Supreme Court considers whether agencies can adopt regulations behind closed doors

December 01, 2014 | By JONATHAN WOOD

This morning, the US Supreme Court heard argument over whether an agency can adopt new, binding interpretation of its own regulations — essentially changing the regulations in secret — without giving anyone notice and an opportunity to object. The facts of the case are tedious — something to do with banks and loan officers — but the principle at issue could have profound effects, as federal agencies regulate everything from the food we eat, the air we breathe, and the water we drink, as well as every other jot and tittle of American life.

This matters because there are more than 150,000 pages of federal regulations, most of which are vague and require further interpretation by the agencies. Agencies generally are allowed to interpret their regulations without going through the full gamut of notice and comment rule-making, and are even given deference from the courts. But when an agency reverses a prior interpretation, fundamentally changing the nature of a regulation and its burdens, it starts to look a lot like the agencies are legislating (adopting a new policy) rather than merely interpreting.

During the argument, the Court picked up on this problem. At one point, Chief Justice Roberts and Justice Scalia pointed out the real reason for the new “interpretation”:

 Chief Justice Roberts: Was there a change in the leadership at the agency between the two interpretations?

Mr. Kneedler (the Deputy Solicitor General): Yes, there was. Yes, there — there was a change in — in the leadership. But the agency —

Justice Scalia: Change in administration?

Mr. Kneedler: Yes, change in administrations. But the agency —

Justice Scalia: Isn’t that a more likely explanation?

Justice Scalia, noting that the agency had repeatedly reversed itself in interpreting the regulation, suggested that the real problem was judicial deference to agency decision-making:

Justice Scalia: So is it a second — second flip-flop? Maybe — maybe we shouldn’t give deference to agency interpretations of its own regulations. That would solve this.

Justice Kagan highlighted the magnitude of the issue:

Justice Kagan: [P]art of what’s motivating it is a sense that agencies more and more are using interpretive rules and are using guidance documents to make law and that there is — it’s essentially an end run around the notice and comment provisions.