U.S. Supreme Court May Require Notice-And-Comment On More Agency Actions

Lynn Calkins is a Partner and Jessica Farmer is an Associate in Holland & Knight's Washington D.C. office

On December 1, 2014, the Supreme Court heard oral argument in Perez v. Mortgage Bankers Association and Nickols v. Mortgage Bankers Association to address whether a federal agency must engage in notice-and-comment rulemaking pursuant to the Administrative Procedure Act before it can significantly alter a rule that articulates an interpretation of an agency regulation.

This appeal has broad ramifications for government regulation and the businesses and citizens affected by regulation. Administrative agencies regularly issue interpretations with varying levels of internal review and formality, and interpretative rules are expressly exempt from the notice-and-comment requirements that the APA imposes on formal regulations. At issue is whether every interpretation falls into this exemption or whether there are ranges of agency actions (from the most formal that undoubtedly require notice-and-comment procedures to the most informal that undoubtedly do not). If the Court provides calibrated definitions, the decision will have a major impact on the degree of deference that courts afford to the various forms of agency action.

This case involves various opinion letters issue by the Department of Labor which altered the agency's interpretation as to whether mortgage loan officers were exempt "administrative" employees under the Fair Labor Standards Act. The Department of Labor did not utilize notice-and-comment rulemaking to issue any of its conflicting interpretations, and the parties filed this action in district court to vacate and set aside the agency's most recent interpretation, arguing that the agency could not change its interpretation without first going through a notice-and-comment period required by the APA.

The D.C. Circuit agreed and found that the agency's most recent interpretation was procedurally defective because the agency failed to satisfy the APA's notice-and-comment requirement. Under its holdings in Paralyzed Veterans of America v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997) and...