Will High Court Labor Ruling on 'Chevron' Deference Affect Net Neutrality Case?
Opinions vary on whether a new Supreme Court ruling will affect the net neutrality case and the deference courts show regulatory agencies. Justices vacated and remanded Monday a decision of the 9th U.S. Circuit Court of Appeals that had deferred to the Department of Labor on regulation under the Fair Labor Standards Act dealing with overtime pay, which was challenged by an automotive dealership (Encino Motorcars, LLC v. Navarro et al., No. 15-415). The high court found the 9th Circuit hadn't adequately required the department to justify a change in policy, particularly in light of the dealership's "significant reliance interests" on the previous policy. Telcos and cable providers also argued FCC didn't adequately justify its policy change and account for their reliance interests in reclassifying broadband from Title I to a Title II telecom service under the Communications Act.
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Writing for the majority in Monday's ruling, Justice Anthony Kennedy noted the high court's Chevron doctrine giving deference to reasonable agency decisions on ambiguous statutory provisions in their domain. "But Chevron deference is not warranted where the regulation is 'procedurally defective' -- that is, where the agency errs by failing to follow the correct procedures in issuing the regulation," Kennedy wrote.
A critic of the FCC's policy said the ruling is helpful to broadband providers that may appeal the D.C. Circuit's ruling upholding the net neutrality and broadband reclassification order (see 1606140023). “I said right after the D.C. Circuit’s decision came out that I thought that the court’s perfunctory treatment of Chevron’s applicability might well interest the Supreme Court," emailed Free State Foundation President Randolph May. Monday's "Encino Motorcars decision reinforces my belief because the Supreme Court, in declining to give Chevron deference to a Department of Labor rule, emphasized the fact that the agency changed a previously-adopted position without providing adequate reasoning. And it also recognized the importance that reliance interests play in deciding whether to accord Chevron deference. In other words, the arguments put forward by the petitioners in the D.C. Circuit case mirror those which swayed the Court in Encino. All told, I think the prospects for review of the D.C. Circuit decision are enhanced.”
A supporter of the FCC order had a different take. "I'm not sure why this case matters very much. If it is because the anti-NN [net neutrality] folks think this case helps them, they are grasping at straws," emailed Andrew Schwartzman, Georgetown Law Institute for Public Representation senior counselor. "This decision is about a scenario where the agency didn't offer any explanation for its changed position interpreting a statute. In the NN case, the FCC explained its revised interpretations at great length. Even [D.C. Circuit] Judge [Stephen] Williams accepted that the statute gives the FCC authority to reclassify and that the reclassification decision was explained," he said. Williams partly dissented. Schwartzman pointed out that Justices Ruth Bader Ginsburg and Sonia Sotomayor "went out of the way to stress that this decision does not change the underlying legal principles."
Kennedy wrote Monday, "One of the basic procedural requirements of administrative rulemaking is that an agency must give adequate reasons for its decisions. ... Agencies are free to change their existing policies as long as they provide a reasoned explanation for the change. See, e.g., National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U. S. 967, 981–982 (2005); Chevron, 467 U. S., at 863–864. When an agency changes its existing position, it 'need not always provide a more detailed justification than what would suffice for a new policy created on a blank slate.' FCC v. Fox Television Stations, Inc., 556 U. S. 502, 515 (2009)."
"But the agency must at least 'display awareness that it is changing position' and 'show that there are good reasons for the new policy.' Ibid. (emphasis deleted)," Kennedy continued. "In explaining its changed position, an agency must also be cognizant that longstanding policies may have 'engendered serious reliance interests that must be taken into account.' Ibid.; see also Smiley v. Citibank (South Dakota), N. A., 517 U. S. 735, 742 (1996). 'In such cases it is not that further justification is demanded by the mere fact of policy change; but that a reasoned explanation is needed for disregarding facts and circumstances that underlay or were engendered by the prior policy.' Fox Television Stations, supra, at 515–516. It follows that an '[u]nexplained inconsistency' in agency policy is 'a reason for holding an interpretation to be an arbitrary and capricious change from agency practice.' Brand X, supra, at 981. An arbitrary and capricious regulation of this sort is itself unlawful and receives no Chevron deference. See Mead Corp., supra, at 227."
Applying the principles to the labor case, Kennedy ruled that "the unavoidable conclusion is that the 2011 regulation was issued without the reasoned explanation that was required in light of the Department’s change in position and the significant reliance interests involved. In promulgating the 2011 regulation, the Department offered barely any explanation. A summary discussion may suffice in other circumstances, but here -- in particular because of decades of industry reliance on the Department’s prior policy -- the explanation fell short of the agency’s duty to explain why it deemed it necessary to overrule its previous position."