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Wednesday, April 18, 2007

Watters: The Court Sidesteps the Chevron Elephant in the Room

Way back last June, I wrote about the significance of the Supreme Court's grant of certiorari in Watters v. Wachovia Bank, the decision in which was handed down today. As I wrote ten months ago with regard to the central issue in the case -- the scope of agency preemption --

Given the absence of a conflict below, one can only assume that someone (or at least four someones, to be exact) sees something very, very wrong with where the law has gone here. After all, would the Court really grant on an administrative law/preemption issue on which the three circuits to reach the question are in unison just to affirm?

In a word, yes. Writing for a 5-3 majority (Justice Thomas recused), Justice Ginsburg agreed with the Second, Fourth, Sixth, and Ninth Circuits that the statutory regime under the National Bank Act clearly contemplates that the Office of the Comptroller of the Currency could preempt state regulation of national banks, and could therefore also preempt state regulation of those banks' "operating subsidiaries."

There are three aspects of the (surprisingly lengthy) decision, to me, worthy of mention:

First, and most importantly, the Court completely side-stepped the lurking Chevron question, ignoring entirely the extent to which the Sixth Circuit's analysis had relied upon Chevron, and opting instead for the Ninth Circuit's Chevron-free view of the preemption question. Indeed, Chevron appears only once in the majority opinion, and there, it is in Justice Ginsburg's description of the Sixth Circuit's decision.

I don't mean to get into too many messy details, but it strikes me as potentially very significant that the majority chose the anti-Chevron route. An easy way out of this case, as the Sixth Circuit held, would be simply to defer to the agency's "reasonable" interpretation of the National Bank Act. But as I noted in a separate earlier post, the Court's jurisprudence on agency preemption is hardly clear that Chevron deference is warranted in situations like this, where the agency is interpreting statutes possibly in excess of their regulatory authority. I therefore suggested that the Court might have granted cert. to get  its Chevron/agency preemption jurisprudence into order, but perhaps instead the grant was merely to reject, albeit sub slilentio, the Sixth Circuit's reliance upon Chevron -- that the Court wanted to affirm, but without relying upon deference to agency preemption.

For points two and three, see below the fold.

Which brings me to my second point: The vindication of the Ninth Circuit's decision in Boutris.  For all of the grief that the Ninth Circuit takes, especially vis-a-vis reversal statistics, cases like this are proof positive that those statistics are incomplete, for there are lots of times when the Court, in modifying decisions of other circuits, is actually adopting the Ninth Circuit's version of the rule. (And vice-versa.)  That's not to say that the Ninth doesn't overreach sometimes, in both directions.  Of course it does.  But on the same day that the Court heard argument in Defenders of Wildlife, there is too much of a tendency, methinks, to belittle anything that comes out of the Ninth, a court that easily claims a representative (if not disproportionate) share of the brightest federal appellate judges in the country (again, in both directions).

Finally, a word is in order concerning Justice Stevens's dissent (joined by the Chief Justice and Justice Scalia): Ultimately, I actually think Stevens is exactly right on the Chevron point, and his dissent is a very worthwhile read.  The issue here, as I explained in more detail previously, is the attenuation. The statute authorizes preemption of state laws with respect to national banks; the OCC is preempting state laws as applied to "operating subsidiaries," entities that are most pointedly _not_ national banks. There is absolutely zero evidence of congressional intent to allow OCC to broadly preempt state laws as applied to entities other than national banks, and, without Chevron, the OCC can't just make it up itself.

And so, inasmuch as the majority sidesteps the Chevron issue (and leaves for another day the messy question of when agencies are entitled to Chevron deference vis-a-vis their authority to preempt state laws), Justice Stevens nails the problem with Chevron deference in this context on the head, especially at pages 20-21 of the dissent.  In his words:

To be sure, expert agency opinions as to which state laws conflict with a federal statute may be entitled to “some weight,” especially when “the subject matter is technical” and “the relevant history and background are complex and extensive.” Geier v. American Honda Motor Co., 529

U. S.

861, 883 (2000). But “[u]nlike Congress, administrative agencies are clearly not designed to represent the interests of States, yet with relative ease they can promulgate comprehensive and detailed regulations that have broad pre-emption ramifications for state law.”

Id.

, at 908 (Stevens, J., dissenting). For that reason, when an agency purports to decide the scope of federal preemption, a healthy respect for state sovereignty calls for something less than Chevron deference. See 529

U. S.

, at 911–912; see also Medtronic, 518

U. S.

, at 512 (O’Connor, J., concurring in part and dissenting in part) (“It is not certain that an agency regulation determining the pre-emptive effect of any federal statute is entitled to deference”).

The (ultimately fatal) problem for the dissent, however, is that the majority resolves the case based on the statute itself, and not the OCC's interpretation thereof.  That analysis may not ultimately be convincing (I think it's pretty close), but the Chevron issue lives on to be resolved another day.

Posted by Steve Vladeck on April 18, 2007 at 12:30 AM in Constitutional thoughts, Current Affairs, Steve Vladeck | Permalink

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