How to Interpret a Regulation: First Principles

Font Size:

A new framework promises greater coherence in regulatory interpretation.

Font Size:

We live in an era of regulation, but our jurisprudence has fallen behind. Despite the central place that regulations occupy in our law, their interpretation has garnered little focused consideration, especially in comparison to the lavish attention devoted to statutory interpretation.

Books.jpgIt is not that courts—or regulated parties—lack occasions to engage in regulatory interpretation. With the growing volume of regulations, courts are routinely confronted with the need to interpret them. For instance, whenever a court addresses a challenge to the consistency of a regulation with an authorizing statute—typically under the Chevron standard—the court must interpret the regulation, just as a court must interpret a statute to judge its constitutionality. Likewise, when a court reviews the validity of an agency’s construction of its own regulations, the court must interpret the regulation to determine if the agency’s construction is, under Auer/Seminole Rock, “plainly erroneous or inconsistent with the regulation.” But even under these well-established doctrines, judicial practice is surprisingly ad hoc: courts rely on the regulation’s text, the agency’s intent, the statute’s text and purpose, the regulation’s procedural history, and principles of statutory interpretation, among other sources—all without a principled method. This grab bag approach compounds uncertainties for the regulated as well as for administrative agencies.

What principles should guide the approach courts take to interpreting regulations? Let’s focus on one of the most important forms of regulation: the rules that administrative agencies issue through notice-and-comment rulemakings under the Administrative Procedure Act (APA). The distinctive legal characteristics of these regulations suggest two key principles for their interpretation.

Principle 1: Interpret the regulation’s text in light of the regulation’s statement of basis and purpose (often referred to as the regulation’s “preamble”). Except in special circumstances, the Administrative Procedure Act requires an agency issuing a regulation through notice-and-comment to publish an accompanying explanatory statement, a “concise general” statement of “basis and purpose.” Under established principles of judicial review associated with the first SEC v. Chenery decision, courts evaluate the validity of regulations based on the grounds the agency invokes to justify them at the time of issue—that is, what appears in the regulation’s statement of basis and purpose. As a result of these doctrines, the text of the regulation and its accompanying statement of basis and purpose stand in a unique relationship: together they constitute the act of regulation through the notice-and-comment process; neither alone constitutes a valid regulation. Based on this connection, the regulation’s text should be interpreted in light of its statement of basis and purpose.

This principle—essentially a specification of the privileged sources for interpretation—avoids the thrust of objections to judicial reliance on legislative history in the statutory context. Commentators and judges argue that the heterogeneity of legislative history creates unduly high error costs for judges, and that relying on legislative history improperly privileges the views of particular actors within the legislature. Relying on regulatory preambles does not implicate these objections. The agency itself issues these statements that provide a detailed explanation of the regulation’s justifications and purposes in a single, highly organized document.

Principle 2: Interpret regulations purposively. A statute that delegates rulemaking authority to an agency must establish goals or principles to guide the agency’s action. Like other forms of agency action, to be valid, a regulation must be purposive in the sense that it implements, or carries into effect, the authorizing statute. Indeed, courts require agencies to demonstrate a rational connection between its regulations and the goals of the authorizing statute. These premises suggest that regulations have a purposive character in that their legal and institutional function is to implement statutory goals or principles, and therefore they should be interpreted in that light.

How, then, should a court discern the regulation’s purpose or the purposes of its particular provisions? The court could independently assess the statute’s purposes and interpret the regulation in light of that determination. Such an approach, however, accords no deference to the agency’s construction of the statute it has been charged with implementing. Instead, the court should interpret the regulations in relation to the agency’s own account of its purposes. Because the agency’s understanding of the purposes of the regulation must incorporate the agency’s view of the statute’s purposes, this approach operationalizes judicial respect for the agency’s statutory interpretations.

Combining this purposive orientation—essentially a commitment as to the aim of interpretation—with a commitment to the preamble as the key source of interpretation yields a basic framework for regulatory interpretation: Interpret the text of a regulation in light of its purposes, purposes discerned from the text of the regulation itself and set forth in the regulation’s statement of basis and purpose.

This purposive framework can be neatly adapted to provide a consistent approach under Chevron and Auer/Seminole Rock. Under it, a court would ask two questions: whether the prospective interpretation of the regulation is (1) permitted by its text but also (2) consistent with the regulation’s purposes set forth in its text and preamble. In line with the deferential grounding of these doctrines, this approach grants the agency more interpretive space than simply asking what is the best or most plausible construction of the regulation. At the same time, it provides greater constraint on the agency—and more notice to the regulated—than simply asking whether an interpretation is permitted by the regulation’s text. Here, consulting the purposes reduces, as opposed to broadens, the set of constructions that count as permissible.

At a basic level, this purposive orientation treats an agency’s public and authoritative justifications for its regulations as more than an elaborate and costly nuisance necessary to survive judicial review—they also create commitments that continue to guide the regulations’ meaning, a goal that drafters of the APA envisioned for these statements. To be sure, this approach inhibits agency flexibility. It disallows agency constructions that are permitted by the regulation’s text but inconsistent with the agency’s original, public justifications. But one party’s flexibility is another’s unpredictability. Holding the agency to constructions of its regulations that are consistent with the agency’s own explanatory justifications translates directly into greater notice of the regulation’s meaning.  

Kevin M. Stack

Kevin M. Stack is Professor of Law and Associate Dean for Research at Vanderbilt University Law School. The post draws from the author’s recent article in the Michigan Law Review, Interpreting Regulations, 111 Mich. L. Rev. 355 (2012).