Limiting the Power of Regulatory Agencies

Regulatory agencies wield extraordinary powers, deciding everything from what land you can build on to whether you can cut someone’s hair. Yet they’re typically unaccountable to voters—staffed by hired bureaucrats, not elected officials. They violate the constitutional principle of separation-of-powers because they essentially write law, prosecute alleged infractions, and impose penalties on those they find guilty.

Worse still, courts have adopted “deference” doctrines that give these agencies power, in many instances, to basically decide for themselves what their own powers are. The most famous such doctrine is “Chevron deference,” which allows agencies to interpret statutes so long as those interpretations are “reasonable”—and then requires courts to defer to those interpretations. This is problematic because an agency will virtually always interpret the law in a way that increases its own power, and Chevron deference then bars courts from counteracting that tendency.

Another kind of deference, called the “Brand X Doctrine,” is even more extraordinary. It allows agencies to effectively overrule the decisions of courts when interpreting laws. In other words, if a court interprets a statute one way, and an agency later interprets it a different way, courts will follow the agency, rather than the other way around. This means that unelected executive branch officials can override the decisions of federal judges—who, under the Constitution, are supposed to be charged with the job of interpreting the law. While there are some limits to the Brand X Doctrine, it ultimately means courts will let agencies rewrite their legal precedents.

That’s problematic not only as a matter of federal law, but also with regard to the principles of federalism. That’s because Brand X also allows federal agencies to decide for themselves when to override state law, and even state court decisions. For example, in one 2013 Arizona case, courts held that a federal insurance law did not override Arizona’s own state insurance law. After that decision, a federal agency issued a new regulation saying otherwise—whereupon the U.S. Supreme Court ordered the Arizona courts to reconsider their earlier decision. Even though the regulation postdated the Arizona Supreme Court’s decision, the state judges were forced to reverse themselves.

The U.S. Supreme Court has said that it’s reluctant to infer that federal law overrides state law. Only where Congress clearly expresses its intent to override state law will the justices make such a finding. But Brand X actually countermands that, because that doctrine says that unelected federal bureaucrats are given more power when a law is vague. In other words, the less clear a law is, the more likely a federal court is to allow bureaucrats to decide that their powers override state law.

In Baldwin v. United States, two California taxpayers sent their tax returns to the IRS, which said that they arrived too late. The taxpayers filed a lawsuit, arguing that under California law, what counts is the day you send something, not the day it arrives. But after the lawsuit began, the IRS wrote a new regulation saying that the date of receipt is what counts. Federal courts then said that the Brand X rule required them to side with the IRS instead of with the taxpayers. They’ve now asked the Supreme Court to take their case, overrule Brand X, and hold that the IRS’s after-the-fact regulation doesn’t override California law. We’ve filed a friend of the court brief urging the court to take the case and eliminating the Brand X Doctrine—to make clear that courts, not unelected regulators, have the responsibility for interpreting the law.