Supreme Court Decides on Judicial Deference to Agency Interpretations of Regulations

Swing vote by Chief Justice John Roberts reflects his support of judicial precedent.

On June 26 the U.S. Supreme Court issued a decision (https://www.supremecourt.gov/opinions/18pdf/18-15_9p6b.pdf)  on how courts should handle ambiguous government regulations. 

Many people, including me, expected that the case would change the level of deference courts grant to a government agency when the agency is interpreting a regulation. The court was asked to reverse a 1997 case, Auer v. Robbins, and a 1945 case, Seminole Rock, both of which concluded that courts should follow the agency’s interpretations of a rule.   

Four members of the Supreme Court would have done just that, asserting that when a regulation is ambiguous, the fault lies with the agency. But Chief Justice Roberts was unwilling to reverse the precedent. Instead, the Court’s opinion winds up emphasizing the limited situations in which an agency’s interpretation receives extra weight.

Since even the Supreme Court acknowledged that the facts of the specific case it was considering weren’t terribly important, I’ll simply note that a Vietnam veteran who was denied benefits in the 80s but granted them in 2006, argued that his benefits should revert back to the date he originally requested them. The Veterans Affairs (VA) denied his request, relying on a regulation that was ambiguous. (An interesting aside: there is a tendency to label judges as “liberal” or “conservative.” That knee-jerk reaction is often inaccurate, and I would argue undercuts the judicial system. In this case, someone might assume “conservatives” would have denied benefits and “liberals” granted them. Functionally, the opposite occurred here. It’s bad to pigeonhole people, including judges.)

The question before the Court was whether a judge could reject an agency’s interpretation of the ambiguous regulation. The Court said that “when the meaning of a regulation is in doubt, the agency’s interpretation becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation.” The way we approach ambiguous regulations is the opposite of how we normally handle vague writing. When a contract is ambiguous, we construe the language against the author, asserting that the person who wrote the text should have gotten it right. But the Supreme Court explained that if you’re trying to figure out what regulation means, the author of the regulation is the best person to opine.

The Court emphasized that there is a huge limit on this deference. It applies only when the government agency has issued an official regulation, subject to notice and comment. So let’s consider how this recent decision and the earlier decision involving Allina and the disproportionate share payments would affect a situation such as Medicare revoking provider-based status because of shared space in an outpatient department. When the Centers for Medicare & Medicaid Services (CMS) argued that shared space was improper, it was relying on an informal agency memorandum, not a formally published regulation. The Court was clear that it is improper to impose penalties on people for government positions that appear in manuals, memos, and other informal guidance that are not regulations subject to notice and comment. Under the decision here, I think courts would be unwilling to impose the penalties sought by CMS when a hospital shares space with another organization. 

An interesting question: the government is soliciting comments on manual provisions now. Will that process result in courts giving manuals more weight?  Only time will tell.