For some years, there has been a lot of debate (including in a symposium in this blog) about the continued viability of the Auer/Seminole Rock deference doctrine, under which, subject to various exceptions, courts are supposed to give an agency’s interpretation of its own regulations “controlling weight, unless that interpretation is plainly erroneous or inconsistent with the regulation.” It appears that there may be at least four votes for reconsidering or overruling the doctrine on the Supreme Court. The late Justice Scalia, the author of Auer, had already turned against it in Decker v. Northwest Environmental Defense Center, 133 S. Ct. 1336 (2013), and Chief Justice Roberts and Justice Alito stated they had serious questions about it in a concurrence in that case. Then in Perez v. Mortgage Bankers, 135 S. Ct. 1199 (2015), Justices Alito and Thomas announced their disapproval of the doctrine. Justice Scalia’s successor, Justice Gorsuch, is well known to be dubious about Chevron (see his concurring opinion Gutierrez-Brizuela, v. Lynch, 834 F.3d 1142, 1149 (10th Cir 2016)), and it is unlikely he is any warmer towards Auer. Justice Kennedy, the possible fifth vote, also signed on to the Chief Justice’s strikingly limited view of Chevron in their dissent in City of Arlington, Texas v. FCC, 133 S. Ct. 1863 (2013).
More evidence that there is some appetite on the Court to take on Auer, arose in the case of Gloucester County School Board v. GG, 822 F.3d 709 (4th Cir. 2016), in which the Fourth Circuit held that a Department of Education letter interpreting its Title IX regulation requiring schools to provide transgender students access to restrooms congruent with their gender identity was entitled to deference under Auer. The Supreme Court granted cert on whether “If Auer is retained, should deference extend to an unpublished agency letter that, among other things, does not carry the force of law and was adopted in the context of the very dispute in which deference is sought?” but in view of the Trump Administration’s change in policy, the Court vacated the decision below and remanded the case.
Now comes a fascinating spin on this question in a case pending before the Supreme Court, Animal Science Products, Inc. v. Hebei Welcome Pharmaceutical Co. Ltd., to be argued June 24, which, although centering around questions of international comity, also raises an Auer deference question with a foreign twist. [Note, I was alerted to this case by a post in the China Law listserv by Wilmer Hale associate (and former ACUS intern) Mark Jia.]
The Question Presented is
Whether a court may exercise independent review of an appearing foreign sovereign’s interpretation of its domestic law (as held by the U.S. Courts of Appeals for the 5th, 6th, 7th, 11th and District of Columbia Circuits), or whether a court is “bound to defer” to a foreign government’s legal statement, as a matter of international comity, whenever the foreign government appears before the court (as held by the opinion below [by the Second Circuit] in accord with the U.S. Court of Appeals for the 9th Circuit).
The underlying litigation involves a federal class action antitrust and price-fixing jury trial verdict for $147 million against two Chinese vitamin C manufacturers (two California distributors were also sued but were those actions were dismissed by the district court judge) that was overturned by the Second Circuit on comity grounds. In re Vitamin C Antitrust Litigation, 837 F.3d 175, 191 (2d Cir. 2016).
As Mark Jia explained in the China Law Listserv,
Under the principle of international comity, U.S. courts typically abstain from exercising jurisdiction over foreign defendants when those defendants cannot at the same time comply with both U.S. law and the law of their home country. The Chinese Ministry of Commerce (MOFCOM) filed multiple amicus briefs in the lower courts asserting that the defendants here, Chinese Vitamin C exporters, were compelled by Chinese law to fix prices, thus “insulating” them from suit. But if … no such compulsion existed (and the contrary statements by MOFCOM are not to be believed), the exporters can be sued under the Sherman Act.
According to the court, the Ministry’s appearance in this case is “historic” because it is the first time any entity of the Chinese Government has appeared amicus curiae before any U.S. court. 837 F.3d at 180, n.5.
Because the case revolves around principles of international comity, the court focused on the tests used to invoke it. Although the Second Circuit and other courts have used a multifactor test, the court found that in “antitrust claims premised entirely on foreign conduct,” the Supreme Court, “in determining whether international comity cautioned against exercising jurisdiction over [them] relied solely upon the first factor—the degree of conflict between U.S. and foreign law.” Id. at 185, citing Hartford Fire Ins. Co. v. California, 509 U.S. 764, 798 (1993). That required the court to decide whether a “‘true conflict’ exists” and to “determine conclusively what the law of each country requires.” Id. at 186. This in turn led to the question of whether the court should defer to the MOFCOM’s interpretation of one of its own regulations (“the 2002 notice”), requiring the vitamin manufacturers to develop “industry-wide negotiated prices.” Id. at 181, 186. The Court ultimately concluded that “Although the 2002 Notice does not specify how the ‘industry-wide negotiated’ price was set, we defer to the Ministry’s reasonable interpretation that the term means what it suggests—that members of the regulated industry were required to negotiate and agree upon a price.” Id. at 190.
