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CALIFORNIA CORPORATE & SECURITIES LAW

Chevron Deference In California

In mid July, the House of Representatives passed the Separation of Powers Restoration Act of 2016, H.R. 4768 (SOPRA).  If enacted, the SOPRA would amend the federal Administrative Procedure Act to require a reviewing court to decide “de novo all relevant questions of law, including the interpretation of constitutional and  statutory provisions, and rules made by agencies”.   The requirement of de novo review would effectively repeal the judicially crafted deference currently accorded to federal agency action under Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984) and Auer v. Robbins, 519 U.S. 452 (1997).

The approach of California courts to the review of agency action already diverges significantly from the federal approach.  According to the California Supreme Court,

An agency interpretation of the meaning and legal effect of a statute is entitled to consideration and respect by the courts; however, unlike quasi-legislative regulations adopted by an agency to which the Legislature has confided the power to “make law,” and which, if authorized by the enabling legislation, bind this and other courts as firmly as statutes themselves, the binding power of an agency’s interpretation of a statute or regulation is contextual: Its power to persuade is both circumstantial and dependent on the presence or absence of factors that support the merit of the interpretation.

Yamaha Corp. of America v. State Bd. of Equalization, 19 Cal. 4th 1, 7 (1998).  This approach distinguishes between quasi-legislative rules and interpretive rules, with the former commanding greater deference than the latter.

Unfortunately, agency actions often do not fit into precise categories.  Some actions may, in fact, turn out to be hybrid in nature.  In Ramirez v. Yosemite Water Co., 20 Cal. 4th 785 (1999), the California Supreme Court applied a two-part approach to a wage order issued by the Industrial Welfare Commission, an action that it viewed as having quasi-legislative and interpretive characteristics.  The Supreme Court first assessed whether the wage order was within the IWC’s delegated scope of authority.  Then, assuming that the order was wholly interpretational, the Court assessed whether it was entitled to considerable judicial deference.

What would a world without Chevron look like?

A recent decision by the First District Court of Appeal provides a view of judicial review without Chevron deference.  In New Cingular Wireless PCS, LLC v. Public Utilities Com., 246 Cal. App. 4th 784 (2016), the Court of Appeal, applying Yamaha and Ramirez, gave “considerable deference” to the agency’s legal result but not the agency’s reasoning.  This is a significant departure from the deference accorded to agency action under Chevron that will uphold an agency’s interpretation of an ambiguous statute if that interpretation is reasonable or permissible even though the court does not believe the agency’s interpretation is the best interpretation.  Thus, California’s standard of judicial review is closer to the U.S. Supreme Court’s pre-Chevron standard of weak deference announced in Skidmore v. Swift & Co., 323 U.S. 134 (1944).  This is not surprising as “The analytic framework established in Yamaha drew heavily from Justice [Robert H.] Jackson’s opinion for the United States Supreme Court in Skidmore . . .”.  New Cingular Wireless PCS, LLC,  246 Cal. App. 4th at 810 n. 22.

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