Deference Means Never Having to Say “You’re Wrong:” the Potential Effect of City of Arlington v. FCC on California Law and the CPUC

June 10, 2013

Goodin Macbride Administrative Law Blog

On May 20, 2013, the United States Supreme Court held that an administrative agency’s construction of a statute related to its own jurisdiction is entitled to deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (“Chevron”). City of Arlington v. Federal Communications Commission, 569 U.S. ___ (2013) (“Arlington”).This holding, if replicated in California appellate courts, has the potential to affect the fashion in which state courts review decisions of the California Public Utilities Commission (“CPUC”) under the judicial review provisions of the California Public Utilities Code.

Chevron arose out of the promulgation by the Environmental Protection Agency (“EPA”) of a permitting requirement under the Clean Air Act that allowed states to adopt a plant-wide definition of the term “stationary source.” Chevron, 467 U.S. at 840. The question before the high court was whether the EPA’s requirement, which allowed stated to treat all pollution-emitting devices within the same industrial grouping as part of a single “bubble,” was based on a reasonable construction of the term “stationary source.” Id. In holding the EPA’s construction was reasonable and entitled to deference, the court articulated the two-question Chevron test: “First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter…. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” Id. at 842-843.

Responding to the first question is generally easy, requiring only a “yes” or “no” answer. Resolving the second question is necessarily more difficult, particularly where the statute at issue is one implicating the question of whether an administrative agency has the jurisdiction or authority to interpret the ambiguous provision at all. The open question, prior to Arlington, was whether Chevron required a Court that had answered “no” to the first question, to then defer to the agency with respect to the agency’s construction of a statute affecting the scope of the agency’s own jurisdiction. (As is discussed below, under California law, the answer is “no.”)

Arlington held that courts must defer, elevating the importance of the first step of Chevron (“whether Congress has directly spoken to the precise question at issue”) by holding that even where the agency’s jurisdiction turns on the construction of a statute, the reviewing court must defer to the agency’s construction of the statute. The holding, at least in the view of the dissent, posits a regime of heightened agency power in government since an agency’s statutory interpretation stands little chance of being overturned in court.

The Arlington Majority¹

Arlington involved a Declaratory Ruling issued by the FCC that defined the term “reasonable period of time” contained in 47 U.S.C. § 332(c)(7)(B)(ii) (enacted as part of the Telecommunications Act of 1996), within which state and local zoning authorities must act on siting applications for wireless facilities; the FCC deemed a “reasonable period of time” to mean 90 for collocation applications and 150 days for other applications. Arlington, 569 U.S. __ (slip op., 2-3).² State and local governments objected to the FCC’s Ruling on the grounds the FCC lacked jurisdiction to interpret ambiguous provisions of Section 332(c)(7). The purported lack of jurisdiction was based on the saving clause in Section 332(c)(7)(A), which provides nothing in the Act shall limit the authority of state and local governments over siting decisions except the limitations of §332(c)(7)(B), and Section 332(c)(7)(B)(v), which authorizes a person who believes a siting decision violates the limitations of §332(c)(7)(B) to commence an action in court. (Slip op., 2). These provisions, the state and local governments argued, showed Congressional intent to withhold from the FCC the authority to interpret the limitations in subsection (B). (Id. at 3).

The Fifth Circuit applied Chevron to the threshold question of whether the FCC had authority to adopt the timeframes in its Ruling, and found the FCC’s interpretation of its statutory authority was reasonable and entitled to deference. 668 F. 3d 229, 248, 254-256 (CA5 2012). The Supreme Court granted certiorari on the limited question of whether a court should apply Chevron to an agency’s determination of its own jurisdiction. (Slip op., 4).

The majority opinion, authored in a noticeably frisky tone by Justice Scalia,³ upheld the Fifth Circuit. The distinction between “jurisdictional” and “non-jurisdictional” ambiguities in an agency’s statutory framework, the majority explained, is false. “No matter how it is framed, the question a court faces when confronted with an agency’s interpretation of a statute it administers is always, simply, whether the agency has stayed within the bounds of its statutory authority.” (Slip op., 5) (emphasis original). In stark contrast to the courts, which separately conclude they have jurisdiction over a matter before turning to the substantive decisions, Congress has “authoritatively prescribed” administrative agencies’ power to act and the manner in which they may act; any improper agency decision, “whether framed as an incorrect application of agency authority or an assertion of authority not conferred,” is a violation of the limits imposed by Congress and may not be parsed into jurisdictional and substantive errors. (Slip op., 6). The only relevant question before a reviewing court, the majority held, is whether the statutory text forecloses an agency’s exercise of authority. (Slip op., 9).

The majority and dissent agree on one point: an agency must receive Congressional authority to “determine the particular matter at issue in the particular manner adopted.” (Slip op., 15). With regard to what constitutes Congressional authority, the majority holds that a general grant of adjudicative or rulemaking authority will validate agency determinations on all matters within the agency’s substantive field. (Id.) Subjecting agency decisions to closer, case-by-case judicial inspection would lead to “[t]hirteen Courts of Appeals applying a totality-of-the-circumstances test [that] would render the binding effect of agency rules unpredictable and destroy the whole stabilizing purpose of Chevron.” (Id. at 16). This sweeping authority does not quite amount to a jurisdictional blank check for the agency, but the majority, having acknowledged Congress can (and does) purposely leave ambiguities in a statute, does not clearly define where the line delimiting an agency’s power under a grant of general authority might lie.

