Non-binding Guidance: A Discussion of Kisor v. Wilkie
The seventh installment of Ropes & Gray’s podcast series, Non-binding Guidance, dives into the closely watched administrative law case, Kisor v. Wilkie. This Supreme Court case addresses the continued validity of the doctrine articulated in the 1997 Supreme Court case Auer v. Robbins, regarding judicial deference to federal administrative agency interpretations of their own regulations. In this episode, Ropes & Gray partner Greg Levine interviews his colleagues, Doug Hallward-Driemeier and Beth Weinman, about the factual background, opinions, and potential implications of Kisor, with particular emphasis on its significance for FDA-regulated life sciences companies seeking to challenge FDA or other federal agency regulatory interpretations. Among other things, Beth and Doug discuss the signals the Kisor case sends about the future of Chevron deference, which addresses the related question of judicial deference to agency interpretations of statutes. Tune in to this discussion to learn about key takeaways from the Supreme Court’s Kisor ruling and its potential impact on FDA-regulated companies.
For a more in depth review of the Kisor v. Wilkie opinion and its potential impact on FDA-regulated life sciences companies, check out the corresponding article, “A New Dawn for Challenges to FDA Actions? Kisor and the Tenuous Vitality of Administrative Deference.”
Greg Levine: Hi, I'm Greg Levine, a partner in the life sciences regulatory and compliance practice group at Ropes & Gray, based in our Washington, D.C. office. Welcome to Non-binding Guidance, a podcast series from Ropes & Gray focused on current trends in FDA regulatory law, as well as other important developments affecting the life sciences industry. I'm here today with my colleague, Doug Hallward-Driemeier, a litigation partner who leads Ropes & Gray's appellate and Supreme Court practice, and who has presented more than 85 appellate arguments, including arguing 17 times before the U.S. Supreme Court. I’m also joined by Beth Weinman, counsel in the life sciences regulatory and compliance group who joined us about a year ago from FDA's Office of Chief Counsel. In the Chief Counsel's Office, Beth worked primarily on Federal Food Drug & Cosmetic Act criminal enforcement and parallel False Claims Act investigations. She also appeared regularly in front of administrative law judges and handled defensive civil litigation on behalf of the government.
On today's episode, we will be talking about Kisor v. Wilkie, a closely watched agency deference case that has attracted significant attention in administrative law circles and among companies operating in highly regulated industries. Today, we'll focus primarily on the impact of that case for FDA regulated entities. Some expected that Kisor might spell the end of the Auer doctrine deference, but Auer appears to live on, at least in name. So I'll turn first to Doug to give us some background and set the stage for the discussion. Doug, what is Auer deference, why does it matter, and why is Kisor potentially so important?
Doug Hallward-Driemeier: Well, thank you, Greg. The Auer doctrine takes its name from a 1997 Supreme Court decision called Auer v. Robbins. And basically, it calls for judges to defer to agencies when they're interpreting their own ambiguous rules. So the reasoning behind Auer deference is basically premised on a number of principles. First, the idea that the agency that “wrote the regulation” is in the best position to interpret it. Second, that agencies often possess particular expertise in administering what are admittedly “highly complex and technical regulatory programs” in which they're charged with making policy determinations. And third, the idea was that uniform agency interpretation gives “predictability about the administrative process” for regulated entities.
So under Auer, courts generally would defer to agency interpretations of their regulations unless that interpretation was “plainly erroneous or inconsistent with the regulation” and the court was able to determine that. So in recent years, Auer really has come under considerable criticism. And one of the leading critics of that was Justice Scalia before his death. He argued, and you can sort of see this in the rule itself, that it gives actually an incentive to agencies to speak vaguely and in broad terms so that they retain flexibility about how they will “clarify” their ambiguous regulatory language, which ultimately has the consequence of a real retroactive application of what is really, in many instances, a new rule on conduct that predated that clarification of that rule. So one of the criticisms he leveled was that Auer deference “contravenes the great rule of separation of powers that he who writes a law must not adjudge its violation,” precisely to avoid that kind of retroactivity.
