Supreme Court Allows Agencies to Reinterpret the Law at Their Discretion

In a decision published on March 9, 2015, the Supreme Court ended the D.C. Circuit Court’s Paralyzed Veterans doctrine, which required administrative agencies to utilize the Administrative Procedure Act’s (APA) notice-and-comment process in order to substantially alter an interpretation. See Perez v. Mortgage Bankers Assoc., 575 U.S. ___, No. 13-1041, slip op. (March 9, 2015). According to the Court, this doctrine improperly imposed procedural requirements on agencies that are not required by the APA.

Pursuant to the APA, legislative rulemaking requires a period for notice and comment by industry stakeholders because, unlike interpretive rules, a legislative rule has the “force and effect of law.” On the other hand, interpretative rulemaking, e.g., when an agency adopts an interpretation of its regulation, is exempted from the notice-and-comment process. Nonetheless, the D.C. Circuit’s Paralyzed Veterans doctrine held that an agency must use the APA’s notice-and-comment process when it issues a new interpretation that deviates significantly from one the agency has previously adopted. In its opinion, the Court held that the Paralyzed Veterans doctrine is inconsistent with the APA and unnecessary to further its purpose, which, in the Court’s view, already adequately provides recourse to regulated entities when an agency issues or amends interpretive rules.