The Arlington Dissent

The dissent, written by Chief Justice Roberts and joined by Justices Kennedy and Alito, presents its fundamental disagreement with the majority in clear terms: “A court should not defer to an agency until the court decides, on its own, that the agency is entitled to deference.” (Dissent slip op. at 1). This judicial oversight is necessary to check the rapidly burgeoning power of the administrative state; the dissent is wary of expanding agencies’ authority to include not only the broad power to answer questions left to them by Congress, but also the power to decide if Congress has given the agency that power. (See id. at 2-5). In addition to providing a necessary check on the power of administrative agencies, whether an agency has jurisdiction is a question of law that must be decided by the courts. (Id. at 6). The dissent notes the duty of the judiciary “to say what the law is,” handed down in Marbury v. Madison, 1 Cranch 137, 177 (1803), has not been altered by the rise of the administrative state. (Dissent slip op. at 6).

These crucial checks and balances were not disturbed in Chevron itself, the dissent argues. There, the challenge to the administrative agency’s interpretation of the Clean Air Act focused on the wisdom of the agency’s policy, as opposed to whether the agency reasonably filled a legislative gap left by Congress. (Dissent slip op. at 7). Judicial deference to agencies on policy matters and areas in which the court has no expert knowledge is appropriate. Such deference must, however, be exercised within the limits of authority granted the agency by Congress. (Id. at 7-8). A general grant of adjudicatory or rulemaking authority will not suffice; the court must determine if the “specific provision” or “particular question” at issue were encompassed in the delegation of authority. (Id. at 12). The dissent would hold the Fifth Circuit erred in granting Chevron deference to the FCC’s determination it had authority to issue the Declaratory Ruling, and would remand for a proper inquiry into the agency’s jurisdiction, one presumably premised on an independent review of whether the statutory scheme enacted by Congress permitted the agency to act as it had. (Id. at 18).

California Law

California law currently distinguishes between the level of judicial deference a court must afford to an administrative agency’s determination of its jurisdiction and that required with respect to matters plainly within the agency’s area of expertise. PG&E Corp. v. Public Utilities Commission held “the general rule of deference to interpretations of statutes subject to the regulatory jurisdiction of agencies does not apply when the issue is the scope of the agency’s jurisdiction.” 118 Cal. App. 4th 1174, 1194 (2004) (quoting Kaiser Foundation Health Plan, Inc. v. Zingale, 99 Cal. App. 4th 1018, 1028 (2002)). (The PG&E court even blurs the distinction by observing in dicta that even where the agency’s jurisdiction is not at issue, “the interpretation of statues is a question of law subject to independent judicial review.” Id. at 1194-1195 (citing Yamaha Corp. of America v. State Bd. of Equalization, 19 Cal. 4th 1 (1998)); see also Sara M. v. Superior Court, 36 Cal. 4th 998, 1011 (2005).) At present, courts adhere to these limitations on deference to the CPUC’s construction of statutes notwithstanding the fact that, as each decision acknowledges, the CPUC is not an ordinary administrative agency, but is a constitutional body with broad legislative and judicial powers. PG&E Corp., supra, 118 Cal. App. 4th at 1194, fn. 17. The rule that an agency is entitled to limited, if any, deference when it decides its own jurisdiction has been affirmed in Pacific Bell Wireless, LLC v. Public Utilities Commission, 140 Cal. App. 4th 718, 729 (2006), and Santa Clara Valley Transportation Authority v. Public Utilities Commission, 124 Cal. App. 4th 346 (2004).

The question is particularly critical because when courts determine that deference to the CPUC is required, the deference is quite broad. The counterpart to Chevron under California law is Greyhound Lines, Inc. v. Public Utilities Commission, 68 Cal.2d 406 (1968). In Greyhound, the California Supreme Court held that “the Commission’s interpretation of the Public Utilities Code should not be disturbed unless it fails to bear a reasonable relation to statutory purposes and language.” What has become known as Greyhound deference reached a high-water mark in Southern California Edison v. Public Utilities Commission , 117 Cal.App.4th 1039 (2004), in which the Court of Appeal, applying Greyhound, agreed with the Commission that the term “obtaining judicial review” in Section 1802 of the Public Utilities Code (governing the compensation of intervenors in Commission proceedings) included actions by The Utility Reform Network (”TURN”) as an intervenor in a federal court proceeding on behalf of the defendant therein (the Commission).

