Perez v. Mortgage Bankers Association
575 U.S. (2015)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
The Administrative Procedure Act's (APA) exemption for interpretive rules from notice-and-comment rulemaking is categorical. An agency is not required to use notice-and-comment procedures when it issues a new interpretation of a regulation, even if that new interpretation significantly revises or rescinds a prior one.
Facts:
- The Fair Labor Standards Act (FLSA) establishes minimum wage and overtime rules but exempts 'administrative' employees.
- The Department of Labor (DOL) has the authority to issue regulations defining which employees qualify for the administrative exemption.
- In 1999 and 2001, the DOL's Wage and Hour Division issued opinion letters concluding that mortgage-loan officers do not qualify for the administrative exemption.
- In 2004, the DOL issued a new set of regulations, using the notice-and-comment process, that provided examples of exempt employees in the financial services industry.
- At the request of the Mortgage Bankers Association (MBA), the DOL in 2006 issued an opinion letter interpreting the 2004 regulations and concluding that mortgage-loan officers were exempt administrative employees.
- In 2010, the DOL changed its position again, issuing a new 'Administrator's Interpretation' that concluded mortgage-loan officers do not qualify for the administrative exemption because their primary duty is making sales.
- The 2010 Administrator's Interpretation, which withdrew the 2006 opinion letter, was issued without a public notice-and-comment period.
Procedural Posture:
- The Mortgage Bankers Association (MBA) filed a complaint in the U.S. District Court for the District of Columbia, challenging the Department of Labor's 2010 Administrator's Interpretation as procedurally invalid.
- Three former mortgage-loan officers intervened to defend the Interpretation.
- The District Court granted summary judgment to the Department of Labor, finding the D.C. Circuit's 'Paralyzed Veterans' doctrine did not apply.
- MBA, the appellant, appealed the decision to the U.S. Court of Appeals for the D.C. Circuit.
- The D.C. Circuit reversed the District Court, concluding that under its binding precedent, the 2010 Interpretation was procedurally invalid because it was a significant change from a prior interpretation issued without notice and comment.
- The Department of Labor and the individual intervenors, as petitioners, sought and were granted a writ of certiorari from the U.S. Supreme Court.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the Administrative Procedure Act (APA) require an agency to use the notice-and-comment rulemaking process when it issues a new interpretation of a regulation that significantly revises a previously adopted interpretation?
Opinions:
Majority - Justice Sotomayor
No. The Administrative Procedure Act does not require an agency to use notice-and-comment procedures when it significantly alters an existing interpretive rule. The text of the APA, specifically 5 U.S.C. § 553(b)(A), categorically exempts 'interpretative rules' from the notice-and-comment requirement. The D.C. Circuit's 'Paralyzed Veterans' doctrine wrongly imposed this procedural requirement by conflating the APA's definition of 'rulemaking' (which includes amendments) with the separate section on procedural requirements. Because an agency is not required to use notice-and-comment to issue an initial interpretive rule, it is also not required to use those procedures when it amends or repeals that rule. The Paralyzed Veterans doctrine is a judge-made procedural requirement that improperly exceeds the 'maximum procedural requirements' Congress established in the APA, as articulated in Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc. While an agency must provide a reasoned explanation for changing its position to survive an 'arbitrary and capricious' challenge, it is not required to undergo notice-and-comment.
Concurring - Justice Alito
Concurring in part and in the judgment, Justice Alito agreed that the Paralyzed Veterans doctrine is incompatible with the APA but wrote separately to express concern over the aggrandizement of agency power. He noted this power stems from broad congressional delegations, the ambiguous line between legislative and interpretive rules, and the Court's doctrine of deferring to an agency's interpretation of its own regulations (Seminole Rock/Auer deference). While the Paralyzed Veterans doctrine was an improper solution, he stated he awaits a case with full briefing and argument to explore the validity of the Seminole Rock doctrine.
Concurring - Justice Scalia
Concurring in the judgment, Justice Scalia agreed that the Paralyzed Veterans doctrine contradicts the APA but argued that the Court's decision, when combined with judicial deference doctrines, creates a regulatory scheme Congress never intended. He reasoned that deference under Auer v. Robbins allows agencies to issue vague regulations and later make binding law through 'interpretive rules' without notice and comment, effectively circumventing the APA's procedural checks. He contended that the proper solution is not to invent new procedural requirements like Paralyzed Veterans, but to abandon Auer deference and have courts independently determine the correct meaning of regulations.
Concurring - Justice Thomas
Concurring in the judgment, Justice Thomas argued that the entire doctrine of judicial deference to an agency's interpretation of its own regulations (originating in Bowles v. Seminole Rock & Sand Co.) raises serious constitutional questions. He asserted that this deference amounts to an unconstitutional transfer of judicial power from Article III courts to the Executive Branch, violating the separation of powers. He contended that the practice undermines the judiciary's role as a check on political branches and allows agencies to change the law at will, which is contrary to the principle of a government of laws, not of men. Justice Thomas concluded that the Seminole Rock line of cases should be reconsidered.
Analysis:
This decision significantly enhances the power and flexibility of federal administrative agencies by eliminating a key procedural hurdle for changing policy. By striking down the D.C. Circuit's Paralyzed Veterans doctrine, the Court allows agencies to reverse their interpretations of regulations without undergoing the lengthy notice-and-comment process. This provides agencies with greater speed and discretion but reduces public participation and creates potential uncertainty for regulated parties. However, the three separate concurrences from Justices Alito, Scalia, and Thomas signal a profound and growing skepticism on the Court regarding the foundational doctrine of Auer deference, suggesting that while agencies won this procedural battle, the broader war over judicial deference to agency interpretations is far from over and may be a target for reversal in a future case.
