On March 9, the Supreme Court handed down a decision in Perez v. Mortgage Bankers Association that does away with what we’ll refer to in this posting as the Paralyzed Veterans doctrine, after an appellate court decision by that same name. The Paralyzed Veterans doctrine was established by the D.C. Circuit in 1997 in the Paralyzed Veterans case and reiterated repeatedly in D.C. Circuit decisions regarding agency rules. Because so many administrative law cases are litigated in Washington, D.C., the Paralyzed Veterans doctrine was, until recently, the law of the land. That doctrine held that an agency must use notice-and-comment procedures as required under the Administrative Procedure Act (APA) when the agency wishes to significantly change its previous interpretation of a regulation, even if the original regulation was not one for which notice-and-comment rulemaking was required. The Supreme Court was unanimous in holding that the doctrine is not consistent with the APA:
The Paralyzed Veterans doctrine is contrary to the clear text of the APA’s rulemaking provisions, and it improperly imposes on agencies an obligation beyond the “maximum procedural requirements” specified in the APA.
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The text of the APA answers the question presented. Section 4 of the APA provides that “notice of proposed rule making shall be published in the Federal Register.” When such notice is required by the APA, “the agency shall give interested persons an opportunity to participate in the rule making.” But § 4 further states that unless “notice or hearing is required by statute,” the Act’s notice-and-comment requirement “does not apply…to interpretive rules.” This exemption of interpretive rules from the notice-and-comment process is categorical, and it is fatal to the rule announced in Paralyzed Veterans.
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Because an agency is not required to use notice-and-comment procedures to issue an initial interpretive rule, it is also not required to use those procedures when it amends or repeals that interpretive rule.
(Emphasis added; citations omitted.)
With respect to how FDA conducts business, it would seem that the Perez decision is unlikely to have an immediate, significant impact. FDA’s issuance of guidance documents is governed by the agency’s Good Guidance Practices regulation, which generally requires notice-and-comment for guidance documents of significance. Nonetheless, it would be surprising if FDA isn’t giving careful thought to how the Perez decision might be helpful in defense of existing and future challenges to changes in the agency’s interpretations of its regulations.
For those lamenting the demise of the Paralyzed Veterans doctrine, there’s a potential salve in the concurring opinions of Justices Alito, Scalia, and Thomas, who signal an inclination to reconsider Auer v. Robbins, in which the Court held that an agency’s interpretation of its own ambiguous regulations is entitled to deference (a holding that relies on the Court’s pre-APA decision in Bowles v. Seminole Rock & Sand Co.). It’s not readily apparent that an additional two Justices are similarly inclined. Nonetheless, we expect that it won’t be long before counsel in an appropriate case takes up the invitation to put Auer in play.