So as a practical matter, Auer stood as a considerable obstacle to any efforts to challenge administrative agencies through the courts. Now, as the Supreme Court and many lower courts have grown more conservative, opposition to the regulatory state has grown along with that change. And many court watchers expected that the court would act to tamp down, in some way, what they saw as inappropriate, sometimes even I think they thought it was blind, deference to federal agencies. Now, for their part, the federal agencies of course were relying very heavily on Auer deference and related doctrine, Chevron deference, for example, which involves deferring to agency interpretations of statutes. They relied on those doctrines of deference to fend off challenges by the regulated entities or industries to their agency decisions. The agencies undoubtedly believe that they are making appropriate decisions, especially when interpreting their own regulations and applying their specialized expertise, and they're not particularly keen for the courts to second-guess them. So when Kisor came along, many expected that it bode ill for Auer, and that it may have foretold the end of Auer deference. But in a surprise to most court watchers, and to the consternation, undoubtedly, of Auer critics, the opinion, which was authored by Justice Kagan for the Court, at least as to most parts, actually affirmed Auer, at least on its face. In so doing, though, the Court really put some very important limits on the application of Auer, which I think raise significant questions about its continued significance as a practical matter. So the doctrine lives on, but may be on life support as a practical matter.
Greg Levine: Thanks for that, Doug. Why don't we get a bit more into the facts of the case. Beth, could you tell us about the specific circumstances in Kisor?
Beth Weinman: James Kisor was a Vietnam War veteran, and he initially sought disability benefits from the VA back in 1982. He alleged that he had developed post-traumatic stress disorder from his military service in Vietnam, in particular from his involvement in a military action called Operation Harvest Moon. While the Supreme Court doesn't discuss the details, Operation Harvest Moon was a major battle in December 1965 that led to heavy losses on the Allied side, attributed by military scholars to a significant lack of coordination between both the U.S. and the South Vietnamese militaries, and between the U.S. Marines and the U.S. Air Force. In fact, during the course of the operation, the commanding general was relieved of his duty because he could not provide clear direction to his units – so a mess, really. The psychiatrist who evaluated Kisor's claim noted his involvement in the battle, but found that he did not have PTSD and the VA denied Kisor his benefits. In 2006, he moved to reopen his claim. And there was a new psychiatric evaluation that resulted this time in the determination that he did, in fact, have PTSD, but the benefits determination was not made retroactive to the time of his original claim – and so Kisor appealed. An ALJ representing the Board of Veterans’ Appeals, which is part of the VA, affirmed the VA's decision based on the VA's interpretation of an agency rule that retroactive benefits could be awarded only if the VA found that there were relevant official service department records that had not been considered in the original denial. I'll note, as the Supreme Court noted in its opinion, that the decision here was by one judge—one ALJ—and in his view, the two new service records identified by Kisor as new weren't relevant because they didn't go to the reason for the original denial.
The next level of review was at the Court of Appeals for Veterans' Claims (and that's an independent Article I Court), and that Court affirmed as well. And next, the case went to the Federal Circuit, which also affirmed based on deference to the Board's interpretation of the VA rule. Kisor had argued before the Federal Circuit that the new records need not relate to the basis of the prior denial, but could relate to another criterion for obtaining benefits. So in doing its deference analysis, the Federal Circuit found that the regulation was ambiguous, found that neither interpretation, neither the government's nor Kisor's, was unreasonable, and deferred to the VA based on Auer, holding that Auer was appropriate unless the agency construction of its own regulation was “plainly erroneous or inconsistent with the VA's regulatory framework.” Following that decision, Kisor took his case to the Supreme Court and he challenged the validity of the Auer doctrine. Kisor failed in his efforts to overturn Auer, but he did succeed in eliciting a Supreme Court opinion that gives anti-deference advocates a great deal of citable language to rely on in future challenges to agency decisions.
