Prof. Thomas Merrill on "Does Chevron Mandate Brand X?"

I'm delighted to pass along this item from Prof. Thomas Merrill (Columbia), whom readers might remember as a guest-blogger from a couple of years ago, and who is the author of The Chevron Doctrine: Its Rise, and Fall, and the Future of the Administrative State (2022):

In Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce, the petitioners are asking the Supreme Court to overrule the Chevron doctrine. Oral argument in the cases included multiple references to a decision called Brand X, short for National Cable & Telecommunications Association v. Brand X Internet Services, decided in 2005. The petitioners could not stop reminding the Court about Brand X.

Brand X held that when a court decides a question of statutory interpretation that would be eligible for Chevron deference if decided by an agency, and the agency subsequently disagrees with the judicial interpretation, the courts are obliged to follow the agency interpretation, not the prior judicial interpretation. Justice Scalia, in dissent, described Brand X as a "breathtaking novelty: judicial decisions subject to reversal by executive officers." He added that this was "probably unconstitutional."

The petitioners in the two pending cases were eager to remind the Court about Brand X in part because of the presumed aversion of the Justices to the idea that an administrative agency can "overrule" a decision of an Article III court—including potentially the Supreme Court.

Undoubtedly, they also thought Brand X was a perfect illustration of the instability in the law that they argue is caused by Chevron. Brand X upheld under Chevron an interpretation of the FCC during the Bush II administration that internet services providers are not subject to common carrier obligations under the federal communications laws. This interpretation, in turn, was later reversed by the Obama FCC, which was then reversed again by the Trump FCC, which itself is now slated to be reversed by the Biden FCC. In short, Brand X led to flip-flopping about the status of internet service providers with every election of a President of a different political party.

Emily Bremer, in a recent post at the Yale Journal on Regulation, has argued that Brand X flows ineluctably from Chevron. This was also the view of the petitioners in Loper Bright and Relentless: if the Court wants to get rid of Brand X, it has to overrule Chevron.

I do not think this is right. Though some of the broader language in Chevron allows agencies to change their statutory interpretations, that issue is apart from the core deference principle for which Chevron stands. For starters, Brand X is just one of six Supreme Court decisions that consider the relationship between judicial precedent and Chevron-style deference to agency interpretations.

As I explain in my 2022 book, The Chevron Doctrine: Its Rise and Fall, and the Future of the Administrative State at 148–158, three of these cases came before the Brand X decision (Maislin Industries, U.S., Inc v. Primary Steel, Inc. (1990),Lechmere, Inc. v. NLRB (1992), and Neal v. United States (1996)), and two came after (United States v. Home Concrete & Supply, LLC (2012) and Epic Systems, Corp v. Lewis (2018)).

The box score? Judicial precedent five, agency interpretation one. If we confine ourselves to Supreme Court precedents that were considered in these cases (as against a subsequent agency interpretation), the score is Supreme Court precedent five, agency interpretation zero.

What is going on here? Judicial precedent has prevailed over agency interpretation not because the Court has reverse-engineered the prior judicial opinions to determine whether they would have been "step one" or "step two" decisions if decided under Chevron. This is particularly clear from the first post-Brand X decision, United States v. Home Concrete & Supply, where the Court upheld a 1958 tax decision it had made, and rejected a recent Treasury regulation to the contrary. The 1958 decision acknowledged that the relevant provision of the tax code was "[]not … unambiguous"—which, under the version of Chevron applied in Brand X, would seem to mean that the agency view should prevail. Nevertheless, the Court ruled the opposite.

One clue about what is happening is that the five decisions rejecting Brand X or its concept all involved prior precedents of the Supreme Court. The one deviant decision, Brand X itself, involved a precedent of the Ninth Circuit.

This suggests that the Court regards adhering to its own precedents as being more important than allowing agencies to exercise delegated authority to interpret statutes they administer. From the Court's perspective, this makes perfect sense. The Court's authority is critically dependent on lower courts and agencies faithfully following Supreme Court precedent. If the Court does not follow its own precedent, maybe no one else will either.

Apparently, the Court in Brand X did not regard it as being equally important that lower courts and agencies faithfully follow Ninth Circuit precedents. If so, this is troubling to an extent—after all, the Ninth Circuit also has an interest in assuring that lower courts and agencies in the Ninth Circuit follow its rulings.

Putting that aside, one can see in the overall pattern of the Court's six decisions a concern about the importance of standing by previous judicial rulings, that is, about stare decisis. The five decisions rejecting the Brand X approach are a testament to the importance of stare decisis to the legal system and, more generally, to the centrality of rule-of-law values and the protection of settled expectations created by significant judicial precedents. Which, not coincidentally, is one reason why the Court should not jettison the Chevron framework itself.

What about the petitioners' second reason for flogging Brand X—that it illustrates the instability that can come about when courts apply the Chevron doctrine? Brand X is unquestionably responsible for unleashing a reign of instability about the legal status of internet service providers. And one must agree with the Court in Brand X that it is preferable to have the FCC decide this issue, rather than the Ninth Circuit.

The instability problem can be managed, if not resolved, by remembering that administrative law includes other well-established doctrines besides Chevron (and for that matter Brand X). One is that agencies are subject to a heightened obligation to provide reasons when they decide to reverse a course of action that they have followed in the past. Thus, if a change in presidential administrations results in a change in policy pursued by an agency, the agency has to offer a persuasive explanation that goes beyond "this is what the President wants."

Another relevant doctrine is that agency interpretations of law should receive more deference from courts when they are consistently maintained over time, and less or no deference if the agency is constantly oscillating between different interpretations. This venerable doctrine, too, is grounded in a concern about protecting reliance interests. Regulated entities should be able to rely on consistently held agency interpretations, and cannot be expected to anticipate the requirements of ever-fluctuating agency interpretations.

Thus, if the FCC adopts a different interpretation of the status of internet service providers every time a President of a different party is elected, a reviewing court should declare that the interpretation is not "reasonable" within the meaning of step two of Chevron. If the court perceives that the agency is just flip-flopping from one view to the opposite, it should announce its own best interpretation of the statute, putting an end to the gyrations.

Application of these two well-established doctrines—requiring an enhanced explanation when an agency reverses an interpretation, and deeming inconsistent or fluctuating agency interpretations to be "unreasonable"—would go a long way toward tempering the problem of instability that the petitioners have associated with Brand X.

With these understandings in place, Brand X, like Chevron, can be allowed to stand as a decision about the deference owed to an agency when it acts within the scope of its delegated authority and there are no settled expectations—including expectations created by controlling judicial decisions—to the contrary.