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Tuesday, June 16, 2015

The Chevron Shuffle and Legislative History

This post's about a puzzling opinion from the D.C. Circuit.  The puzzle has to do with the Chevron two step and legislative history.  This puzzle's important, and not just for King v. Burwell

In Council for Urological Interests v. Burwell (CUI), published last week and available here, the D.C. Circuit shuffled between one view and another of legislative history's role in the Chevron analysis.  On the first step, the court of appeals held that a Conference Report didn't foreclose an agency's rule.  On the second step, however, the court held the same Conference Report required a remand of the rulemaking.  (For those unfamiliar with the Chevron two step, check out this discussion or this much more entertaining video.)  The flaw, the court held, was not in the agency's reading of the statute's text but rather in its "tortured reading" of the Conference Report.  There's something in the case for everyone who has debated whether Chevron has one step or two and what role, if any, legislative history should play in those steps.

In CUI, an association of physicians challenged regulations promulgated by the Secretary of Health and Human Services that "effectively prohibit[ed] physicians who lease medical equipment to hospitals from referring their Medicare patients to these same hospitals for outpatient care involving that equipment."  The court of appeals remanded one of the regulations to the Secretary with instructions to "grapple with [a] Conference Report" that might be read to preclude the Secretary's view of the statute.

Interestingly, the panel members shuffled their votes between Chevron's two steps.  At step one, one majority of the panel (Judges Griffith and Rogers) rejected the physicians' argument that the Conference Report foreclosed the agency's reading of the statute.  At step two, however, a different majority (Judges Henderson and Rogers) remanded the rulemaking because of the Conference Report.  Judge Henderson, who would have decided the case at step one, wrote the step two portion of the opinion.  Of course, parts of her step two opinion read like step one analysis.  For those who think Chevron has only one step, that's not surprising.  See Matthew C. Stephenson & Adrian Vermeule, Chevron Has Only One Step, 95 Va. L. Rev. 593 (2009).

The case also has something for those who think Chevron has two steps.  See, e.g., Richard M. Re, Should Chevron Have Two Steps?, 89 Ind. L.J. 605 (2014); Kenneth A. Bamberger & Peter L. Strauss, Chevron's Two Steps, 95 Va. L. Rev. 611 (2009).  Kenneth Bamberger and Peter Strauss have argued that step two entails "judicial oversight" of the "agency decisionmaking process," with the court asking whether the agency "has appropriately taken account of other interpretive tools --- like normative canons of construction or legislative history --- when resolving ambiguity in the governing statute."  Bamberger & Strauss, supra, at 623.  Parts of Judge Henderson's step two analysis in CUI can be read in these terms.  The agency had addressed the Conference Report in the rulemaking, but, Judge Henderson explained, its "jargon [was] plainly not a reasonable attempt to grapple with the Conference Report."  The court therefore remanded and instructed the Secretary to reconsider whether her interpretation of the statute "is consistent with the . . . Conference Report."  In other words, the agency failed reasonably to resolve statutory ambiguity, or so Judges Henderson and Rogers held.

By contrast, Judge Griffith thought the agency's briefs saved its rulemaking.  Citing Chenery, Judges Henderson and Rogers concluded they couldn't rely on the agency's litigating position.  Judge Griffith replied that the physicians forfeited their Chenery argument by not raising it until the reply.  So the case has something for those who think Chenery's founded in the nondelegation doctrine and "states a necessary condition for Chevron deference."  Kevin M. Stack, The Constitutional Foundations of Chenery, 116 Yale L.J. 952, 1006 (2007).

The case also has something for those who think courts should stop dancing the Chevron two step.  See, e.g., Jack M. Beerman, End the Failed Chevron Experiment Now:  How Chevron Has Failed and Why it Can and Should Be Overruled, 42 Conn. L. Rev. 779 (2010).  There's confusion in the competing opinions.  Judge Henderson, for example, would have used legislative history to foreclose deference to the agency at step one.  Her reason?  "In the Chevron context, . . . a failure to consult legislative history would leave the text ambiguous and thereby transfer authority to an administrative agency, whose democratic accountability is nil."  Really, nil?  Zip, zilch, nada?  Not even a little bit?  And if the concern's accountability, then why use legislative history to transfer authority to an Article III court?  Doesn't that miss an important reason courts do the Chevron two step?     