In support of its decision to defer, the court emphasized that “the danger that an interpretation suggested by the plain language of a governmental directive may not accurately reflect Chinese law is all the more plausible where the documents the district court relied upon are translations and use terms of art which are unique to the Chinese system.” Id. at 190-91 (internal quotation marks omitted).
What is especially interesting in terms of administrative law are several dueling amicus briefs. The first one is by two distinguished U.S. China Law experts (Professors Don Clarke of GW and Nicolas Howsan of Michigan) challenging MOFCOM’s statements in the lower courts and the authoritativeness of MOFCOM’s interpretation of its own rules. They assert that “Not only does MOFCOM have no authority to interpret statutes, but Chinese law is clear that ministries may not be the final arbiters of the validity of their own rules within the Chinese legal system. Asserting that its authority to interpret law is unquestioned does not make it so.” Brief at 4. They base this on their conclusion that the Chinese Law on Legislation does not permit Chinese ministries to be the final arbiter of the compliance of their own rules. Moreover, they assert that MOFCOM had made contrary statements about this in WTO proceedings.
In its own amicus brief to the Supreme Court, MOFCOM begged to differ:
In 2001, China’s State Council promulgated rulemaking procedures that empower the Ministry to make and interpret its own regulations. See Add. 24–25, Decree of the State Council, People’s Republic of China (No. 322), Regulations on Procedures for Formulation of Rules, art. 33 (effective Jan. 1, 2002) (“The power to interpret rules belongs to the formulating organs of rules…. Interpretations of rules have the same force and effect as the rules themselves.”). Brief at 33.
This view is backed up in an amicus brief by a group of six Chinese administrative law scholars, arguing that (MOFCOM’s) interpretation of its own rules are indeed authoritative. In language very reminiscent of those made by the U.S. Government (at least in the past) in favor of Auer deference, these scholars argue “The reason why China’s system of legal interpretation has established the principle of ‘the rule-maker has the authority to interpret the rule,’ is because China ascribes to the belief that the goal of legal interpretation is to seek out the rule’s original intended meaning. The entity that established the rule is the entity that is best suited to explain the original meaning.” Brief at 5-6.
They also assert, “Moreover, in China, the rule-maker’s interpretation of its own rules is controlling upon the courts. When a State Council ministry—such as the Ministry of Commerce—interprets its own regulations, the Chinese courts give those interpretations deference because the ministry best understands the original intent and purpose of its own regulations.” Id. at 7.
Without getting in the middle of the argument between the U.S. and Chinese scholars/amici, I would like to highlight that these six Chinese scholars are among the most distinguished administrative law scholars in China. They include the most senior of them all, YING Songnian, now in his 70s, and a Walter Gellhorn-like teacher and mentor to many young professors in China. Professor Ying has been a leading drafter of China’s Administrative Litigation Law, State Compensation Law, Law on Administrative Penalties, Law on Legislation, and the Administrative Licensing Law. I have met him many times and he has visited and spoken at my law school. The group also includes his colleague from the China University of Politics and Law, MA Huaide, who is President of the Administrative Law Studies Institute of the China Law Society (rough analog to the ABA Adlaw Section). The other four scholars are very distinguished as well. While, of course, they have strong ties to the government (Professor Ying has served in the National People’s Congress, for example), I have seen first-hand that they have been instrumental in promoting reform measures in Chinese administrative law such as those permitting suits against the government, requiring public comment periods in rulemaking, offering trial-type hearings in licensing and penalty disputes, and creating the Open Government Information Regulation. By virtue of their positions they have earned the right to be outspoken about the need for such reforms, so while they are supporting their government in this case, they are by no means simply government mouthpieces.
In conclusion, the Supreme Court probably granted cert in this case to propound on the doctrine of international comity (and the amount of deference due to authoritative pronouncements of foreign governments in antitrust claims premised on foreign conduct), not to delve deeply into the intricacies of Chinese administrative law or implications for deference to U.S. agency interpretations. But it will be interesting to see if either of these issues are addressed at all.
Given the Solicitor General’s argument that the court of appeals erred by treating the Ministry’s amicus brief as conclusive, in my view, it is likely that the Supreme Court will agree with that and remand for a less deferential review.
That said, I certainly hope that the Supreme Court does preserve the doctrine of international comity; it seems to be in rather short supply in our other two Branches.
Jeffrey S. Lubbers is Professor of Practice in Administrative Law at American University’s Washington College of Law. He has participated in numerous workshops on administrative law reform in China since 1993.