Ruling without Rules: Agency Use of Non-Legislative Rules
to Influence Private Conduct

For AALS Administrative Law panel January 6, 2001 San Francisco - FINAL - delivery
Punctuation revised for ABA Admin Law Midwinter meeting, San Diego, Feb.17, 2001

THREE SETTINGS IN WHICH NONLEGISLATIVE RULES ARE NOT BINDING
Robert A. Anthony, George Mason University School of Law

We're talking about nonlegislative rules, like guidances and advisories and opinion letters and bulletins and press releases and Dear Colleague letters and inspection manuals. These are documents that were not promulgated through the APA's notice-and-comment procedures or other procedures that Congress has laid down for making rules with the force of law. For simplicity I'll refer to all these nonlegislative rules as "guidances."

The broad issue before us concerns the extent to which guidances may bind persons outside the agency – not bind them legally, which by definition they cannot do, but bind them in a practical sense. The inquiry includes the effects of applying the guidances at the agency level and of reviewing them in court.

Today I want to lay out three salient positions, regarding three situations in which there is a danger that guidances issued by agency personnel will inappropriately have a binding effect, even though they were not adopted through notice-and-comment and do not carry the force of law. My bedrock principle is that agencies can make binding law only to the extent Congress has authorized. I will sketch the three positions in a moment, after drawing some threshold distinctions.

We confront two quite distinct kinds of inquiries about any guidance. One asks whether the guidance is substantively valid. Within that question are issues of deference and its accompanying binding effects, which are what I will focus on. The other asks whether the guidance is procedurally valid – that is, is it invalid because it was issued without notice and comment? These two kinds of inquiries are often confused, but it is essential to keep them separate.

The answers to both can be approached by pursuing two further inquiries: First, does the guidance interpret existing law, found in statutes or regulations, or, on the other hand does it reach into new territory unsupported by existing law? Second, where the guidance does not interpret, and does reach into new territory, does the agency treat it as binding on persons outside the agency, or does the agency merely intend the guidance to state a tentative, nonbinding position? A document is binding if the agency treats it as establishing fixed criteria for determining the rights or obligations of persons outside the agency. I will develop this second inquiry a little later.

On the first – whether the document interprets anything -- it is of course notorious that, in particular cases, it may be very difficult to decide whether a guidance does or does not interpret existing law. But the distinction is crucial, and once it is drawn in a given case, it has clear consequences.

A guidance that genuinely interprets existing law does not have to go through notice-and-comment rulemaking procedures. It comes within section 553's exemption for "interpretative rules." So – unlike some guidances that don't interpret anything – an interpretive guidance is procedurally valid without notice and comment. This is true even if the agency makes the guidance binding in a practical sense on private persons, by mechanically relying on it in enforcement or in determining eligibility for approvals or benefits. Now, I hasten to add that that doesn't necessarily mean that the interpretation is substantively valid – a court may arrive at a different interpretation. And it doesn't mean that the guidance is legally binding – by definition it is not.

But, recognizing that a guidance is not legally binding, how far can it be binding as a practical matter, so that private parties must observe it? As I have just indicated, the agency can make it practically binding by routinely applying it as a fixed criterion for decision. Beyond that, the practical binding effect of an interpretive guidance is a function of the likelihood that it will be challenged in court, and then of the likelihood that the guidance will be upheld by the court. If guidances will automatically be validated and applied by the courts, they gain prodigious practical binding effect, because – obviously -- the law that the courts apply is the law that the public must obey.

1. That brings me to the first of the three situations that I am going to examine: where the guidance interprets a statute that the agency administers. How should its substantive validity be tested? At first glance, this may look like a job for Chevron. Chevron deference to an agency interpretation has the practical effect in most cases of giving the agency's position binding force, since the court reviewing under Chevron must accept the agency interpretation unless it finds it to be contrary to statute or to be unreasonable, which is quite unusual.

