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Interpreting regulations.

The age of statutes has given way to an era of regulations, but out jurisprudence has fallen behind. Despite the centrality of regulations to law, courts have no intelligible approach to regulatory interpretation. The neglect of regulatory interpretation is not only a shortcoming in interpretive theory but also a practical problem for administrative law. Canonical doctrines of administrative law--Chevron, Seminole Rock/Auer, and Accardi--involve interpreting regulations, and yet courts lack a consistent approach.

This Article develops a method for interpreting regulations and, more generally, situates regulator3' interpretation within debates over legal interpretation. It argues that a purposive approach, not a textualist one, best suits the distinctive legal character of regulations. Administrative law requires agencies to produce detailed explanations of the grounds for their regulations, called statements of basis and purpose. Courts routinely use these statements to assess the validity of regulations. This Article argues that these statements should guide judicial interpretation of regulations as well. By relying on these statements as privileged sources for interpretation, courts not only grant deference to agencies but also treat these statements as creating commitments with respect to a regulation's meaning. This approach justifies a framework for interpreting regulations under Chevron, Seminole Rock/Auer, and Accardi that is consistent with the deferential grounding of these doctrines, and provides more notice to those regulated than does relying on the regulation's text alone.

This Article also shows how regulatory, purposivism constitutes a new foothold for Henry Hart and Albert Sacks's classic legal process account of purposivism. Hart and Sacks's theory is vulnerable to the criticism that discerning statutor3, purpose is elusive because statutes do not o[ten include enacted statements of purpose. Regulatory, purposivism, however, avoids this concern because statements of basis and purpose offer a consistent and reliable source for discerning a regulation's purpose. From this perspective, the best days for Hart and Sacks's legal process theory may be ahead.
TABLE OF CONTENTS

Introduction
  I. The Interpretation of Regulations: An Overview
     of the Problem
       A. Chevron's Silence
       B. Seminole Rock's Inadequacy
       C. Accardi's Complexity
       D. The APA's Neglected Interpretive Mandate
  II. The Distinctive Legal Character of Regulations
       A. The Twofold Character of Regulations
       B. The Institutional Place of Regulations
  III. Legal Process Purposivism Revisited
       A. The Purposive Technique
       B. The Grounds for Purposivism
  IV. Purposive Regulatory Interpretation
       A. Purposive Regulatory Interpretation: The Technique
       B. Purposive Regulatory Interpretation:
          Legal Process Grounds
       C. Deference and Commitment in Purposive
          Regulatory Interpretation
       D. Responding to Textualist Challenges
       E. Is This Purposivism or Textualism?
   V. Purposivism's Place in Administrative Law
       A. Interpreting Regulations Under Chevron
       B. A Solution for Seminole Rock
       C. A Middle Ground for Accardi
       D. Administrative Flexibility and the Rule of Law
       E. Incentives for Strategic Manipulation
       F. Preemption and the Legal Status of
          Statements of Basis and Purpose
Conclusion


Introduction

As statutes gradually supplanted the common law during the twentieth century, (1) lawyers and judges devoted increasing attention to methods of statutory interpretation. By the century's end, statutory interpretation had ballooned into one of the most contested issues in judicial practice and scholarly debate. (2) The ascendance of statutory interpretation occurred, however, as regulations issued by administrative agencies eclipsed statutes as sources of law. (3) With the rise of regulations, lawyers and judges now routinely confront questions of interpretation on this next frontier--that is, the interpretation of regulations themselves.

While all agree that regulations are primary sources of law, strikingly little attention has been devoted to the method of their interpretation. Courts and scholars have labored over legal interpretation generally and the methodology for statutory interpretation in particular. But regulations--specifically, the rules that administrative agencies produce largely through the notice-and-comment rulemaking process (4)--have been orphaned from those debates. Administrative law has done no better in attending to the interpretation of regulations. Administrative law specifies how agencies must make regulations--that is, the procedural requirements for rulemaking. (5) And courts and commentators have devoted tremendous attention to refining the standards for judging the validity of regulations. (6) But theorizing about how a court--or any other legal actor, for that matter--should interpret regulations has attracted only occasional notice, (7) especially in comparison to the volume of legal work devoted to figuring out how to comply with regulations. We lack a debate over, much less an account of, the basic elements of regulatory interpretation, including "the overall goal of interpretation," (8) "the admissible sources the interpreter may consider in attempting to achieve that goal," (9) and the relationships among those sources. The lack of attention to judicial methods of regulatory interpretation is more than a shortcoming in interpretive theory. It is also a practical problem for administrative law and lawyers who grapple with regulations. Several central doctrines of administrative law depend on courts interpreting regulations. Under Chevron, a court must interpret the regulation to judge whether it is permitted under the agency's authorizing statute, (10) just as a court must interpret a statute to judge its constitutionality. Under Seminole Rock/Auer, a court must interpret the regulation to determine whether the agency's preferred construction is "plainly erroneous or inconsistent with the regulation." (11) Likewise, under the Accardi principle, (12) a court cannot determine whether an agency has failed to comply with its own regulation without interpreting the regulation itself. How a court interprets the regulation at issue can decide the outcome under these doctrines.

