feedback from those who will be affected by the change. Legal rules create settled expectations. That's one of the most important reasons we have them in the first place. A change in interpretation is a change in law. It will by definition unsettle settled expectations, creating new winners and new losers.

So why does such a change require public conversation in the form of notice and comment? The answer is that administrative regulations are a special and strange form of law. If you had asked the Founding Fathers who made law in the federal U.S. system, they’d have said, “Congress.” They didn't imagine a world in which many of the most important laws that determine the quality of the air we breathe, the safety of the food we eat and the healthiness of the drugs we take would be decided by administrative agencies that are formally part of the executive branch.

What makes the regulations passed by these agencies legitimate in our constitutional structure? Part of it is that Congress formally authorizes the agency to make decisions. But Congress understood when it passed the APA in 1946 that mere delegation wasn't really enough to justify this strange new form of lawmaking. The APA requires notice and comment in order to put the public back into the process. The result isn't perfect by any means -- but it's far better than leaving the interested public out altogether.

When the D.C. Circuit adopted the “Paralyzed Veterans” rule, it was trying to make what was effectively lawmaking more democratically legitimate. It was relying on its special expertise in understanding how the administrative state works. You might even go so far as to say that the D.C. Circuit was acting as the Supreme Constitutional Court of the administrative state.

Now that the Supreme Court has rejected the rule, the agencies become more powerful. Scalia in his concurrence proposed that the Supreme Court should also end judicial deference to agency interpretations of their own regulations -- but that's highly unlikely.

In an eloquent and lengthy separate concurrence, Justice Clarence Thomas argued that there were constitutional reasons to reject the idea of judicial deference to agency interpretations. The logic of his opinion actually extends to the Chevron rule as well.

Scalia and Thomas are right as a matter of original constitutional structure. The problem is that the ship of originalism has long sailed in relation to the administrative state, which is itself of doubtful constitutionality when viewed from the standpoint of the Framers.

The right answer here was to let the D.C. Circuit do its job of rationalizing and legitimizing the constitutionality of the fourth branch of government. The court, as Justice Robert Jackson once said, is infallible because it’s final. But it isn't final because it's infallible. This time, the nine got it wrong.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Noah Feldman at nfeldman7@bloomberg.net

To contact the editor on this story:
Stacey Shick at sshick@bloomberg.net