Perez v. Mortg. Bankers Ass'n

• Decision Date: 09 March 2015
• Docket Number: No. 13-1052,No. 13-1041,13-1041,13-1052
• Parties: THOMAS E. PEREZ, SECRETARY OF LABOR, ET AL., PETITIONERS v. MORTGAGE BANKERS ASSOCIATION ET AL. JEROME NICKOLS, ET AL., PETITIONERS v. MORTGAGE BANKERS ASSOCIATION
• Court: United States Supreme Court

THOMAS E. PEREZ, SECRETARY OF LABOR, ET AL., PETITIONERS
v.
MORTGAGE BANKERS ASSOCIATION ET AL.

JEROME NICKOLS, ET AL., PETITIONERS
v.
MORTGAGE BANKERS ASSOCIATION

No. 13-1041
No. 13-1052

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 2014
Argued December 1, 2014
March 9, 2015^*

(Slip Opinion)

Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

The Administrative Procedure Act (APA) establishes the procedures federal administrative agencies use for "rule making," defined as the process of "formulating, amending, or repealing a rule." 5 U. S. C. §551(5). The APA distinguishes between two types of rules: So-called "legislative rules" are issued through notice-and-comment rulemaking, see §§553(b), (c), and have the "force and effect of law," Chrysler Corp. v. Brown, 441 U. S. 281, 302-303. "Interpretive rules," by contrast, are "issued . . . to advise the public of the agency's construction of the statutes and rules which it administers," Shalala v. Guernsey Memorial Hospital, 514 U. S. 87, 99, do not require notice-and-comment rulemaking, and "do not have the force and effect of law," ibid.

In 1999 and 2001, the Department of Labor's Wage and Hour Division issued letters opining that mortgage-loan officers do not qualify for the administrative exemption to overtime pay requirements under the Fair Labor Standards Act of 1938. In 2004, the Department issued new regulations regarding the exemption. Respondent Mortgage Bankers Association (MBA) requested a new interpretation of the revised regulations as they applied to mortgage-loan officers, and in 2006, the Wage and Hour Division issued an opinion letter finding that mortgage-loan officers fell within the administrative exemption under the 2004 regulations. In 2010, the Department again altered its interpretation of the administrative exemption. Without notice or an opportunity for comment, the Department withdrew the 2006

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opinion letter and issued an Administrator's Interpretation concluding that mortgage-loan officers do not qualify for the administrative exemption.

MBA filed suit contending, as relevant here, that the Administrator's Interpretation was procedurally invalid under the D. C. Circuit's decision in Paralyzed Veterans of Am. v. D. C. Arena L. P., 117 F. 3d 579. The Paralyzed Veterans doctrine holds that an agency must use the APA's notice-and-comment procedures when it wishes to issue a new interpretation of a regulation that deviates significantly from a previously adopted interpretation. The District Court granted summary judgment to the Department, but the D. C. Circuit applied Paralyzed Veterans and reversed.

Held: The Paralyzed Veterans doctrine is contrary to the clear text of the APA's rulemaking provisions and improperly imposes on agencies an obligation beyond the APA's maximum procedural requirements. Pp. 6-14.

(a) The APA's categorical exemption of interpretive rules from the notice-and-comment process is fatal to the Paralyzed Veterans doctrine. The D. C. Circuit's reading of the APA conflates the differing purposes of §§1 and 4 of the Act. Section 1 requires agencies to use the same procedures when they amend or repeal a rule as they used to issue the rule, see 5 U. S. C. §551(5), but it does not say what procedures an agency must use when it engages in rulemaking. That is the purpose of §4. And §4 specifically exempts interpretive rules from notice-and-comment requirements. Because an agency is not required to use notice-and-comment procedures to issue an initial interpretive rule, it is also not required to use those procedures to amend or repeal that rule. Pp. 7—8.
(b) This straightforward reading of the APA harmonizes with longstanding principles of this Court's administrative law jurisprudence, which has consistently held that the APA "sets forth the full extent of judicial authority to review executive agency action for procedural correctness," FCC v. Fox Television Stations, Inc., 556 U. S. 502, 513. The APA's rulemaking provisions are no exception: §4 establishes "the maximum procedural requirements" that courts may impose upon agencies engaged in rulemaking. Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U. S. 519, 524. By mandating notice-and-comment procedures when an agency changes its interpretation of one of the regulations it enforces, Paralyzed Veterans creates a judge-made procedural right that is inconsistent with Congress' standards. Pp. 8—9.
(c) MBA's reasons for upholding the Paralyzed Veterans doctrine are unpersuasive. Pp. 9—14.