Should interpretations set forth in nonlegislatively issued guidances get Chevron deference from the courts? The Supreme Court's May 2000 decision in Christensen v. Harris County said no. Christensen held that "interpretations such as those in opinion letters – like interpretations contained in policy statements, agency manuals, enforcement guidelines, all of which lack the force of law – do not warrant Chevron-style deference. . . . Instead, interpretations contained in formats such as opinion letters are 'entitled to respect' under our decision in Skidmore v. Swift . . . (1944), but only to the extent that those interpretations have the 'power to persuade.'"

This is an eminently sound position. The Christensen Court contrasted agency interpretations "arrived at after, for example, a formal adjudication or notice-and-comment rulemaking." Those would get the strong Chevron deference, rather than the weak deference of Skidmore. Although the Court didn't spell out its reasoning, its rationale is clear. Chevron deference confers on the agency's interpretation a binding practical effect comparable to the force of law. (A court can set aside the interpretation only if it is unreasonable, which is essentially the same basis on which a court can set aside a legislative rule, which has the force of law.) Therefore Chevron deference should be granted only when the agency has exercised a congressionally authorized power to make law, and has promulgated its interpretation through procedures authorized for making law. Thus, it is appropriate to give Chevron deference to an interpretation set forth in a regulation, adopted after notice-and-comment rulemaking, because there the agency has followed statutory rulemaking procedures and has exercised delegated statutory authority to make regulations having the force of law.

But where the agency just issues a guidance, without observing notice-and-comment or other statutory procedure, the agency is not exercising any power that Congress has given it to make law, and Chevron deference is inappropriate. If agency personnel could simply issue interpretations informally and still get the strong Chevron deference, affected private parties would for practical purposes be bound by those informal interpretations, because they'd know that the courts would almost certainly enforce them. The agencies wouldn't need to bother with the APA's notice-and-comment requirements.

The "weak" deference of Skidmore is appropriate to the review of guidances. Under Skidmore it is the court that does the interpreting. The court must give consideration to the agency's interpretation, but only as part of the court's process of determining the correct interpretation. In many cases – probably the great majority of cases -- the court will agree with the agency's position. But it is not required to accept it just because it's reasonable, as it would have to do if the Chevron doctrine governed. The Skidmore formula respects the agency's expertise and assures that its views get fair consideration, without having to give its interpretation binding effect.

2. My second situation arises when an agency official issues a guidance that interprets, not a statute, but a regulation. That is, it interprets an legislative rule, which has the force of law because it was issued through notice-and-comment. What force should the courts give to guidances that interpret regulations? Here, unfortunately, the Supreme Court has taken an illogical and highly antidemocratic position. It says that "the agency's interpretation must be given '"controlling weight unless it is plainly erroneous or inconsistent with the regulation."'" (Thomas Jefferson Univ. v. Shalala, 114 S.Ct. 2381, 2386-87 (1994), Auer v. Robbins, 519 U.S. 452 (1997).) Plainly erroneous or inconsistent with the regulation! Not even an express reasonableness requirement! The Court formulated this standard back in the days of the New Deal, before the APA, in the 1945 Seminole Rock case. (325 U.S. 410, 414.)

This formula makes it exceedingly hard to overturn an agency's interpretation of its own regulations, even where, as is usually the case, the interpretation is only a very informal one. This abject mode of judicial deference gives agency officials the practically-binding power to tell people what they can and can't do, provided only that the agency folks can claim to be interpreting the agency's regulations. Moreover, it encourages agencies to promulgate vague regulations and then wait to spell out details later in informally issued "interpretations." Where the regulation is vague, with possible meanings spanning a broad and indeterminate range, strong Seminole Rock deference enables the agency informally to create new requirements, without public participation and free of meaningful judicial review. This style of deference is inconsistent with that of Christensen, which subjects informal interpretations of statutes to the more searching Skidmore standard.