Yet courts have not developed a consistent approach to regulatory interpretation under these doctrines or elsewhere. Decisions sometimes rely exclusively on the regulation's text (13) and canons of construction, (14) but in other instances courts invoke aspects of the regulation's procedural history, (15) the court's construction of the authorizing statute's purposes or congressional intent, (16) or the agency's own justification for the regulation, (17) among other tools. (18) Courts not only lack a consistent approach but also generally invoke one interpretive tool or another without stating reasons for doing so--nor manifesting a compunction to consider how similar interpretive issues have been handled in the past. (19) As a result, little law or considered practice on interpretive methodology applicable to regulations is developing. Indeed, it is hard to avoid the impression that the judiciary does not recognize regulatory interpretation as an aspect of judicial practice, like statutory interpretation, that merits independent and systematic consideration. (20)

This Article develops a theory of regulatory interpretation to address this gap in both interpretive theory and judicial practice. Regulations, it argues, are particularly well suited to a purposive method of interpretation. The Article takes as a starting point that a theory of regulatory interpretation must be grounded in the distinctive character of regulations and the institutions that issue them. Regulations are creatures of administrative law, and distinctive features of that legal context suggest a purposive rather than a textualist approach to interpretation. At the most basic level, to issue a regulation, administrative procedure and judicial doctrine require an agency to publish a detailed explanation of the grounds and purposes of the regulation, called a "statement of basis and purpose," (21) also referred to as a regulatory "preamble." (22) Congress, in contrast, faces no analogous requirement to include a statement of purpose in its legislation, and enacts such statements in a minority of statutes. (23) Moreover, when courts judge the validity of regulations, their task is not to determine if there is any conceivable basis for upholding them, as courts do in constitutional review of legislation, but rather to ask whether the agency articulated grounds in its statement of basis and purpose on which the regulations may be upheld. (24) As a result of these doctrines, the text of a regulation and its statement of basis and purpose stand in a unique relationship: together, they constitute the act of regulation, an act that is not complete without either element of this couplet. Based on this premise, it does not make sense to interpret the text of a regulation independently from its statement of basis and purpose.

Now consider a further feature of regulations: like other forms of agency action, a regulation must implement a statute's aims or goals within prescribed means. To be valid, a regulation must be purposive in the sense that it implements, or carries into effect, the authorizing statute. (25) Here again, the contrast with legislation is sharp. Whereas Congress can select its own ends so long as they are constitutionally legitimate, (26) administrative agencies' aims are prescribed by statute. Based on the premise that regulations must be purposive in this sense of carrying into effect the agency's statutory aims, it makes sense to read them in light of their purposes. Bringing these observations together suggests the outlines of an interpretive method: that a regulation should be read in light of its purposes, with the regulation's text and the statement of basis and purpose constituting the privileged interpretive sources.

From these premises grounded in the distinctive character of regulations, this Article builds on Henry Hart and Albert Sacks's classic exposition of a purposive theory in The Legal Process (27) to develop the interpretive approach. Seeking a foothold in Hart and Sacks's theory might seem curious given that their approach to statutory interpretation has been under attack for decades. (28) Commentators routinely distill Hart and Sacks's view to the prescription that courts interpret statutes under the presumption that the legislature is "made of reasonable persons pursuing reasonable purposes reasonably." (29) Critics view that presumption as too optimistic a premise for a theory of statutory interpretation. (30)

But this shorthand account neglects Hart and Sacks's emphasis on enacted sources for discerning statutory purpose and their justification for doing so. A rarely noticed but critical element of their approach is that the court's first step in attributing purpose to a statute is to "accept[]" any "formally enacted statement of purpose in a statute," (31) and only if such a statement is unavailable or unavailing should the court engage in the broader inference of purpose for which their theory is so well known. (32) Once the place of enacted statements of purpose in Hart and Sacks's approach comes into view, it also becomes clear how their theory provides a model for purposive regulatory interpretation. An agency's statement of basis and purpose, like a statute's enacted statement of purpose, provides an authoritative statement of purposes issued on behalf of the institution, and thus constitutes a privileged interpretive source. From this perspective, Hart and Sacks's theory may hold its greatest promise with regard to legal sources that they largely overlooked--regulations.