(1) MBA asserts that an agency interpretation of a regulation

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that significantly alters the agency's prior interpretation effectively amends the underlying regulation. That assertion conflicts with the ordinary meaning of the words "amend" and "interpret," and it is impossible to reconcile with the longstanding recognition that interpretive rules do not have the force and effect of law. MBA's theory is particularly odd in light of the limitations of the Paralyzed Veterans doctrine, which applies only when an agency has previously adopted an interpretation of its regulation. MBA fails to explain why its argument regarding revised interpretations should not also extend to the agency's first interpretation. Christensen v. Harris County, 529 U. S. 576, and Shalala v. Guernsey Memorial Hospital, 514 U. S. 87, distinguished. Pp. 9-12.
(2) MBA also contends that the Paralyzed Veterans doctrine reinforces the APA's goal of procedural fairness. But the APA already provides recourse to regulated entities from agency decisions that skirt notice-and-comment provisions by placing a variety of constraints on agency decisionmaking, e.g., the arbitrary and capricious standard. In addition, Congress may include safe-harbor provisions in legislation to shelter regulated entities from liability when they rely on previous agency interpretations. See, e.g., 29 U. S. C. §§259(a), (b)(1). Pp. 12-13.
(3) MBA has waived its argument that the 2010 Administrator's Interpretation should be classified as a legislative rule. From the beginning, this suit has been litigated on the understanding that the Administrator's Interpretation is an interpretive rule. Neither the District Court nor the Court of Appeals addressed this argument below, and MBA did not raise it here in opposing certiorari. P. 14.

720 F. 3d 966, reversed.

SOTOMAYOR, J., delivered the opinion of the Court, in which ROBERTS, C. J., and KENNEDY, GINSBURG, BREYER, and KAGAN, JJ., joined, and in which ALITO, J., joined except for Part III—B. ALITO, J., filed an opinion concurring in part and concurring in the judgment. SCALIA, J., and THOMAS, J., filed opinions concurring in the judgment.

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Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

JUSTICE SOTOMAYOR delivered the opinion of the Court.

When a federal administrative agency first issues a rule interpreting one of its regulations, it is generally not required to follow the notice-and-comment rulemaking procedures of the Administrative Procedure Act (APA or Act). See 5 U. S. C. §553(b)(A). The United States Court of Appeals for the District of Columbia Circuit has nevertheless held, in a line of cases beginning with Paralyzed Veterans of Am. v. D. C. Arena L. P., 117 F. 3d 579 (1997), that an agency must use the APA's notice-and-comment procedures when it wishes to issue a new interpretation of a regulation that deviates significantly from one the agency has previously adopted. The question in these cases is whether the rule announced in Paralyzed Veterans is consistent with the APA. We hold that it is not.

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I A

The APA establishes the procedures federal administrative agencies use for "rule making," defined as the process of "formulating, amending, or repealing a rule." §551(5). "Rule," in turn, is defined broadly to include "statement[s] of general or particular applicability and future effect" that are designed to "implement, interpret, or prescribe law or policy." §551(4).

Section 4 of the APA, 5 U. S. C. §553, prescribes a three-step procedure for so-called "notice-and-comment rulemaking." First, the agency must issue a "[g]eneral notice of proposed rule making," ordinarily by publication in the Federal Register. §553(b). Second, if "notice [is] required," the agency must "give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments." §553(c). An agency must consider and respond to significant comments received during the period for public comment. See Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U. S. 402, 416 (1971); Thompson v. Clark, 741 F. 2d 401, 408 (CADC 1984). Third, when the agency promulgates the final rule, it must include in the rule's text "a concise general statement of [its] basis and purpose." §553(c). Rules issued through the notice-and-comment process are often referred to as "legislative rules" because they have the "force and effect of law." Chrysler Corp. v. Brown, 441 U. S. 281, 302-303 (1979) (internal quotation marks omitted).

Not all "rules" must be issued through the notice-and-comment process. Section 4(b)(A) of the APA provides that, unless another statute states otherwise, the notice-and-comment...