Perez v. Mortgage Bankers Association

Perez v. Mortgage Bankers Association was a unanimous Supreme Court decision addressing the degree of deference agencies owe to their own interpretations of ambiguous regulations, particularly when an agency changes its prior interpretation without formal notice-and-comment rulemaking. The case arose from a challenge by the Mortgage Bankers Association and other trade groups to a rule promulgated by the Department of Labor under the Fair Labor Standards Act, and it implicated doctrines developed in earlier precedents such as Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. and Auer v. Robbins. The Court's opinion clarified administrative law principles governing interpretive rules, adjudications, and the Administrative Procedure Act.

Background

The dispute originated with a 2008 opinion letter from the Wage and Hour Division of the United States Department of Labor interpreting the Fair Labor Standards Act's exemptions for "administrative" and "professional" employees, an interpretation used to assess whether mortgage loan officers were exempt from overtime pay. The Mortgage Bankers Association and trade groups representing lending institutions litigated under the Administrative Procedure Act and sought review in the United States Court of Appeals for the District of Columbia Circuit, arguing the agencies had failed to provide notice-and-comment rulemaking when reversing an earlier interpretation. The D.C. Circuit held that the Division's change of position required notice-and-comment procedures under the Administrative Procedure Act and the court's decision relied on precedents such as Skidmore v. Swift & Co. and Bowen v. Georgetown University Hospital about agency adjudication and guidance documents.

Supreme Court Decision

The Supreme Court of the United States granted certiorari to resolve whether an agency must use notice-and-comment procedures under the Administrative Procedure Act to change an interpretation of a regulation in an interpretive rule or opinion letter. Chief Justice Ruth Bader Ginsburg did not write the opinion; Justice Antonin Scalia authored the unanimous opinion for the Court. The Court reversed the D.C. Circuit, holding that courts must apply the ordinary standards of administrative law review when an agency changes an interpretation, and that the Administrative Procedure Act does not categorically bar an agency from changing course without notice-and-comment when dealing with interpretive rules. The Court remanded for further proceedings consistent with its opinion.

Legal Reasoning and Precedent

Justice Scalia's opinion emphasized that the Administrative Procedure Act distinguishes between substantive rules subject to notice-and-comment and interpretive rules, and that longstanding precedents—Skidmore v. Swift & Co. and Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.—govern the weight courts give to agency interpretations. The Court explained that an agency's change in interpretation does not automatically render the agency action arbitrary and capricious under Motor Vehicle Manufacturers Association v. State Farm Mutual Automobile Insurance Co.; instead, courts must evaluate whether the agency provided a reasoned explanation under the Arbitrary and capricious test articulated in State Farm. The opinion distinguished interpretive rules from legislative rules, drawing on doctrine established in cases like Pacific Bell Telephone Co. v. Public Utilities Commission of California and the Court's administrative law canon. The decision also interacted with deference doctrines exemplified by Auer v. Robbins, though the Court did not overrule Auer; it framed how courts should treat agency interpretations when agencies change positions.

Impact and Subsequent Developments

The decision constrained circuit court approaches that had required notice-and-comment for any change in interpretation and reaffirmed agency flexibility in issuing interpretive rules, opinions, and guidance documents. It affected litigation strategy for parties such as the Mortgage Bankers Association, labor organizations like the American Federation of Labor and Congress of Industrial Organizations (AFL–CIO), regulated industries including banking and real estate, and agencies like the Department of Labor and the Securities and Exchange Commission. Lower courts adjusted standards for reviewing agency changes under the Administrative Procedure Act and applied State Farm reasonableness review rather than a per se rule requiring notice-and-comment. Subsequent cases in the United States Courts of Appeals cited the decision in disputes over agency guidance, interpretive rules, and substantive rulemaking procedures.

Reactions and Commentary

Scholars in administrative law, commentators at institutions such as the Brookings Institution and the Heritage Foundation, and practitioners from firms like WilmerHale and Covington & Burling debated the decision's implications for regulatory predictability and administrative accountability. Supporters, including some regulatory agencies and industry trade groups like the Mortgage Bankers Association, argued the ruling preserved agency agility and coherence. Critics, including labor advocates and public-interest organizations such as Public Citizen and the American Civil Liberties Union, warned it could reduce transparency and circumvent participatory rulemaking. Law review articles in journals such as the Harvard Law Review, Yale Law Journal, and Columbia Law Review analyzed the decision alongside contemporaneous developments including calls to reassess Chevron deference and proposals in Congress to amend the Administrative Procedure Act.

Category:United States administrative law cases Category:United States Supreme Court cases Category:2015 in United States case law