So understood, this regulatory purposivism avoids the significant objections textualists have mounted against purpose-based theories of statutory interpretation. With regard to statutes, textualists have argued that purposive theories require a dubious attribution of a single set of purposes to a multimember body, undermine lair notice, and give courts poor guidance in determining the level of generality of legislative compromise. (33) With regard to regulations, the agency itself, not a subgroup of its members, issues statements of basis and purpose: these statements generally provide detailed explanation of the regulation's provisions and its overall purposes. By relying on these statements along with the regulation's text, purpose is not only coherent but also more easily ascertainable for regulations.

Importantly, this purposive approach to regulatory interpretation-reading a regulation's text in light of the purposes set forth in the statement of basis and purpose and as inferred from the text--justifies a consistent framework for courts to use when interpreting regulations under central administrative law doctrines, including Chevron, Seminole Rock/Auer, and Accardi. When faced with regulatory interpretation under each of these doctrines, the purposive approach makes the critical inquiries whether the interpretation is (1) permitted by the regulation's text and (2) consistent with the regulation's purposes, as set forth in the statement of basis and purpose and the regulation's text. This two-prong framework rationalizes the approach to regulatory interpretation under these administrative law doctrines. It also strikes an appealing balance between deference to the agency and fair notice of the meaning of regulations. On the one hand, it constrains the scope of permissible interpretations of the regulation more narrowly than asking only what constitutes a permissible construction of the text, and accordingly provides greater notice of the regulation's meaning. On the other hand, the approach also grants deference to the agency in the strong form of judicial acceptance of the agency's most elaborate disquisition on the regulation's purposes. By treating the grounds the agency invokes to justify and explain its regulation as creating commitments with respect to the regulation's meaning, this method distinguishes between deference to the agency's interpretive judgments--which it grants--and the agency's flexibility to alter its interpretations in ways inconsistent with the grounds it invoked to justify them--which it constrains.

Developing a theory of regulatory interpretation is not only overdue but also particularly timely. The Supreme Court, the president, and agencies are beginning to struggle more explicitly with regulatory interpretation. Justice Scalia, for instance, recently announced his interest in revisiting Seminole Rock deference based on John Manning's critique of the doctrine. (34) Seminole Rock requires a court to accept an agency's interpretation of its own regulation so long as the agency's construction is not "plainly erroneous or inconsistent with the regulation." (35) While the application of Seminole Rock requires interpreting regulations, if Seminole Rock were to be overruled, the need for a theory of regulatory interpretation would be all the more pressing. More generally, over the past several years, there has been a lively debate about federal agencies' powers to preempt state law. (36) One central question in that debate is the relevance of an agency's own statement of preemption in a regulation's statement of basis and purpose. Agencies' practice of engaging in so-called "preemption by preamble" has attracted notice, (37) culminating in President Obama issuing a memorandum directing agencies not to include preemptive statements in their preambles. (38) The debate about the import of agency statements on preemption in regulatory preambles has not, however, been grounded in a general approach to regulatory interpretation. (39) Given the prominence of regulations, these issues are leading indications of an unresolved and fundamental issue, not isolated events. The Article proceeds in five parts. Part I motivates the inquiry by explaining how central doctrines in administrative law--Chevron, Seminole Rock, and Accardi--require courts to interpret regulations, yet courts lack a consistent approach. The central body of the Article, encompassing Parts II, III, and IV, articulates and defends a purposive theory of regulatory interpretation. Part II argues that well-established aspects of American administrative law suggest a purposive approach, Part III provides an account of Hart and Sacks's legal process purposivism, and Part IV shows how Hart and Sacks's theory provides a framework for purposive regulatory interpretation. Part IV also argues that this approach provides an attractive conception of deference, one that induces agency deliberation (40) and responds to textualist critics of purposivism as a theory of statutory interpretation. Part V argues that this purposive technique provides a framework that meets the demands for regulatory interpretation under Chevron, Seminole Rock, and Accardi, and addresses scholarly concerns about the operation of these doctrines. Part V also responds to practical objections that this approach unduly constrains the agency's flexibility and creates unmanageable incentives for manipulation of the content of statements of basis and purpose. In these ways, the Article aims to give jurisprudential consideration to the interpretation of regulations in keeping with their prominent place in our law.

