Will The Courts Stop Deferring To SEC Interpretations?
Thursday, November 20, 2014

In 1984, the U.S. Supreme Court announced a foundational principle of administrative law.  When a court reviews an agency’s construction of a statute that it administers, the court should:

  • Ascertain whether the statute is ambiguous.  If it is unambiguous, both the court and the agency are bound to apply the clear meaning of the statute.

  • If the statute is ambiguous, the court must determine whether the agency’s interpretation is reasonable or permissible.  If so, then the court should uphold the agency’s interpretation even if the court believes that the agency’s interpretation is not the best possible interpretation.

This is known as the “Chevron deference” because it was enunciated in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).   As an administrative agency, the SEC has benefited from Chevron deference.  See, e.g., Teicher v. SEC, 177 F.3d 1016, 1019 (D.C. Cir. 1999) (“Reviewing the Commission’s statutory interpretation under the principles of Chevron . . . , we find that Teicher has not effectively challenged the Commission’s reading of the Act’s unambiguous language.”)

Columbia Law School Professor Philip Hamburger recently wrote that Chevron deference for the SEC may soon go the way of the Carolina parakeet:

SEC interpretations are therefore very problematic, for although the interpretations get deference on the theory that they are administrative, they are used to secure criminal convictions.  Even when the SEC works through its own enforcement proceedings, it is evading juries in criminal proceedings and otherwise using its administrative enforcement as a mode of criminal prosecution.

As I see it, the SEC’s problem arises from the fact that Chevron deference is due to an agency when “administering” a law.  An agency that only enforces a statute is not entitled to Chevron deference.  Kelley v. Environmental Protection Agency, 25 F.3d 1088 (D.C. Cir. 1994).  As Professor Hamburger observes, the SEC’s interpretations are used in criminal enforcement:

A court owes no deference to the prosecution’s interpretation of a criminal law.  Criminal statutes “are for the courts, not for the Government, to construe.” Abramski v. United States, 573 U. S. ___, ___ (2014) (slip op. at 21).

Statement of Justice Scalia in Whitman v. U.S., 574 U. S. ____ (2014).

More fundamentally, I’ve long believed that it is fundamentally unjust to imprison people based on theories that are adopted in the course of their own convictions.

 

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