Agency Discretion in Interpreting Statutes versus Regulations—The Difference and the Loper Bright Decision and Regulation Deference—The OASIS+ Contract and the Court of Federal Claims

As most know, agency discretion was eliminated for interpreting statutes when the agency enacts enabling regulations for a statute that vary from the statutory language—even if the variation occurs by an agency “with an eye to policy preferences that had not made it into the statute.” (Loper Bright, 603 U.S., 403-04) This was called the Loper Bright decision by the U.S. Supreme Court and that decision stated, “agency interpretations of statutes . . . are not entitled to deference.” (Loper Bright, 603 U.S., 391-92). In a more recent decision, the Court of Federal Claims—COFC—made the distinction between deference to statutory interpretation and deference to agencies in applying their own regulations. Here’s how the process generally works for a basic understanding:

  First, Congress passes a statute. Second, the agency promulgates rules/regulations to implement that statute—generally with a public comment period in which they can accept or reject public input. Third, the agency interprets and applies its rules/regulations.

  In Loper Bright, the U.S. Supreme Court overturned the Chevron deference standard and eliminated the deference given to an agency in interpreting statutes when enacting regulations. In short, the U.S. Supreme court said that agencies cannot create legislation through regulations—the agencies must adhere to the language of the statute.

  But once the agencies have enacted regulations that abide by the language of the statute, they may be entitled to some deference in applying/interpreting their own regulations, as the Court/COFC in QED Group/Q2 v. U.S., stated in March. That is, an agency—if it passes the first hurdle of enacting regulations true to language of the statute—may be entitled to deference in interpreting/applying its own regulations. In the Q2 case, the COFC examined the OASIS+ regulations and statute for two questions before the Court. On the first question, it gave no deference to agency interpretation of the statute. On the second question, the COFC signaled it would have given deference to an agency interpretation of its regulation had it passed a regulation on point with the [second] question at hand. The agency, the Court found, simply had not passed an applicable regulation. Had the agency done so, it could have potentially met the standards for regulatory deference set forth below.

  Citing a 2019 Supreme Court case, the COFC found three requirements must be met for an agency to receive that deference in applying its regulations:

“(1) ‘the regulatory interpretation must be the agency’s authoritative or official position, rather than [an] ad hoc statement not reflecting the agency’s views”;

(2) “the agency’s interpretation must in some way implicate its substantive expertise”; and

(3) the “agency’s reading of a rule must reflect its fair and considered judgment.” Q2 quoting the Kisor v. Wilkie U.S. Supreme Court decision.

In this case, the agency never enacted a regulation on point with the second part of a statute, so the Court interpreted the statute directly. However, this decision examined the agency’s interpretation of its own regulations and stated that an agency may be given some deference in interpretation of its own regulations—if the three standards listed above are met. If those standards, set forth by the U.S. Supreme Court, are not met then the agency will not receive deference to its interpretation of its own regulations.