I. THE INTERPRETATION OF REGULATIONS: AN OVERVIEW OF THE PROBLEM

In the 1960s and 1970s, agencies increasingly turned to rnlemaking to implement their statutory powers. (41) Agency reliance on rulemaking has persisted. Today, the majority of agencies issue their most significant policies through notice-and-comment rulemaking. (42) With the rise of rulemaking, it is hard to deny a naive expectation, perhaps a reflection of a lingering nostalgia for a mechanical jurisprudence, that agency regulations would resolve legal ambiguities, not create them. To be sure, many regulations clarify legal obligations. But regulations are not unique among legal sources for their lack of ambiguity or the obviousness of their interpretation. At times, regulations replicate statutory ambiguities; (43) in other instances, they create their own. (44) Changed and unforeseen circumstances also unsettle the interpretation of regulations that had appeared to be clear. (45)

Agencies' profuse production of regulations has multiplied the occasions on which courts confront issues of regulatory interpretation. As I explain in this Part, several doctrines of administrative law implicate regulatory interpretation. Courts must interpret a regulation to evaluate its validity under the agency's authorizing statute (Chevron), to determine whether to accept an agency's construction of its own regulation (Seminole Rock), and to assess an agency's compliance with its own regulation (Accardi). Courts, however, have not developed a consistent approach to regulatory interpretation under these doctrines or elsewhere.

This conclusion parallels Hart and Sacks's famous observation about statutory interpretation: "The hard truth of the matter is that American courts have no intelligible, generally accepted, and consistently applied theory of statutory interpretation." (46) Regulatory interpretation, however, raises a further worry. As I illustrate below, courts typically devote scant attention to justifying their approach to regulatory interpretation in relation to prior decisions and, as a result, little law or consistent practice has emerged.

A. Chevron's Silence

The Chevron doctrine provides a good starting point because it so clearly illustrates how little attention has been devoted to regulatory interpretation. When a party challenges an agency's regulation as violating the agency's authorizing statute, Chevron typically provides the framework of review. (47) To review the validity of a regulation under Chevron, (48) the court must interpret the regulation. But the Chevron doctrine provides no guidance on how a court is to do so.

To appreciate how application of Chevron requires regulatory interpretation. consider the elements of the Chevron inquiry. Doctrinally, courts typically frame this inquiry in two steps. In Chevron's first step, the court asks whether the statute clearly addresses "the precise question at issue." (49) In Chevron's second step, the court asks whether the agency's action is "based on a permissible construction of the statute." (50) Commentators have long argued that step one and step two involve the same questions of statutory interpretation. (51) Regardless of whether the Chevron doctrine is viewed as having two interpretive steps, as represented in long-standing judicial doctrine, or as a single inquiry into statutory permissibility, the point for our purposes is the same: the reviewing court cannot determine whether an agency has based its regulation on a permissible construction of the statute without interpreting the regulation. An understanding of the regulation--an interpretation of its meaning and application--is required to sensibly ask whether the statute permits the regulation.

An analogy to constitutional review of federal legislation helps to highlight this fundamental point. When a court reviews the constitutionality of federal legislation, it is commonplace that the court must interpret not only the Constitution but also the statute. (52) Likewise, to judge the validity of a regulation under an authorizing statute, the court must interpret not only the statute but also the regulation. In both contexts, judging the consistency of the lower-order law with the higher-order law requires construing the lower-order law.

The Chevron doctrine, however, is silent on how a court should interpret a regulation. The familiar guidance the Chevron doctrine gives on how a court should determine what counts as a permissible reading of the statute--consulting the "traditional tools of statutory construction" (53)--has no analog with regard to how a court should interpret a regulation. Moreover, in the sophisticated literature on how a court should approach statutory interpretation under Chevron, (54) the question of how a regulation is interpreted has gone virtually unnoticed.

The dearth of doctrine addressing regulatory interpretation under Chevron can be partially explained by the well-established doctrine, attributed to Bowles v. Seminole Rock & Sand Co. (55) and Auer v. Robbins, (56) that an agency's construction of its own regulation is "controlling unless 'plainly erroneous or inconsistent with the regulation.'" (57) Agencies frequently offer interpretations of their regulations, so the question of regulatory interpretation under Chevron often turns on whether the agency's interpretation is permissible under Seminole Rock, (58) a doctrine I address in the next Section. But many evaluations of regulations under Chevron do not depend on the application of Seminole Rock, whether because an agency interpretation is not available or for some other reason. (59) In those cases, the reviewing court must still adopt an interpretation of the regulation to assess the regulation's permissibility under the authorizing statute. The moment of regulatory interpretation can pass so swiftly as to be barely discernible. Even when the interpretation of a regulation receives explicit attention, an uncanny detachment characterizes the interpretive exercise: courts rely on principles of statutory interpretation without pausing or commenting on the justification for applying those principles to regulations and without situating their approach in relation to other decisions in which courts have construed regulations.