Greg Levine: Thank you, Beth. Doug, could you tell us more now about the Court's opinion? We know this is one of these complicated rulings with many parts, Justice Kagan writing for the majority, and at times the plurality, Chief Justice Roberts concurring in some parts but not others, and a concurrence from Justice Gorsuch that was effectively a dissent. So what are the highlights of the case, and what's coming next?
Doug Hallward-Driemeier: Well, as I said before, the headline at least was that Auer survives. But as a practical matter, the opinion by Justice Kagan for the majority, this is the part in which Chief Justice Roberts joins, actually sets forth some very important limitations on when Auer would apply. And it's probably worth talking about those in a little more detail, because they are, as I say, very significant constraints.
So first, the Court said that Auer deference would not apply “unless the regulation was genuinely ambiguous.” Of course, agencies always want to say, after the fact, that their own regulations were ambiguous. You would think agencies would be better at writing regulations that were not ambiguous, but they're always citing ambiguity so that they get deference for the construction. And what the Court said here in Kisor is that the reviewing court has to apply all of the traditional rules of construction before they come to that conclusion that the regulation is truly ambiguous. So they're supposed to look at obviously the text, but also its purpose and context to determine whether the court can discern the answer to this question before getting to deference. So the second limitation is that the “agency's reading still has to be reasonable,” and that means that it has to fall within the bounds of reasonable interpretation. And I think some probably have thought historically that that was not much of a constraint at all. Here in this opinion, the Court clarifies that it is, in fact, “a requirement that the agency can fail,” so that's helpful. And then third, the Court says that, again, before applying Auer deference, “the court has to apply an independent inquiry on whether the character and context of the agency's interpretation is one that would entitle it to controlling weight.” And for that, they're supposed to be looking at factors such as whether the agency's interpretation was authoritative –if it was the official position of the agency, whether it is made in the manner that you would expect the agency to do – the person that Congress might have expected at the agency to be making that interpretation, and whether it really is truly implicating their substantive (i.e., their technical policy-based) expertise, and then finally, whether the interpretation raises those retroactivity concerns that I mentioned earlier – the lack of fair warning to regulated parties. So there are very significant limitations among those three principles, I think, to when the agency will successfully be able to invoke deference.
Now, you mentioned that Justice Gorsuch's opinion is more like a de facto dissent, and I think that's accurate. He says, “It should have been easy for the Court to say goodbye to Auer v. Robbins,” and he characterized it, much as Justice Scalia has, as creating “a systematic judicial bias in favor of the federal government, the most powerful of entities, and against everyone else” – kind of setting up this David vs. Goliath type of situation . So I think when you read all of the opinions, as you say, there were several of them, it was kind of a really divided Court here. Perhaps the most telling is that you have a concurring opinion by the Chief Justice, who joined the majority as to many of the parts of the opinion, and then also another concurring opinion by Justice Kavanaugh, who otherwise joined Justice Gorsuch in his sort of would-be dissent. And those two concurring opinions actually are very close together, right? And so Chief Justice Roberts actually says that “the distance between the majority and Justice Gorsuch is not as great as might initially appear,” and that the cases in which Auer deference would be warranted pretty much overlap with the cases in which the agency's explanation of the outcome is reasonable, and is probably the same one that the Court would come to. And Justice Kavanaugh, in slightly different words, agreed that there are many instances in which the Court is never going to have to ultimately resolve this question, whether it's deferring or not to the agency.
So one of the interesting things, though, before we leave it, is that both the Chief Justice and Justice Kavanaugh kind of flag that there's another related issue where they might come out differently, or at least Chief Justice Roberts might come out differently, and that has to do with the related doctrine of Chevron deference. Now, Chevron deference and Auer deference are similar in that they both call for deference to the agency at the end of the day. But Auer is deference to the agency in construing its own ambiguous regulations, where presumably it had the ability under the statute to adopt any number of a variety of regulatory lines, right? Chevron is deference to the agency when it is construing an ambiguous or purportedly ambiguous statute. And that is one that I think the conservative end of the Court has even more trouble with, from a separation of powers standpoint, that Congress has written and the courts are supposed to be construing these statutes. And so the Chief Justice sort of said wait a minute, to be clear, that's a different question – and so I think that may well foreshadow that the outcome may be different in a case in which Chevron was directly challenged.
