Encino Motorcars v. Navarro –
US SCt – June 20, 2016 (6-2)
1. Chevron
deference is not warranted where a regulation is “procedurally defective”—that
is, where the agency errs by failing to follow the correct procedures in
issuing the regulation.
A premise of Chevron is
that when Congress grants an agency the authority to administer a statute by
issuing regulations with the force of law, it presumes the agency will use that
authority to resolve ambiguities in the statutory scheme. . . . When
Congress authorizes an agency to proceed through notice-and-comment rulemaking,
that “relatively formal administrative procedure” is a “very good indicator”
that Congress intended the regulation to carry the force of law, so Chevron
should apply. . . But Chevron deference is not warranted where the
regulationis “procedurally defective”—that is, where the agency errs by failing
to follow the correct procedures in issuing the regulation.
2. One basic procedural
requirement of administrative rulemaking is that an agency must give adequate
reasons for its decisions. Where the agency has failed to provide even a
minimal level of analysis, its action is arbitrary and capricious and so cannot
carry the force of law. Agencies are free to change their existing policies,
but in explaining its changed position, an agency must be cognizant that
longstanding policies may have “engendered serious reliance interests that must
be taken into account.” Here, the regulation in question, which involved
a change of position, was issued without a reasoned explanation.
One of the basic procedural
requirements of administrative rulemaking is that an agency must give adequate
reasons for its decisions. The agency “must examine the relevant data and
articulate a satisfactory explanation for its action including a rational
connection between the factsfound and the choice made.” Motor Vehicle Mfrs.
Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co.,
463 U. S. 29, 43 (1983) (internal quotation marks omitted). That requirement is
satisfied when the agency’s explanation is clear enough that its “path may
reasonably be discerned.” Bowman Transp., Inc. v. Arkansas-Best
Freight System, Inc., 419 U. S. 281, 286 (1974). But where the agency has
failed to provide even that minimal level ofanalysis, its action is arbitrary
and capricious and so cannot carry the force of law. See 5 U. S. C. §706(2)(A);
State Farm, supra, at 42–43.
Agencies are free
to change their existing policies as long as they provide a reasoned
explanation for the change. . . . .Chevron, 467 U. S., at 863–864. When
an agency changes its existing position, it “need not always provide a more
detailed justification than what would suffice for a new policy created on a
blank slate.” . . . . But the agency must at least “display awareness that it
is changing position” and “show that there are good reasons for the new
policy.” . . . .“In such cases it is not that further justification is demanded
by the mere fact of policy change; but that a reasoned explanation is needed
for disregarding facts and circumstances that underlay or were engendered by
the prior policy.” . . . .It follows that an “[u]nexplained inconsistency” in
agency policy is “a reason for holding an interpretation to be an arbitrary and
capricious change from agency practice.” . . . An arbitrary and capricious
regulation of this sort is itself unlawful and receives no Chevron deference.