The Supreme Court's 2007 decision in National Association of Home Builders v. Defenders of Wildlife (60) provides a good illustration, both because the Court devoted admirable attention to regulatory interpretation and because it did so in complete isolation from any precedent on regulatory interpretation, as if the problem were sui generis. In Home Builders, the Court had to resolve whether provisions of the Endangered Species Act ("ESA") required the Environmental Protection Agency ("EPA") to consult with the Secretary of Commerce or Interior when the EPA transferred permitting authority over discharges into navigable waters under the Clean Water Act ("CWA") to state authorities. (61) Concluding that the ESA was ambiguous on the point, the Court invoked Chevron to guide its review of an agency regulation issued under the ESA stating that the ESNs consultation requirements applied to "all actions in which there is discretionary Federal involvement or control." (62) The Court then faced two competing constructions of this regulation. Under one construction, the regulation restricted the scope of the ESA's consultation requirements to instances of discretionary, as opposed to mandatory, federal involvement. Under the other, the regulation merely clarified that discretionary actions were included within the scope of the ESA's consultation provisions. (63)

The Court adopted the latter interpretation based on the regulation's text, its procedural history, and the canon against surplusage. As to the regulation's text, the Court cited a classic administrative law decision, Citizens to Preserve Overton Park v. Volpe, (64) and the Random House Dictionary to support its interpretation of the word "discretionary." (65) The alternative construction, the Court reasoned, would have rendered the regulation's reference to "discretionary" federal involvement "mere surplusage." (66) The Court cited one of its own decisions applying the presumption against treating statutory terms as surplusage. (67) The regulation's procedural history, the Court elaborated, also supported this construction: whereas the agency's proposed version of the regulations had applied the ESA's obligations to "all actions in which there is [f]ederal involvement or control," the final regulations changed that language to "all actions in which there is discretionary [f]ederal involvement or control." (68) All told, the alternative construction of the regulation "would rob the word 'discretionary' of any effect, and substitute the earlier, proposed version of the regulation for the text that was actually adopted." (69)

At one level, the Court's approach to regulatory interpretation in Home Builders has a lot to recommend it. The Court self-consciously confronted two alternative constructions of the regulation raised in its Chevron inquiry, and deployed a variety of conventional tools of interpretation. At another level, however, the Court's analysis reflected no sense of obligation to consider how it had previously handled similar issues of regulatory interpretation. In an age in which federal agencies issue more binding rules of conduct than Congress (70) and a significant portion of the Court's own docket involves regulatory issues, (71) the Court did not cite a single prior decision on regulatory interpretation as authority for its application of the particular interpretive tools it selected.

Home Builders is not an outlier; in the Supreme Court's crowded Chevron docket, it is difficult to find occasions in which the Court situates its interpretation of a regulation under Chevron with regard to any prior instances of regulatory interpretation. (72) For regulatory interpretation under Chevron, each day is a new day. But consistent application of Chevron to regulations requires more; it requires an account of how the reviewing court should interpret regulations for the purpose of judging their validity.

B. Seminole Rock's Inadequacy

The most obvious place to turn for assistance with regulatory interpretation is the long-standing doctrine that an agency's construction of its own regulation is "controlling unless 'plainly erroneous or inconsistent with the regulation.'" (73) This doctrine--referred to as Seminole Rock deference and Auer deference--does not obviate the need for regulatory interpretation any more than Chevron obviates the need for statutory interpretation.

A comparison to Chevron helps illustrate this point. Chevron obviously requires the reviewing court to construe the statute under which the agency's action is challenged to determine whether the agency's construction of the statute is permissible. An analogous point applies under Seminole Rock: the court must construe the regulation to determine whether the agency's interpretation of it is permissible. (74)

The Seminole Rock and Auer line of authority provides some guidance on how a court is to judge whether an agency's interpretation of a regulation is permissible, but judicial practice has not been consistent. In Seminole Rock, the Court advised that its "tools ... are the plain words of the regulation and any relevant interpretations of the Administrator." (75) A strain of precedent relies primarily on the plain meaning of the regulation. In Auer, for instance, the Court upheld the Secretary of Labor's interpretation of his own regulations based primarily on dictionary definitions of the critical regulatory phrase ("subject to"). (76) Likewise, in Christensen v. Harris County, on the basis of the text alone, the Court rejected an agency's construction of a regulation. (77) The Court, however, has not offered a justification for this particular emphasis on plain meaning, and courts invoke a much wider range of interpretive tools in determining whether an agency's construction is permissible. The Supreme Court has relied on "the Secretary's intent at the time of the regulation's promulgation," (78) canons of statutory construction, (79) statutory language and purpose, (80) the consistency of the agency's interpretation over time, (81) the regulation's own procedural history, (82) and the consistency with the agency's statement of basis and purpose. (83)

