The curious case of Seminole Rock: revisiting judicial deference to agency interpretations of their ambiguous regulations.

AuthorTorstensen, Peter M., Jr.

INTRODUCTION

The Constitution created a governing structure designed to safeguard citizens from the concentration of government power. (1) To create this structure, the framers relied upon three primary mechanisms--the separation of government powers, a system of checks and balances, and the lawmaking process. In particular, the framers vested the legislative, executive, and judicial powers in separate branches to provide distinct boundaries for each power. (2) However, they permitted enough interference to equip each branch with power to defend against encroachments from the other branches. (3) These checks and balances secure sufficient separation by relying on the ambition of men to preserve their own power. (4) In addition, the legislative process requires that, in order to become binding law, a bill must pass both houses of Congress and be presented to the President for approval (5)--a process that, in practice, is quite burdensome. (6) This process reflects a value judgment by the framers that "the legislative power of the Federal Government be exercised in accord with a single, finely wrought and exhaustively considered, procedure." (7)

The modern administrative state is predicated on a normative judgment that is often in direct opposition to individual liberty interests--namely, there is a distinct preference for efficient governance in light of modern exigencies. (8) Out of these efficiency-based concerns arose judicially constructed doctrines of deference to agency decisionmaking. In particular, courts defer to an agency's reasonable interpretation of ambiguities in the statutes they administer--" Chevron deference" (9)--and the regulations they promulgate-" Seminole Rock deference." (10) Both Chevron and Seminole Rock alleviate some of the administrative burden on agencies by giving them significant latitude in their interpretive decisions, subject to two general requirements: (1) there must be an ambiguity in the statute or regulation, and (2) the interpretation of the statute or regulation must be reasonable. (11) Chevron is based on a presumption of congressional intent. (12) That is, when Congress delegates authority to an agency to execute a statutory program, they intend for the agency to resolve ambiguities in the statute. (13) Seminole Rock appears to be an obvious corollary--if Congress intends for an agency to clarify ambiguities in a statute Congress drafted, surely Congress also intends the agency to clarify any ambiguities in its own regulations. (14) However, the Seminole Rock principle suffers from some significant constitutional infirmities.

At a closer look, Seminole Rock deference violates the principle of separation of powers and incentivizes troubling exercises of agency gamesmanship. When an agency interprets an ambiguity in a statute they are charged with administering, the legislative branch effectively relinquishes power to the agency, or executive branch, to resolve the ambiguity in pursuit of a reasonable regulatory program. (15) However, when an agency interprets an ambiguity in a regulation it promulgated, expands the power of the executive branch by reserving for themselves the authority to interpret the rule they authored. (16) This encourages agencies to enact vague regulations to avoid the inconveniences of agency rulemaking and, at a later time, issue interpretations to achieve their regulatory ends--interpretations that bind the courts so long as they are not "plainly erroneous." (17) This problem is exacerbated by the procedural requirements of the Administrative Procedure Act (APA), which provides "the maximum procedural requirements" that courts may impose on agencies engaged in rulemaking. (18) While the APA obligates agencies that engage in rulemaking to follow the extensive notice-and-comment requirements, (19) it expressly exempts interpretive rules from these onerous provisions. (20) While the contours of interpretive rules are imprecise, they have the potential to impose obligations upon citizens just as burdensome as legislative rules. (21)

Recognizing these issues, some courts have enacted procedural safeguards to protect against agency abuse of the interpretive rules exemption. (22) Agencies can use interpretive rules to interpret new regulations, old regulations, and to reinterpret previously settled interpretations. (23) In Paralyzed Veterans of America v. D.C. Arena L.P., the D.C. Circuit attempted to protect against burdens imposed on affected parties by agency reinterpretations. (24) Paralyzed Veterans held that when an agency significantly revises a previously settled interpretation of a regulation, it has in effect, amended the rule without notice and comment, which is prohibited under the APA. (25) While the aim of Paralyzed Veterans was noble, the Supreme Court held in Perez v. Mortgage Bankers Ass'n that requiring interpretive rules, even those that are significant revisions, to go through notice and comment violates the clear text of the APA and the obligation that reviewing courts not impose additional pro cedural requirements on agency action beyond those provided for in the APA. (26) Mortgage Bankers has important--albeit indirect--consequences for the future of Seminole Rock. Namely, the repudiation of the Paralyzed Veterans doctrine opens the door for agencies to issue interpretive rules to accomplish substantive revisions in regulatory policy. (27) This increases the possibility that the Court will soon be presented with opportunities to reconsider the merits of Seminole Rock. This is important, as there now appear to be as many as four Justices willing to consider the possibility of either overruling or significantly limiting Seminole Rock--Chief Justice Roberts and Justices Scalia, Thomas, and Alito. (28)

