Notice & Comment

Seminole Rock Step One, by Kevin M. Stack

Seminole Rock has a step one inquiry too—and, like Chevron’s step one, it depends on the court’s choice of interpretive method. Chevron’s step one asks whether the authorizing statute “directly” speaks “to the precise question at issue” in the sense of clearly prohibiting or requiring the agency’s position. The method of statutory interpretation that the court adopts when applying Chevron’s step one notoriously influences the outcome. Seminole Rock’s step one asks the court to judge whether the agency’s interpretation of own regulation is “plainly erroneous or inconsistent with the regulation.” Resolving Seminole Rock’s step one inquiry also requires the court to adopt an interpretive method—a method of regulatory interpretation—to determine if the agency’s position is foreclosed or warrants controlling deference.

How should courts interpret an agency’s regulations when applying Seminole Rock step one? In decisions applying Bowles v. Seminole Rock & Sand Co. and later Auer v. Robbins, the Supreme Court has relied upon a grab bag of tools, but not given the issue sustained analysis. As a matter of first principles, the method of regulatory interpretation should be informed by the distinctive legal character of regulations. As required by the Administrative Procedure Act and enforced by judicial doctrine, notice-and-comment regulations have a distinctive form: the agency issues the regulations with an extensive statement of their “basis and purpose.” These statements—which form the heart of the regulation’s preamble—include an articulation of the purposes of the regulation, its evidentiary and economic basis, its place in the regulatory scheme, the agency’s consideration of alternatives and comments, as well as interpretive commentary. The regulation’s preamble is the agency’s official justification of the regulation, issued contemporaneously with the regulations, and the basis for judicial review of the validity of the regulations. Regulatory preambles also undergo extensive consideration and vetting both inside the agency and by other executive branch officials. For all of these reasons, it makes sense to interpret regulations in light of their preambles—including the purposes set forth in them. The Second Circuit’s recent decision in Halo v. Yale Health Plan, per Chief Judge Robert Katzmann, exemplifies this approach.

This method of regulatory interpretation, which I have defended at length and more briefly, should apply under Seminole Rock step one. The question of whether an agency position is permitted by or inconsistent with a regulation is a matter of independent judicial determination, just as Chevron’s step one question of permissibility is a matter of independent judicial evaluation. As such, the method of interpretation under Seminole Rock should follow the approach applicable to regulatory interpretation more generally.

This interpretive approach to Seminole Rock also addresses criticism that the doctrine undermines rule-of-law values of notice. A prominent critique is that Seminole Rock fails to give parties adequate notice of the meaning of regulations because it effectively binds courts to enforce a construction of the regulation that is “permissible” but would not be obvious or predictable to parties. But under the approach to Seminole Rock’s interpretive step just outlined, agency positions qualify for Seminole Rock’s controlling deference only when they are consistent with the text of a regulation when read in light of its preamble. This grants Seminole Rock’s controlling deference to a narrower range of agency positions than simply according this deference to any agency position permitted by the regulatory text. That limit directly augments notice of the meaning of regulations. It tells regulated parties and regulatory beneficiaries to expect the regulations to be enforced in ways that are permitted by the regulation’s text when read in light of its preamble—and that they will have an opportunity to contest agency positions that veer from text when read in light of its preamble.

While treating statements in preambles as bearing on how a regulation will be later interpreted, this approach to regulatory interpretation at Seminole Rock’s step one still preserves important agency flexibility. First, the agency will receive Seminole Rock’s controlling deference for any position that is consistent with the regulatory text when read in light of the preamble. Second, this approach does not prohibit an agency from taking a position inconsistent with the regulatory text when it is read in light of its preamble—it just will not receive controlling deference for those stances. Third and most important, the agency writes the preamble. A preamble can be written with exhaustive commentary and interpretive directions about the rule’s meaning and application or much more sparsely. The agency thus has a significant hand in determining the extent of the interpretive constraint a preamble imposes on the regulations it accompanies.

Answering the Seminole Rock step one question by reading agency regulations in light of their preambles has important implications for agencies. In general, it gives agencies incentives to provide relatively more guidance in their preambles (or have reasons for declining to do so) because they know that their preamble guidance will be used in determining whether later agency actions are consistent with the regulations. From a publicity perspective, it is hard to object to an agency providing more guidance rather than less at the time it issues its rules. In addition, once this guidance function of the preamble comes fully into view, it also becomes clear that agencies need to do more to present preamble guidance in an accessible manner and to integrate it with other forms of guidance, as recommended by the Administrative Conference of the United States in its Recommendation 2014-3.

The question of what matters more in a framework of judicial review—the level of deference or the court’s interpretive method—has no general answer. But it is clear under both Chevron and Seminole Rock that interpretive method plays a central role in how these deference frameworks operate. At least in the case of Seminole Rock, the right interpretive approach—determining the meaning of the rules in light of the regulatory preamble—gives agencies reasons to be forthright about how they understand their rules and, by holding agencies to those understandings, enhances notice of the meaning of regulations without abandoning Seminole Rock deference.

Kevin M. Stack is Professor of Law at Vanderbilt University Law School, and was the consultant to the Administrative Conference of the United States (ACUS) for the project which concluded in ACUS adopting its Recommendation 2014-3. This post draws on his Interpreting Regulations, 111 Mich. L. Rev. 355 (2012), Preambles as Guidance, 85 Geo. Wash. L. Rev. (forthcoming 2016), and How to Interpret a Regulation: First Principles, RegBlog (Feb. 11, 2013).


This post is part of an online symposium entitled Reflections on Seminole Rock: The Past, Present, and Future of Deference to Agency Regulatory Interpretations. You can read the entire series here.