Do N.Y. State Courts Apply 'Chevron' Two-Step for Deferring to Agency?
It is doubtful that any recent case has had as substantial an impact on federal administrative law as the 1984 Supreme Court case Chevron v. Natural Resources Defense Council.1 Chevron and its progeny established the Chevron two-step analysis, a means of determining whether federal courts must defer to administrative agencies' interpretations of statutory terms.
This article examines the Chevron two-step analysis. Specifically, we review the federal standard for determining whether courts should defer to agency interpretations of federal statutes, and compare it to the approach of the New York state courts when they engage in the review of agency interpretations.
In Chevron, an oil company and other petitioners challenged certain regulations promulgated by the Environmental Protection Agency (EPA). The U.S. Court of Appeals for the District of Columbia had adopted a "static" definition of a statutory term, and held that the agency's construction of the statute was improper. In overturning the reasoning of the circuit court, the Supreme Court determined that such decisions of administrative agencies are to be given substantial deference, and that deference to administrative interpretations is justified based on legislative intent; Congress, by incorporating some ambiguity into a federal statute, intended that the agencies should resolve the ambiguity. The court then established a two-step process for determining whether administrative interpretations of statutory terms are entitled to deference.
Chevron step one requires courts to apply standard principles of statutory interpretation and ask whether the "plain language of the statute" is definitive. If the "plain language of the statute" is dispositive, courts should not defer to the agency's interpretation.
Only if the statute's language is ambiguous should courts proceed to Chevron step two: reviewing the agency's interpretation of the statute. If it is reasonable—even if it is not the best interpretation—the court will defer to the agency's interpretation.
Chevron 'Step Zero'
Even before considering the Chevron two-step analysis, federal courts must question whether the Chevron analysis is appropriate (this is often referred to as Chevron step zero). Chevron analysis will only follow when "it appears that Congress delegated authority to the agency generally to make rules carrying the force of law" and if the interpretation was made in the exercise of that authority.2 The focus of the courts' inquiry is on the interpretive method and the nature of the question at issue;3 if the agency's interpretation is made via a method which was not intended to have the force of law or concerned a topic outside of the agency's authority, the Chevron analysis will not apply.
Generally, formal agency rulemaking (via notice-and-comment procedures) will invoke Chevron analysis. However, agency interpretations made via informal opinion letters, policy statements, agency manuals, enforcement guidelines,4 and unpublished opinions5 do not invoke Chevron. Similarly, interpretations which reverse prior interpretations (unless they have adequate explanations),6 and interpretations of statutes which the agency is not charged with administering7 generally should not receive Chevron analysis.
Chevron Step One
If an agency has promulgated a rule which satisfies Chevron step zero, federal courts then apply the Chevron analysis, which was reaffirmed this year in the U.S. Supreme Court case City of Arlington v. FCC.8 Applying Chevron step one, federal courts address whether a question is covered by the "plain language of the statute" that the agency is tasked with enforcing.
The focus of the inquiry is on whether the language of the statute is "clear" or "ambiguous." For example, the Supreme Court in 2005 reviewed whether the statutory term "telecommunications service" was ambiguous.9 The FCC had determined that cable modem service was not a "telecommunications service," even though the circuit court of appeals had previously determined that cable modem service was a telecommunications service. Looking at the statutory history and the language itself, the Supreme Court determined that it was ambiguous from the history and language whether cable modems were a type of telecommunications service.
Chevron Step Two
If a statutory term is ambiguous, Chevron step two requires federal courts to determine whether an agency's interpretation of a statute is "permissible." "Permissible" is a low standard, and courts have found that it requires reasonableness, meaning that the agency's determination "reflects a plausible construction of the plain language of the statute and does not otherwise conflict with Congress' expressed intent."10 The agency's interpretation does not have to be the best interpretation of the statute. Usually, federal courts will look to the statute's history and language in order to determine whether an agency's interpretation is "reasonable" or "plausible." If the language is consistent with the statutory history and purpose and not contrary to the statute's language, it will usually be considered reasonable.11
Federal courts occasionally look to the common law or other statutes to see if the definition is consistent.12 If an interpretation is a substantial departure from the common law or other statutes, it might be unreasonable. Other considerations include whether the governing statute involves technical language,13 and whether the agency's determination is inconsistent with prior agency precedent (if the agency has failed to give an explanation for the change in position).14
New York and Step Zero
As discussed above, federal courts normally require formal rulemaking in order to invoke Chevron analysis. The New York Court of Appeals has not addressed this issue as clearly as the federal courts have. In fact, there does not appear to be any uniformity in the lower courts concerning whether formal rulemaking is required in order to receive Chevron-like deference.
For example, in the 2007 case Marigliano v. New York Cent. Mut. Fire Ins.,15 the Civil Court recognized that an informal opinion letter from the Insurance Department was non-binding and not entitled to deference, relying on Second Circuit precedent interpreting New York law. Similarly, in the 2011 case of Matter of Abel16 and the 2010 case Zelanis v. New York State Adirondack Park Agency,17 the Bronx County Family Court and the Supreme Court, Essex County (denying deference to New York state agencies' interpretations) each cited to federal precedent which held that opinion letters, policy statements and agency manuals do not invoke Chevron deference.
Conflicting authority indicates that New York state courts may be more willing than federal courts to defer to interpretations which are not the product of formal rulemaking. For example, in A.M. Med. Servs. v. Progressive Cas. Ins.,18 a 2012 Appellate Division, Second Department case, the court deferred to an interpretation of a regulation contained in an informal opinion letter issued by the general counsel of the superintendent of insurance. Also, in McMorrow v. Hevesi,19 a 2004 Appellate Division, Third Department case, the court deferred to a policy statement issued by the state comptroller interpreting service leave provisions of the Military Law, reasoning that the interpretation in the policy statement was not irrational.
Despite the seemingly conflicting precedent, it seems that the weight of the authority suggests that New York state courts will engage in Chevron-like analysis for even informal administrative interpretations, such as in opinion letters. However, this is one area that could benefit from Court of Appeals guidance.