The Supreme Court's recent decision in Talk America, Inc. v. Michigan Bell Telephone Co. (84) illustrates some of this methodological variety. In contrast to the emphasis on the plain meaning of a regulation's text, the Court in Talk America resolved decisive issues of regulatory interpretation with reference to the explanatory preambles to Federal Communication Commission ("FCC") regulations. (85) In Talk America, the Court deferred under Seminole Rock/Auer to the FCC's view, set forth in its amicus brief that, under the FCC's regulations, incumbent communications carriers had a duty to provide access to certain facilities ("entrance facilities") for purposes of interconnection at cost-based rates (86) even though incumbent carriers do not have a duty to provide "unbundled" access to those same entrance facilities at cost-based rates. (87)

AT&T argued that the FCC's interpretation was inconsistent with its regulations and therefore not entitled to deference under Seminole Rock/Auer. (88) Rejecting AT&T's position, (89) the Court relied extensively on the FCC's explanations in its regulatory preambles as to the scope of the FCC's prior regulations. (90) The Court noted that the FCC had "emphasized" in the explanatory preambles of two prior regulations that its unbundling decision "'d[id] not alter' the obligation on incumbent [carriers] ... to provide facilities for interconnection purposes." (91) Moreover, the Court found that the distinction made in these FCC explanatory materials--between access to entrance facilities for interconnection purposes and unbundled access to those facilities--though unstated in the text of the regulation, "[was] neither unusual nor ambiguous." (92) For the Court in Talk America, judging the consistency of the FCC's interpretation of its regulations depended on the consistency of its position with the agency's prior explanations in its statements of basis and purpose. (93) While the Court engaged in textual analysis of the regulations, (94) it unmistakably relied on the FCC's regulatory preambles to determine whether the agency was entitled to deference under Seminole Rock/Auer. (95)

Talk America's reliance on regulatory preambles for the purpose of construing FCC regulations is not itself a problem; on the contrary, one of the central practical aims of this Article is to defend that approach to regulatory interpretation. But Talk America illustrates the lack of attention paid to interpretive method under Seminole Rock. The Court in Talk America did not pause to justify its reliance on the FCC's regulatory preambles, or distinguish the case from prior decisions resolving Seminole Rock determinations on the basis of the regulatory text alone. In the increasing stream of Seminole Rock decisions, one strains to discern any greater attention to regulatory interpretation than is apparent under the Chevron doctrine. (96)

C. Accardi's Complexity

The story is much the same under the established doctrine of United States ex rel. Accardi v. Shaughnessy, (97) frequently called the Accardi principle. (98) The Accardi principle requires an agency to follow its own regulations (99) Application of the Accardi principle obviously requires the court to interpret the agency regulations at issue. As Thomas Merrill notes, based on his extensive survey of Accardi decisions in the D.C. Circuit, one of the recurring issues in Accardi litigation is "the need to determine the meaning of an agency regulation." (100)

Merrill's study showed that Accardi decisions offer no particular insight or consistent approach to regulatory interpretation. Like decisions under Chevron and Seminole Rock, Merrill describes the D.C. Circuit's Accardi decisions as "all over the lot" on the recurring issue of how to interpret a regulation: (101)
   Sometimes the court deters to the agency's interpretation of the
   regulation under the Seminole Rock doctrine: sometimes the court
   insists that the meaning of the regulation is plain and the agency
   will not be heard to argue to the contrary; sometimes the court
   stretches a regulation to give effect to its perceived purposes...
   (102)


Indeed, Accardi decisions, whether revolving around a Seminole Rock inquiry or not, invoke a familiar variety of interpretive tools. Some rely only on plain meaning, (103) while others also look to statutory purpose, (104) regulatory purpose, (105) canons of construction, (106) and regulatory history. (107) These decisions have the same ad hoc quality apparent under Chevron and Seminole Rock; there is generally little to no self-conscious effort to build on prior decisions that interpreted regulations or to specify how tools of construction relate to one another, much less to justify what makes one tool or another appropriate, (108) Like Chevron and Seminole Rock, Accardi too requires a theory of regulatory interpretation.

D. The APA's Neglected Interpretive Mandate

The Administrative Procedure Act ("APA"), moreover, clearly requires courts reviewing agency action to interpret the agency's action, including its rules and regulations. Section 706 directs that the reviewing court "shall ... determine the meaning or applicability of the terms of an agency action." (109) The same section of the APA on the scope of review--section 706-authorizes "arbitrary" or "capricious" review (110) and provides the statutory foothold for the Chevron doctrine. (111) But judicial and scholarly attention to the task of interpreting agency action, including agency regulations, pales in comparison to that devoted to the Chevron doctrine and arbitrariness review. It is time for interpreting the meaning of agency action, including regulations, to take its place alongside the other requirements of section 706 in judicial focus and theory.

