Leigh Ann Benson, (left) and Stephen A. Miller, (right) of Cozen O'Connor. Leigh Ann Benson, (left) and Stephen A. Miller, (right) of Cozen O’Connor.

The U.S. Supreme Court is considering whether to limit the power of administrative agencies. Kisor v. Wilkie, which was argued last month, is a head-on challenge to the deference afforded to an agency when interpreting its own regulations. The Supreme Court prescribed this level of deference in 1997. In Auer v. Robbins, a unanimous decision written by the late Justice Antonin Scalia, the court held that an agency’s interpretation of its own regulations should control if its interpretation is not plainly erroneous or inconsistent with the regulations. Now, just 22 years later, the court seems willing to reconsider this decision.

The challenge comes from petitioner James Kisor, a Vietnam veteran who suffers from post-traumatic stress disorder. In 1982, the Department of Veteran Affairs denied Kisor’s request for benefits. He applied again in 2006—this time, armed with additional documentation in support of his diagnosis that was previously unavailable to him. The VA granted this second application but only prospectively; the decision would not apply retroactively to 1982. The VA’s explanation was that the documents were not “relevant” to his prior request. Using Auer deference, the VA was able to interpret and define relevant, and then it was Kisor who bore the burden of establishing that the VA’s interpretation was not valid.

After failing to carry that burden, Kisor challenged the underlying decision all the way to the Supreme Court. Kisor asserts that Auer runs afoul of the Administrative Procedure Act (APA). In particular, he argues that it eviscerates the notice and comment requirements and contravenes with the “basic principles of predictability and public notice” that are the heart of the APA. He also argues the effect of Auer is out of line with basic principles of separation of powers. Under Auer, he argues, the law-making and law-interpreting is performed by the same branch with unchecked authority.

In response, the Department of Justice does not disagree entirely with Kisor and recognizes some of the same concerns with Auer. The DOJ, however, argues against overruling it entirely and instead proposes limiting and clarifying the deferential standard. It offers a multipart test to determine whether Auer deference should apply to the interpretation of a regulation. The proposed test considers whether the regulation is ambiguous; whether the interpretation is reasonable; whether there was fair notice of the interpretation; whether the interpretation came from a high-level member of the agency and someone with expertise. The DOJ presented this as a “workable” standard “consistent with existing law.”

The power of the growing administrative state is at issue. Within the early minutes of oral argument, Justice Stephen Breyer referred to this as that “greatest judicial power grab since Marbury v. Madison.”

Justice Neil Gorsuch challenged the DOJ’s proposed test. He expressed concerns with “how much notice is fair or how much expertise counts.” He also presented the possibility of multiple agencies reaching widely different decisions about how to interpret common terms, for example, relevance.

Gorsuch’s concerns seemed to resonate with Justice Brett Kavanaugh. Kavanaugh pointed out that judges frequently disagree about threshold issues, and that alone likely “creates a whole sideshow” when it comes time to determine if a regulation is “ambiguous”—a threshold question under the proposed test.

On the other hand, Justices Elena Kagan and Sonia Sotomayor noted that the party best suited to interpret a regulation is the authorized agency because of its expertise. Kagan suggested that Auer was correctly decided because federal judges are “less suited” to make nuanced decisions about agency policy than the agencies with the subject-matter expertise. Sotomayor echoed her, naming the agency as the “best” party to bear the responsibility of interpreting regulation because it is the agency that is responsible for sound and reasonable interpretations.

The question seems to be whether Auer will be overruled or limited—not whether it will remain fully intact. As Gorsuch stated, “nobody before us alive is willing to take Auer literally and it’s just a matter of how much revision to it we’ve already made. Is it enough? How much further should we go? Or should we just give up on it altogether?” Even those justices that seemed to favor leaving some degree of power to the agencies, like Kagan and Sotomayor, still gave full consideration to the DOJ’s proposed test that would limit Auer. This leads observers to think some degree of change to the administrative state is imminent. But just how much change remains to be known until the court issues its opinion, likely in June 2019.

Stephen A. Miller practices in the commercial litigation group at Cozen O’Connor’s Philadelphia office. Prior to joining the firm, he clerked for Justice Antonin Scalia on the U.S. Supreme Court and served as a federal prosecutor for nine years in the Southern District of New York and the Eastern District of Pennsylvania.

Leigh Ann Benson also practices in the firm’s commercial litigation group. She received her J.D. from Villanova University School of Law and her B.A., magna cum laude, from Virginia Tech.