Judge Henderson's reasoning thus tees up John Manning's critique of the use of legislative history in the Chevron analysis.  He argues that using legislative history to narrow an agency's discretion "necessarily alters the scope of --- and thereby contradicts --- a delegation made by the relevant statute to the agency."  John F. Manning, Chevron and Legislative History, 82 Geo. Wash. L. Rev. 1517, 1521 (2014).

My own view is that CUI's about the agency's changing interpretations of legislative history, not legislative history itself.  As far as I can tell, the agency had one view of the Conference Report in the 2000s, another when it promulgated the rule, and a third in its briefing to the court.  Unexplained changes in position and post hoc rationalizations can't make a reviewing court all that confident about the agency's decisionmaking.  Chevron, however, seemed to frustrate rather than to facilitate the court's analysis of that problem and its directions to the agency on remand.  Apparently the agency needs to "grapple with the Conference Report."  How much of a struggle will be enough?  Would it be enough, for instance, if the agency were to conclude that legislative history's unreliable and thus irrelevant?  Or does CUI suggest an agency has a special obligation to use legislative material when interpreting statutes?  See Jerry L. Mashaw, Norms, Practices, and the Paradox of Deference:  A Preliminary Inquiry into Agency Statutory Interpretation, 57 Admin. L. Rev. 501, 513 (2005).

It would be helpful, as Bradley Silverman has pointed out in connection with King v. Burwell, if federal courts specified how to dance the Chevron two step with legislative history in hand.  But I wouldn't be surprised if the doctrine just keeps shuffling from one foot to the other.  

Posted by Seth Davis on June 16, 2015 at 05:51 PM | Permalink


As someone who believes that Step Two and State Farm are equivalent, and that such equivalence is the only way to explain why Step Two isn't Step One Redux, I really hate this opinion and think it illustrates that only State Farm can sensibly save Step Two from redundancy. As I understand the opinion, at Step One the panel says that read by itself the statute is ambiguous and permits the agency's reading. Then they say that clear legislative history can defeat an agency at Step One, but that this legislative history also permitted the agency's reading for very sound reasons that the agency first argued in its briefing. Then, at Step Two, the panel says that the agency's interpretation of the relevant snippet of legislative history in the reg was "tortured," "the stuff of caprice," and "belongs . . . to the cross-your-fingers-and-hope-it-goes-away school of statutory interpretation," and that the agency therefore loses notwithstanding its good arguments regarding the history that saved the agency at Step One, because they weren't made in the reg and Chenery forecloses their consideration. For this panel, then, Step Two is just a repeat of Step One, in which a reviewing court again asks whether the agency gave a textually permissible reading of the statute and especially salient legislative history,* the sole difference being that the panel thinks Chenery doesn't apply at Step One and does apply at Step Two. After all, if the panel thought Chenery applied at Step One, it should have held at Step One that, considering only the agency's reasoning in the rulemaking, the agency failed to explain why the legislative history didn't unambiguously foreclose its reading of the statute. This saves Step Two from redundancy, but in a pretty bizarre way; why should Chevron consist of asking the same question twice, except that the second time it's asked we throw out agency arguments we considered the first time?

On the other hand, I see no echoes of State Farm at all in the panel's treatment of Step Two. Their remand will be satisfied if the agency simply makes the same lawyerly point about the legislative history that saved the agency at Step One and that the panel bought, i.e. that assuming the conference report's explication of the equipment-rental exception resolves the ambiguity in the equipment-rental exception, the agency still has residual authority under another clause to ban referrals that the exception currently allows. The fact that the agency has *already* given a series of really sound policy reasons for opting for the reading of the statute it did never enters into the panel's Step Two review, and beefing those up isn't the subject of the remand.

As I see it, this is a weirdly persnickety application of Chenery - the agency's explanation of the text of the statute itself didn't change from what it was in the reg, and the stuff about the committee report is just a sentence in eight pages of pretty compelling justification for the rule. I would let them slide on advancing new explanations of the legislative history, which may or may not even matter given how extremely amenable the text of this statute is to the agency's reg. But if you do enforce Chenery here, the agency's problem is a Step One problem; reviewing only the arguments Chenery allows the court to review, the agency hasn't explained why the legislative history doesn't resolve the ambiguity in the petitoners' favor. But, since the agency has some pretty good ideas about that now, they should get a remand. And once they do explain, then all that's left to do at Step Two is apply State Farm to the agency's policy reasons for picking the permissible reading it chose to pick, instead of the permissible reading the petitioners would have the agency pick.