II. THE DISTINCTIVE LEGAL CHARACTER OF REGULATIONS

To develop a theory of regulatory interpretation, it makes sense to begin by identifying distinctive characteristics of regulations. This Part argues that the distinctive legal characteristics of regulations and their place in public law hold implications for the privileged sources of interpretation as well as for the goals of regulatory interpretation--two key elements in a theory of legal interpretation. As to the sources of interpretation, the way in which administrative law binds the text of regulations to their statements of basis and purpose suggests that it does not make sense to interpret the regulation's text independently from its accompanying statement. As to the goal of interpretation, the role of agencies as implementers of established statutory aims suggests that regulations have a purposive character--that is, they prescribe means to implement the ends provided by the statute. Therefore, a primary, perhaps the primary, goal for interpretation should be interpreting the regulations in light of their purposes. From these two premises, the later Parts of this Article develop and defend a purposive theory of interpretation.

A. The Twofold Character of Regulations

Regulations--specifically, regulations produced through notice-and-comment rulemaking--are creatures of administrative law. The interaction of three well-established features of American administrative law--the APA, hard-look review, and the Chenerv principle--gives regulations their distinctive legal character, and suggests that the regulation's text should be read in company with the regulation's statement of basis and purpose.

1. The Statement of Basis and Purpose. One of the definitive requirements of notice-and-comment rulemaking under the APA is that the agency incorporate into the regulations it issues "a concise general statement of their basis and purpose." (112) In general, the failure to issue an adequate statement of basis and purpose renders the agency's action invalid. (113) The requirement to produce a statement of basis and purpose is such a basic aspect of notice-and-comment rulemaking that it hardly seems remarkable. But despite its quotidian status within administrative law, it does mark an important point of contrast between regulations and statutes. Congress need not provide an authoritative statement of its purposes and grounds to enact legislation under Article I, Section 7 of the Constitution.

2. The Standard of Rationality. While the APA's mandate that the agency promulgating rules produce a "concise general statement of their basis and purpose" might have been understood to require only a reference to the statutory authority for the regulation and its ends, (114) the judiciary has long treated it as requiring a detailed statement of the agency's reasoning supporting the choices that the agency made. Judicial review of whether an agency has produced an adequate statement of basis and purpose has been intertwined with review of whether the regulation is "arbitrary" or "capricious." (115) As is familiar to students of administrative law, beginning in the 1960s ,and 1970s, the judiciary elaborated the "arbitrary" or "capricious" standard of review under the APA into a demanding form of rationality review known as the hard-look doctrine. (116)

Under the leading formulation of this doctrine, "the agency must examine the relevant data and articulate a satisfactory explanation for its action including a 'rational connection between the facts found and the choices made.'" (117) The court "consider[s] whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." (118) In addition, the agency may not "entirely fail[] to consider an important aspect of the problem," may not "offer[] an explanation for its decision that runs counter to the evidence before the agency," nor offer an explanation that is "so implausible that it could not be ascribed to a difference in view or the product of agency expertise." (119) The agency must also relate the factual findings and expected effects of the regulation to the purposes or goals the agency must consider under the statute (120) as well as respond to salient criticisms of the agency's reasoning. (121) Hard-look review further distinguishes regulations from legislation; it has long been understood as requiring a higher standard of rationality than the minimum rational basis standard of constitutional review. (122)

3. The Timing Rule. Operating alongside this demanding standard for agency rationality, and frequently considered an aspect of arbitrary and capricious review, is the requirement that the agency's statement of reasons justifying its action appear at the time the agency acts, not afterwards. The Supreme Court's 1943 decision in SEC v Chenery Corp. provides the classic formulation of this principle: "[A]n administrative order cannot be upheld unless the grounds upon which the agency acted in exercising its powers were those upon which its action can be sustained." (123) The Cheneo' principle has been taken as settled since it was announced and applies to rulemaking as well as other forms of agency action. (124)

This high demand that the agency's action be sustained only on the grounds upon which the agency based its decision is also unique in American public law. Neither constitutional review of federal legislation nor the standards of appellate review of lower court decisions impose this demanding uphold-only-for-the-reasons-given rule. (125) The combination of the searching standard of review defined by the hard-look doctrine and the Chenery principle has resulted, as Martin Shapiro observes, in courts holding that "a rule [is] not arbitrary and capricious only when it [is] well reasoned and well supported by facts" set forth by the agency at the time it acts. (126)

4. Implications. These three requirements--the APA's procedural requirement that the agency issue a statement of basis and purpose, the arbitrary and capricious review's standard of rationality, and Chenely's timing rule--not only impose a uniquely high demand for rationality on agency action but also distinctively bind the agency's rules to the reasoning the agency provides for them in its statement of basis and purpose. Issuing a statement of basis and purpose is not merely a procedural requirement of validity in the way that a majority (or supermajority) vote in the Senate is necessary to enact legislation. Instead, the statement of basis and purpose is one part of the agency's product in the rulemaking proceeding. Moreover, because a reviewing court can uphold the agency's rule solely on the basis of the grounds offered in the statement of basis and purpose, the substantive validity of the rule depends on the content of the agency's statement of basis and purpose.

