Beyond Seminole Rock

Abstract

Seminole Rock deference — which requires courts to defer to an agency’s interpretation of its own ambiguous regulations — may be living on borrowed time. Although it might seem harmless, many worry that Seminole Rock violates the maxim that the same hands should not both make and interpret the law. Indeed, the fear is that this combination of powers may create incentives for agencies that value flexibility to promulgate ambiguous rules whose meaning they can later clarify retroactively, to the detriment of regulated parties who lack notice regarding their legal obligations. The upshot is that several Justices of the Supreme Court have called for Seminole Rock to be revisited.

What has been overlooked, however, is that overruling Seminole Rock would have unintended consequences. This is so because another case, Chenery II, enables agencies to put parties in a similar bind simply by not promulgating rules at all. Under Chenery II, an agency has discretion whether to promulgate industry-wide rules or instead to give meaning to statutes by case-by-case adjudication. Because the doctrines are substitutes for each other, albeit imperfect substitutes, if the Court were to overrule Seminole Rock, agencies that place a high value on their own future flexibility could achieve it by pivoting to Chenery II. Yet for regulated parties, this could be worse than the status quo because even an ambiguous rule generally provides more notice than an open-ended statute. Equally troublesome, because overruling Seminole Rock would discourage rulemaking, it would reduce public participation in the regulatory process.

The insight that Seminole Rock and Chenery II are interconnected — meaning what happens to one affects the other — counsels in favor of stare decisis. Importantly, however, if the Supreme Court is inclined to overrule Seminole Rock, it should also revisit aspects of Chenery II to prevent problematic substitution. For instance, the Court could begin affording Skidmore rather than Chevron deference to statutory interpretations announced in adjudications and could also bolster fair notice. Absent such revisions, overruling Seminole Rock may harm the very people the Justices hope to help.

Keywords: Administrative Agencies, Seminole Rock, Stare Decisis, What Is New in Administrative Law

JEL Classification: K23