* To quote Judge Henderson's part of the majority opinion, "Chevron
step two is determined by reference . . .to the agency’s textual
analysis (broadly defined, including where appropriate resort
to legislative history)."

Posted by: Asher Steinberg | Jun 16, 2015 9:45:29 PM

That seems right on. It seems to also echo Judge Silberman's opinion in Nat’l Ass’n of Reg. Util. Comm’rs v. ICC, 41 F.3d 721, 726 (D.C. Cir. 1994), which is cited in the opinion. I was looking at it again, just now, and the language seems to underscore your point. Maybe, as that opinion suggests, there's a spectrum or range of Chevron Step Two analyses that depend on how the statute is written. When the statutory language is very broad, abstract, and confers a great deal of policymaking authority, perhaps State Farm is almost redundant; but where the language is more precise and requires the agency to deliberate about statutory meaning, that requires different analysis under Step Two.

Here's the language from that opinion (citations omitted):

"[A]lthough Chevron 's second step “sounds closely akin to plain vanilla arbitrary-and-capricious style review, ... interpreting a statute is quite a different enterprise than policy-making." Whether an agency action is to be judged as reasonable, in accordance with the APA's general arbitrary and capricious standard, or whether it is to be examined as a permissible interpretation of the statute vel non depends, at least theoretically, on the scope of the specific congressional delegation implicated. The range of delegations extends from, at one end, a statute that simply charges an agency to act (e.g., to grant licenses) in the public interest to, at the other end, a painstakingly detailed and focused command. When Congress' instructions are conveyed at a high level of generality, an agency is not likely to consider its action as an “interpretation” of the authorizing statute, nor is that action likely to be challenged as a “misinterpretation.” (Yet even then, the agency would be expected to assert that a particular decision was shaped by the general policy concerns that animated the legislation.) When, on the other hand, the statute is quite specific, agency action normally is evaluated in terms of how faithfully it follows the more detailed direction; in such cases the question is more obviously whether the agency permissibly interpreted the statute. In any event, the more an agency purports to rely on Congress' policy choice—as set forth in specific legislation—than on the agency's generally conferred discretion, the more the question before the court is logically treated as an issue of statutory interpretation, to be judged by Chevron standards."

Posted by: Adam Zimmerman | Jun 16, 2015 8:02:56 PM


Thank you for your comment, which I think highlights another interesting feature of the opinion that can be read more than one way. On the one hand the step two analysis echoes State Farm. On the other, it could reasonably be read to involve something other than hard look review. I have in mind Bamberger & Strauss's argument that judicial oversight under step two doesn't involve hard look review but rather an assessment of the agency's deliberation about statutory meaning. I think there's an important conceptual and doctrinal distinction between hard look review and what Bamberger and Strauss describe, but it may be (frequently?) difficult for courts to distinguish the two. We might, to push the metaphor, describe a shuffle between Chevron step two and State Farm. The CUI opinion was published on June 12, 2015, the same day the D.C. Circuit published National Association of Broadcasters v. FCC, in which Judge Sri Srinivasan treats step two and hard look review as redundant. (For the opinion, see http://www.cadc.uscourts.gov/internet/opinions.nsf/9A41CA79055C150C85257E620054EA95/$file/14-1154-1557167.pdf.)

Posted by: Seth Davis | Jun 16, 2015 7:33:30 PM


It's really interesting to see a panel shift positions and alliances like this at each stage of Chevron. I can't think of other times where a panel has similarly "shuffled."

Just skimming the decision now, another thing the opinion highlights is the uncomfortable overlap between "hard look" review and Chevron Step Two. The panel's requirement that HHS go back and "grapple" with the Conference Report sounds like the "hard look" review that the Supreme Court has sometimes required of agencies since State Farm--reviewing decisionmaking to ensure the agency (1) considers all the relevant factors Congress wanted it to consider, (2) considers all the important aspects of the problem, and (3) provides a "satisfactory explanation" for its actions that included a "rational connection between the facts and the choice made."

State Farm involved judicial review of an agencies' policymaking, which as the court recognizes, Op. at 19, is supposed to be different that when a court reviews an agencies' interpretation of a statute. But the outcome--a remand requiring more deliberation--is very similar.

Posted by: Adam Zimmerman | Jun 16, 2015 7:08:42 PM

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