Seminole Rock deference warrants reconsideration as it is based on questionable constitutional and pragmatic foundations. This Note argues that courts should provide a meaningful check on agency interpretations by engaging in de novo review of agency resolutions of regulatory ambiguities. Part I explores the development of the Seminole Rock doctrine, from its questionable doctrinal foundations and rapid expansion to the developing concerns regarding its continued validity. In addition, Part I explains the variety of forms that agency interpretations can take, including legal briefs, amicus briefs, and internal memoranda, and discusses their impact in expanding the scope of Seminole Rock deference. Part II considers the various justifications for, and concerns with, Seminole Rock deference. In particular, Part II looks at two primary arguments offered in support of Seminole Rock--the agency's special insight and institutional competence--and assesses their merits in light of Seminole Rock's primary concerns--separation of powers and agency gamesmanship. Finally, Part III considers the merits of Professor Manning's argument that Seminole Rock should be replaced with Skidmore deference, (29) and concludes, despite the potential efficiency costs, that the Court should abandon Seminole Rock and engage in de novo review of agency interpretations of their regulations.

  1. THE EVOLUTION OF SEMINOLE ROCK DEFERENCE

    1. The Genesis of Deference to Agency Interpretations of Agency Regulations

      During World War II and for the purpose of "stabiliz[ing] prices ... and other disruptive practices resulting from abnormal market conditions," Congress passed the Emergency Price Control Act of 1942 (the Act), which dele gated authority to the Price Administrator to establish maximum prices for commodities by regulation or order. (30) Three years later, in Bowles v. Seminole Rock & Sand Co., the Supreme Court was called upon to determine the proper interpretation and application of a price regulation--Maximum Price Regulation No. 188 (the Regulation)--issued by the Administrator pursuant to his authority under the Act. (31) The Regulation provided that any seller of articles subject to the Regulation--which included sellers of crushed stone-could not charge a higher price than the price which they charged during the base period of March 1, 1942, through March 31, 1942.32 The Court was tasked with determining the meaning of the phrase: "Highest price charged during March 1942." (33)

      Seminole Rock & Sand Co. manufactured crushed stone subject to the Regulation. (34) In October 1941, Seminole Rock contracted with Seaboard Air Line Railway to provide crushed stone on demand at sixty cents per ton, but the stone was not delivered until March 1942. (35) In January 1942, Seminole Rock contracted with V.P. Loftis Co. to provide crushed stone on demand at $1.50 per ton, but Loftis only demanded a small portion of the stone during January--more deliveries were eventually made to Loftis in August 1942. (36) After the effective date of the Regulation, Seminole Rock entered into new contracts with Seaboard to sell crushed stone at eighty-five cents and one dollar per ton, but the Price Administrator brought an action to enjoin Seminole Rock from violating the Regulation, alleging that the highest price that Seminole Rock could sell the crushed stone for was the sixty cents per ton it had previously charged Seaboard. (37) In particular, the Court had to determine if "highest price charged" meant that the seller had to charge and deliver the product during March 1942 or if it just required an actual delivery of the product during March 1942. (38) If the Court found that the product had to be charged and delivered during March 1942, the ceiling price for Seminole Rock would likely be the outstanding offering price of $1.50 per ton to Loftis. (39) If, however, the Court determined that the product only needed to be delivered during March 1942, the ceiling price would be sixty cents per ton as Seminole Rock had delivered crushed stone to Seaboard during March of 1942 at that price. (40) The problem before the Court appeared to be a common interpretive issue, but...

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