Greg Levine: That's really interesting stuff, Doug. I mean, obviously there's very important issues that are being decided and also that are maybe coming down the pike as well. Beth, as far as where we stand at the moment, what do you think that the Kisor decision is going to mean for companies that are regulated by the FDA?
Beth Weinman: Look, the fact that the Supreme Court didn't overrule the Auer doctrine means that FDA can continue to invoke it in litigation that is challenging its regulatory and administrative decisions. And it's going to do that. Following Kisor, the agency's arguments for deference, however, are going to receive much greater scrutiny. There's no doubt about that. The opinion sets forth a number of pretty stringent requirements that are going to have to be met in order for Auer to apply, and the government is going to have to articulate very clearly why it meets the new test that's outlined in Kisor that Doug has already talked about. The opinion gives those challenging FDA action multiple avenues to assert that Auer deference is not appropriate in a given situation. It also gives good arguments to agencies that it is appropriate.
Greg Levine: Okay, so for example, how might a challenger to an FDA decision try to use the Kisor case?
Beth Weinman: Well, Doug already mentioned the ambiguity flag. You know, there's great language in Kisor for challengers to administrative action that deference shouldn't be reflexive, and that agencies can't just say, “Oh, the regulation's ambiguous.” So I think that is one way. Kisor really instructs courts that they have to consider a lot of factors before coming to the determination that a regulation is ambiguous. And they really want courts to think about, “Is this interpretation an interpretation that Congress would be comfortable with?” And I'm not sure that that's something courts have really been doing before. And in fact, in Kisor, the majority told the Federal Circuit to go back and do this analysis on remand – they thought the Federal Circuit had determined the regulation was ambiguous too quickly. And look, I think Kisor is going to make things difficult for agencies that are trying to invoke Auer deference where they can't demonstrate that their actions are evidence-based or that they comport with proscribed procedures. We know, as evidenced by the name of this podcast, that FDA issues a lot of non-binding guidance documents. And should a litigant challenge the application of such a document, FDA's going to be hard-pressed, given the disclaimers it typically attaches to such documents, as well as the characterization of guidance in its good guidance practice regulations, it is going to be hard-pressed to assert that Auer deference is warranted based on a guidance alone. FDA is going to have to ground its reasoning in binding law. And this is no surprise – FDA knows this. They're just going to have to work harder at explaining themselves. Usually, the agency is able to find a regulation or a statutory provision to support its decision, but it's going to have to do a better job at articulating the basis for its decisions.
Greg Levine: So Beth, or Doug, maybe this is a question for you. Are there cases already being decided where we see Kisor being used? And if so, how are they coming out?
Doug Hallward-Driemeier: Well, there was one case in particular in the D.C. Circuit where we had a split decision, a majority and then Judge Williams, senior judge, who concurred in the result. And it was interesting because you really see here both sides citing Kisor and really citing it for what they wanted, right? And in particular, it was interesting that Judge Williams, who was the one who was inclined to defer less to the agency—this involved EPA—and they were construing a very convoluted regulation about when they are required to reset fuel efficiency standards, and are they required to do that yearly, etc. But Judge Williams was less inclined to defer to the agency, and he was citing Kisor in support of that. So I think that it's an example of how Kisor can be read for what one wants to read into it, and I think that that may suggest that we will see this really becoming a little more dependent on which judge you draw and what it is that they're looking for. Beth, I don't know what you've seen?
Beth Weinman: I think that's right. It's interesting. There are a bunch of cases that have come out where Kisor has been used not to defer to agencies, but in those cases, the readings of the regulations were very strained and inconsistent with past positions – and it's quite possible that, prior to Kisor, those cases would have come out the same way.
Greg Levine: Okay, so there's clearly a lot of unpredictability here, one element being which judge you draw. Beth, are there any conclusions we can draw, or concepts that we might bear in mind in thinking about the types of FDA actions and how they might be analyzed under Kisor?
