A pragmatic approach to judicial review of informal guidance documents.

• Author: Bell, Mark M.

1. INTRODUCTION

   In 1984, the United States Supreme Court revamped judicial review of agency statutory interpretation (1) in the landmark case of Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. (2) Under the now familiar Chevron two-step inquiry, (3) an agency's statutory interpretation is permissible if Congress has not directly spoken on the issue and the agency's interpretation is reasonable. (4) However, lower courts have struggled with how and when to accord Chevron deference. (5)

   Further complicating the Chevron deference problem is the Supreme Court's 2001 decision allowing agencies to create rules by informal means. (6) In 2001, U.S. v. Mead Corp. implemented the "force of law" test as the appropriate deference standard for informal agency actions. (7) The force of law test led to increased confusion. Under this amorphous test, the reviewing court must decide whether Congress would have intended the informal procedure to carry the force of law. (8) If the court finds that Congress would have intended the informal procedure to carry the force of law, then the agency's interpretation receives Chevron deference. (9)

   The force of law test has resulted in diverse lower court opinions because the test is incredibly difficult to apply. (10) Unsurprisingly, there is now little predictability for agencies and parties challenging agency action. (11) Among the troubling complexities of administrative law, scholars have noted that few rank with that of determining the proper amount of deference to accord agency interpretations and statements of policy. (12)

   This article argues that the force of law framework is unworkable and that courts should implement a new analytical framework to address the agency deference question. Instead of attempting to fit the current landscape of administrative law within the Chevron-Mead framework, courts and scholars should re-think the character of agency action. Rather than categorizing agency action as legislative or nonlegislative, agency action should be recategorized as implementing, modifying, or reversing policy. Accordingly, the level of deference should then depend on these new categorizations. Following this Introduction, Part II provides an overview of the current state of judicial deference. Part III discusses possible solutions to the problem and rejects the current solutions. Part 1V suggests an approach to the problem, addresses selected criticisms, and demonstrates the method by applying it to three recent Supreme Court cases. This article concludes that courts should look to whether the agency is initiating, modifying, or reversing policy and apply deference accordingly.

2. BACKGROUND

   It is important to note that agencies receive power through delegation. (13) Thus, when Congress recognizes that it does not have the time, resources, experience, or expertise to adequately address a given problem, (14) it will respond by delegating regulatory authority to an administrative agency. (15) The agency, now possessing regulatory authority, gathers experts and analyzes potential solutions. (16) After analyzing the problem, the agency constructs a remedy. Typically, the agency then implements the remedy by either agency adjudication or legislation. (17) Of the two, agency adjudication is the slower process. It is similar to the development of a canon of common law where the agency slowly interprets, implements, and refines a broadly worded statute or organic act. Alternatively, when an agency invokes its legislative authority, the agency regulates "in one fell swoop" and establishes an across-the-board rule applicable to all parties. (18) After the agency issues a rule, the agency develops processes and procedures to implement the rule while concurrently evaluating the effectiveness of the rule. (19) By creating a rule, the agency binds the public with essentially the same power that Congress possesses when passing a statute. (20) Just as Congress must follow procedural requirements to enact legislation, (21) agencies are also constrained by formal processes. (22)

   The Administrative Procedure Act (APA) provides the formal procedures necessary to create rules. (23) Under the APA, an agency must use the notice-and-comment process to create a rule. (24) Notice-and-comment rulemaking, or "informal rulemaking," requires the agency to (1) notify the public that it intends to create a rule; (2) provide the public with an opportunity to comment on the proposed rule; and (3) issue a "concise and general statement of basis and purpose" for the rule. (25) The notice-and-comment process ensures that agencies give deliberate consideration to the concerns raised by the public and the regulated industry.

   Although notice-and-comment procedures are theoretically essential for the promulgation of rules, (26) there are circumstances where the APA allows agencies to act informally without following any set procedures. (27) For instance, an agency does not need to follow formal procedures when it interprets an existing rule or issues a general statement of policy. (28) The APA creates this bifurcated formal and informal structure to allow agencies to issue "rules" for important policy decisions (or for decisions that impact large groups of people), and to use less formal means for less important decisions. This dichotomy is fairly intuitive. When an agency formally regulates the public, the agency must use formal procedures; however, when the agency only explains its policy or interprets existing law, the agency need not follow formal procedures.

   Within the American system of checks and balances, (29) one area of great tension rests in the intersection of agencies and the courts. The following section provides a background of the Chevron deference-framework and describes how the courts have struggled to fit informal agency action within this framework.

   Chevron Approach

   Since 1984, Chevron has been the starting point for agency-deference questions. (30) Under Chevron, courts must first ask "whether Congress has directly spoken to the precise question at issue." (31) If so, the court must give effect to the unambiguously expressed intent of Congress and the agency interpretation receives no deference. (32) If, however, the court determines that Congress has not expressed its opinion on the question at issue, the court must then ask "whether the agency's answer is based on a permissible construction of the statute." (33) Empirically, when agencies receive Chevron deference, the agency is rarely overturned; thus, Chevron deference is highly deferential. (34)

   Although Chevron is seemingly straightforward, the Supreme Court has never expressly stated exactly what types of agency action receive Chevron deference. Because the Court has never stated when Chevron applies, lower courts and commentators have struggled with determining when to apply Chevron. (35) One of those commentators, Professor Cass Sunstein, has argued that there is actually an additional step in the Chevron analysis. He calls it "Step Zero." (36)

   According to Professor Sunstein, a trilogy of recent cases informed his Step-Zero analysis. In Christensen v. Harris County, (37) the Wage and Hour Division of the Department of Labor issued an opinion letter describing complex rules relating to "compensatory time." (38) Writing for the Court, Justice Thomas concluded that "[i]nterpretations such as those in opinion letters--like interpretations contained in policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law--do not warrant Chevron style deference." (39) Here, the Court expressly distinguished opinion letters and policy statements from rules "arrived at after, for example, a formal adjudication or notice-and-comment rulemaking." (40) Thus, Christensen seemingly creates a bright-line rule that informal documents do not, and cannot, receive Chevron deference.

   However, United States v. Mead Corporation (41) obfuscated Christensen's bright-line rule. In Mead, the United States Customs Service issued a tariff classification applicable solely to the Mead Corporation; Mead Corporation challenged the classification because the policy carried the force of law. (42) That is to say, the Customs Service's ruling directly affected a substantial right of the Mead Corporation, subjecting the Mead Corporation to an additional tax. The Mead Corporation argued that the Customs Service was applying its regulatory authority without following the appropriate procedures. (43)

   Writing for the majority, Justice Souter concluded that Chevron applies "when it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority." (44) Thus, Professor Sunstein concludes that the "linchpin for deference is ... the power to act with the force of law." (45)

   Under Mead, Congress delegates authority when it is clear that the agency can "engage in the process of rulemaking or adjudication that produces regulations or rulings for which deference is claimed." (46) When "agencies have been given power to use relatively formal procedures, and if [the agencies] have exercised that power, [the agencies] are entitled to Chevron deference." (47) The Court further relaxed Christensen's bright-line distinction by holding that Chevron deference is appropriate "even when no such administrative formality was required and none was afforded." (48) Thus, under Mead, agencies can promulgate rules without using formal processes so long as Congress has given the agency the power to make rules by following a formal process. (49)

   The final case in the trilogy is Barnhart v. Walton, (50) which further eviscerates Christensen's bright-line rule. In Barnhart, the Social Security Administration issued a regulation that defined a statutory term. (51) The regulation stated that an...