Seminole Rock's strong deference to interpretations of regulations also ignores § 706 of the APA, which states that "the reviewing court . . . shall determine the meaning or applicability of the terms of an agency action." That language was plainly intended to afford affected persons recourse to an independent judicial interpreter of the agency's legislative acts. There can be many different interpretations of a given agency regulation, and often the agency's version will advance a self-interested purpose of the agency adverse to private parties. Private parties ought to be able to argue for their own interpretations without automatically being trumped by the agency in court. Of course the court should give fair consideration to the agency's interpretation, under Skidmore. But the court should be neutral in reviewing the interpretation. Its job should to be to interpret the regulation, not merely to mechanically ratify the agency's position unless it is plainly erroneous. It is antidemocratic and downright unfair to allow agency officials to make practically-binding law merely by issuing informal guidances interpreting regulations, with no public input, and without observance of procedures specified by Congress for making law.

3. For my third situation, we shift our focus from the substantive validity of the guidance, as in the first and second situations, to its procedural validity. This situation arises when agency personnel issue a guidance that does not interpret a statute, or an existing regulation, or any other law. Here, the agency people are stepping forth onto new ground, and, if their positions can carry binding effect, they are making new law. They are creating new sources of rights or obligations. These guidances are seldom issued by the agency heads but almost always at lower levels, usually with no prior notice to or input from the affected public, and with little or no supporting explanation or justification.

With respect to these guidances that don't interpret anything, the main issue is not whether they should get deference from the courts. The issue is whether they are invalid to begin with because the agency set forth new duties but did not use notice-and-comment or other required rulemaking procedures to issue them.

The general criterion is easily stated, although in individual cases it may be difficult to apply: If the agency treats the guidance as binding on private parties, the guidance is invalid. That is, if the guidance is intended to bind, or has binding effect – if it sets forth a binding norm – it is procedurally invalid for failure to use notice-and-comment.

But, if the agency merely treats the guidance as a tentative statement of what it expects to do in future cases as they may arise, the guidance should be valid. For its guidance to qualify as a valid "policy statement" within § 553's policy statement exception to its notice-and-comment requirement, the agency must make it plain that its policy is tentative, and must keep "an open mind" about reconsidering it when applying it in the future. The agency must afford each affected private party a fair opportunity to argue for a different policy position before a final decision is made in its individual case. In other words, the guidance must be provisional – tentative – not binding. If it is issued in this way, the agency may issue the guidance without notice and comment, and may refer to it in the decision of later cases, so long as it does not treat it as automatically controlling.

Often, though, the practical effect of a guidance is just as automatically binding as the effect of a fully-promulgated regulation. That happens when the agency treats the guidance as establishing fixed criteria, which the agency is going to routinely or automatically apply – for example, by deciding enforcement cases based on the guidance, or by requiring that its terms be satisfied before a permit or some other sort of approval will be granted to an applicant.

Sometimes, unfortunately, there is little that affected private parties can do about an agency's use of a guidance to enforce programs or decide cases. An applicant for a permit, for example, usually needs the permit promptly, and can't afford the time and money and possible future agency hassle of challenging the guidance in court.

But, when guidances like these do get to court, they are invalidated under the APA. If agencies want to bind the public to new obligations, they must promulgate regulations that comply with the APA or other required legislative rulemaking procedures. That is the main purpose of APA § 553: to require the agency to use notice and comment when it issues new rules binding on the public. If the agency wants to issue an informal guidance that does not interpret existing law but establishes new substance, it must make clear that the document is not binding but is tentative, and it must keep an open mind and be prepared to reconsider the policy at the time of its application.

To sum up: The world of guidances consists for our purposes of two large categories. First are those that interpret existing law: Whether they interpret statutes or interpret regulations, they may be issued without notice and comment, but, on judicial review they should get only the weak Skidmore deference and not strong Chevron or Seminole Rock deference. The second category of guidances, those that do not interpret existing law, are valid only if they are tentative and don't have practical binding effect on persons outside the agency. Correspondingly, the two key questions are, first, does the guidance interpret? and second, if it does not, is it practically binding on private parties?

Applying these questions, we get three categories of nonlegislative rules: 1) interpretive rules, which interpret existing law, 2) exempt policy statements, which do not interpret and are tentative rather than binding, and 3) noninterpretive documents that have practical binding effect on private parties. I propose calling documents in this last category "spurious rules," because they are procedurally invalid.

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