Beth Weinman: Yes, I think Kisor has language for FDA to rely on as well. The plurality opinion makes very clear that where a rule is technical or implicates policy expertise, it is still appropriate to defer to the agencies. And the majority opinion also talks about the importance of agency expertise. And so I think FDA will use that language and is likely, in complicated cases, to continue to receive deference. I think the case that Doug talked about already, the EPA case, really shows how Auer will be applied in cases with complex regulatory regimes.
Greg Levine: Beth, if you were to put yourself back in your seat at the FDA when you were a litigator at the agency, how would this be affecting your thinking? How would you view the case? And how, if at all, do you think it would affect not only your actions but the actions and decisions of the agency itself?
Beth Weinman: I am quite sure, Greg, that my old friends and colleagues are not thrilled with Kisor. In my view, this is a quintessential case of bad facts making bad law from the perspective of those in federal government who really care about the importance and continued vitality of the regulatory state. I mean, it is technically a win for the government. There is language for everybody in the opinion, as we've discussed. So while I think the agency will have to work harder, and especially the first time around, I think it's able to do that. It's going to have to marshal all of the evidence that it relied on to support its action – it is going to have to marshal the scientific arguments, it's going to have to marshal the policy rationales, and it's going to have to explain itself clearly. And especially when the policy issues and the science are hard, I expect that courts are going to defer in those situations.
Greg Levine: So certainly, the FDA can do that – I mean, they have the capability to do that oftentimes. I suppose there could be resource issues, there can be other things that might interfere there, but in a lot of ways, that is a change in how FDA is going to have to do its work, at least in some contexts. I think there are plenty of times where the FDA says, “We're the FDA, we know, and this is our decision.” And that's by and large, the end of it. Or they might give you a very cursory set of reasons or a reason for a determination that they make. So on the one hand, we could look at this and say, “Well, this is something they can do and it's not that big a deal.” On the other hand, you could look at it and say, “Oh, jeez, this is quite a burden.” And I think that what that then takes you to is, “Are there going to be some instances, some circumstances, where they don't do something that they would have done, or they do something differently than they would have done it originally, as far as the actual decision that they make?”
Beth Weinman: That's an interesting question. I mean, look, the decisions the agency makes affect industry in important ways, and it has to take its decision making and its power seriously. And I don't think it's too much to ask an agency to explain itself. Now, in a situation where they want to take an action that doesn't matter that much, that's not high priority, and it potentially rests on a complicated rationale, will it decide not to make that decision? I suppose that's theoretically possible. I mean, I think where the agency is making decisions and following up on policies that are important, it is going to have to marshal the evidence, and it probably will. And I don't think it will decide not to make decisions that are important to it.
Greg Levine: Okay, thanks for that, Beth. Doug, let's give you the final word. We've talked about some of the cases that are being decided. We've talked a bit about the Chevron issue that might be coming down the road. I mean, sum it up for us. Where are we?
Doug Hallward-Driemeier: Well, I think your allusion to Chevron is actually important, that probably where we're headed is a situation in which the courts are acting much more forcefully in terms of defining the legal boundaries, but that they would still continue to defer to the agency where truly you have a very technical scientific issue in which the agency has expertise – and that's, I think, the critical point that Beth was making. And arguably, from a separation of powers perspective, that's where this ought to come down. But I do think that, for regulated parties, it will open up many additional arguments that they can make when they want to bring a challenge to an adverse agency action.
Greg Levine: Well, thanks so much, Beth and Doug. And thank you to our listeners today. That's all the time we have. Thanks for tuning in to our podcast, Non-binding Guidance. For more information about our practice or other topics of interest to life sciences companies, please visit our FDA regulatory and life sciences practice pages at www.ropesgray.com. You can also listen to Non-binding Guidance and other RopesTalk podcasts in Ropes & Gray's podcast newsroom on our website or subscribe to this series wherever you listen to podcasts, including on Apple, Google and Spotify. Thanks again for listening.