As a result, the statement of basis and purpose is not only joined to the text of the rule as the other principal product of the rulemaking proceeding, but it also provides the grounds for the validity of the rule. The two--the rule issued and the statement of basis and purpose--form an intertwined couplet; the text without the statement is invalid, and the text is valid only so far as it is justified by the statement. From this perspective, the text of the regulation alone does not constitute the regulatory act. Rather, the regulatory text is one part of the twofold act that also includes the statement of basis and purpose.

Based on the premise that the text of a regulation is one part of a twofold regulatory act, it does not make sense to interpret the text of the regulation independently from its statement of basis and purpose. Once the rules and statements are seen as part of the same regulatory act, the text of the regulation should be read in light of the statement of basis and purpose. Put in terms of the sources of review, recognizing this twofold character of regulation clarifies that the regulatory text and statement of basis and purpose should constitute privileged sources for regulatory interpretation. This use fits the Attorney General's expectations at the time of the APA's enactment. As the Attorney General's Manual on the APA states, the required statement of basis and purpose "will be important in that the courts and the public may be expected to use such statements in the interpretation of the agency's rules." (127) (As addressed later, it has many other virtues.)

Specifying the regulation's text and the statement of basis and purpose as privileged sources for interpretation is an important step in developing an interpretive approach, but it does not suggest the goals of interpretation. To gain some purchase on the aims of regulatory interpretation, it is worth stepping back to consider the place of regulations in public law.

B. The Institutional Place of Regulations

Agencies are implementing bodies. Statutes establish agencies' goals and the scope of their powers. The minimum requirement for a constitutionally permissible delegation can be understood as the statute establishing an aim, a goal for the agency, or in the phrasing of the doctrine, an "intelligible principle" (128) to guide the agency's action. Those goals or principles may be set forth at a high level of generality--for instance, setting air standards that "allow[] an adequate margin of safety, [and] are requisite to protect the public health," (129) or regulating radio broadcasting "as public convenience, interest, or necessity requires." (130) But the statute still establishes the agency's ends--and frequently also permissible means for pursuing those ends. The agency's task then is to implement--to give effect to--those basic goals, consistent with any specification of means in the statute. As Edward Rubin writes, "We create agencies and authorize them to act ... because we want them to implement our basic commitments--our value choices." (131)

Not only is the agency's role one of implementation, but the validity of its actions also depends on the agency demonstrating an instrumentally rational connection between its chosen means and the ends prescribed by the statute. As noted in the preceding Section, arbitrary and capricious review requires the agency to demonstrate how its actions--including its regulations-further the agency's statutory goals or purposes. (132) This leads to an important characterization: regulations have a purposive character in the sense that they are part of the agency's effort to implement statutory goals or principles, and they are valid only insofar as they are consistent with those goals or principles. That understanding, in turn, suggests a basic orientation to their interpretation: if regulations have a purposive character in the sense of functioning to implement the statute, then one aim of interpretation should be to understand the agency's chosen means in light of the purposes or principles it sought to implement.

Putting these implications--for both sources and goals--together reveals the seeds for a method of interpretation. Based on the premise that regulations have a purposive character, the interpreter will approach the regulation trying to make sense of it as having a purpose or purposes. But because of the twofold nature of the regulatory act, the privileged sources for ascertaining that purpose will be the text of the regulation itself and the agency's statement of basis and purpose. Accordingly, the thrust of regulatory interpretation is purposive, and discerning the regulation's purposes will turn toward the agency's own understanding of those purposes as reflected in the text, and just as importantly, in the regulation's statement of basis and purpose.

This brief examination of the legal character and role of regulations has suggested elements of a purposive method of interpretation. As a method of interpretation, purposivism has a long pedigree. (133) The shape and limits of a purposive theory have been particularly well developed with regard to statutory interpretation. Indeed, in the last decade, arguments about the merits of purposivism and textualism have dominated debates on statutory interpretation, (134) during which time textualist tenets have had an important impact on judges and scholars. (135) To develop a purposive theory of regulatory interpretation, it makes sense to assess whether a purposive approach could find grounding in premises of purposive theory more generally, while at the same time avoiding the central critiques to which purposive approaches to statutory interpretation have been subject.
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Title Annotation:Introduction through II. The Distinctive Legal Character of Regulations, p. 355-382
Author:Stack, Kevin M.
Publication:Michigan Law Review
Date:Dec 1, 2012
Words:7208
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