As PG&E Corp. notes, the CPUC is no ordinary administrative agency. Established by Article XII of the California Constitution, the CPUC’s statutory powers are broadly stated. Public Utilities Code section 701 provides the CPUC may “supervise and regulate every public utility in the State and may do all things, whether specifically designated in this part or in addition thereto, which are necessary and convenient in the exercise of such power and jurisdiction.” In the face of this sweeping grant of authority, which for better or worse gives the CPUC great leeway in deciding what it may and may not do, the jurisdictional limitation on deference stated in PG&E Corp. offers one of the few limitations. (Another of consequence is the fact that even under Section 701, the CPUC may not disregard an express legislative directive. Assembly of the State of California v. Public Utilities Commission,12 Cal.4th87 (1995))

California appellate courts have limited authority to determine whether the policy or substance of a CPUC action is proper, which is consistent with general judicial deference to agency determinations where the court lacks expertise with the subject matter. Under California law, however, deference to an agency’s determination of its own jurisdiction is not required. To the contrary, that decision rests firmly with the courts.

Arlington’s Potential Impact on California Law and the CPUC

As it is rooted in federal law and not grounded in any constitutional principle, Arlington is not directly applicable to review of CPUC decisions by California appellate courts. Arlington does, however, offer an analytical framework that an advocate could employ to seek abrogation of the distinction stated in PG&E Corp. between the CPUC’s construction of statutes affecting CPUC jurisdiction and its construction of other statutes, those the Legislature has ostensibly charged the Commission with administering. Given (1) the relatively recent reaffirmation of Greyhound deference in Southern California Edison v. Peevey, 31 Cal.4th 781 (2003), and (2) the fact that the California Supreme Court has never, in a case arising under section 1756 of the Public Utilities Code, held that a court must “independently review” the Commission’s construction of the Code, the time could prove opportune for such an argument. Of course, that advocate’s initial challenge would be to get the Court to hear the matter; the California Supreme Court last agreed to review a Commission decision in 1995 (State Assembly, supra; Edison v. Peevey, infra, arose from a referral of a question of state law to the Court from the Ninth Circuit.)

Were our fictional advocate to make this argument, it is unclear what effect Arlington would have on the jurisdiction-specific judicial review provision of Section 1757. A broad reading of Arlington, which would rely on the general grant of authority given the CPUC by the State Legislature, would either confine judicial review to instances where the Public Utilities Code explicitly says “the commission has/does not have jurisdiction over XYZ,” or would render judicial review moot. Arlington’s explanation as to why there is no meaningful distinction between jurisdictional and substantive agency determinations is problematic because there is no clear mechanism for deciding where judicial deference is appropriate, and because it ignores the possibility that administrative statutes might distinguish between jurisdictional and substantive decisions made by the agency.

Southern California Edison v. Peevey, 31 Cal.4th 781 (2003) (“Edison”), is illustrative of this problem. Edison involved a challenge to the CPUC’s interpretation of Public Utilities Code sections 330 through 398.5, under which the CPUC proposed a stipulated judgment as part of an action initiated by Edison alleging the CPUC’s regulation of electricity violated federal law. TURN intervened and opposed the stipulated judgment as a violation of California law. The question whether the CPUC had authority to propose the judgment under Section 330 et seq. was certified by the Ninth Circuit to the California Supreme Court.⁴ Had the question been presented to the court under the judicial review provisions of Section 1757, instead of being certified, it could have been framed two ways: (1) Did the CPUC act without, or in excess of, its powers or jurisdiction under Section 1757(a)(1)? Or (2) did the CPUC fail to proceed in the manner required by law under Section 1757(a)(2)? The former is a threshold jurisdictional question, akin to the personal jurisdiction analysis courts must perform before engaging in substantive analysis. The latter is a question of statutory interpretation, but contains no jurisdictional analysis–the CPUC’s authority to interpret the statute at issue is assumed. Arlington holds these questions are indistinguishable. The plain language of Section 1757, and the line of cases following PG&E Corp., indicate otherwise. Arlington provides no reasoning or mechanism to reconcile this conflict.

The dissent’s view reflects the checks and balances currently in place between the CPUC and courts, which are codified in the judicial review provisions of Section 1757. The CPUC has broad authority to regulate public utilities, and the courts are empowered to check the CPUC when it overreaches. If Arlington is adopted by California authority, it is unclear to what extent this balance will be disturbed, or how courts and the CPUC will reconcile Arlington’s holding with established state precedent. It is certain, however, introducing Arlington into California law will result in a period of confusion and conflict.

(The views, opinions, and errors in this blog are all solely those of the writer, Megan Somogyi. They are offered only to promote further thought and discussion and are not intended to be relied upon as legal advice on any matter or subject.)

^1.Justice Breyer’s concurring opinion does not bear on the subject matter of this post, and is therefore not discussed.

^2.All further citations to Arlington are to the Slip Opinion.

^3.Practitioners familiar with the telecommunications industry will notice footnote 1 of the majority opinion, appending the first mention of CTIA-The Wireless Association: “This is not a typographical error. CTIA-The Wireless Association was the name of the petitioner. CTIA is presumably an (unpronounceable) acronym, but even the organization’s website does not say what it stands for. That secret, known only to wireless-service-provider insiders, we will not disclose here.” (Slip op., 3, fn. 1).

^4.The court was also asked to decide whether the stipulated judgment violated the Bagley-Keene Open Meeting Act (Gov. Code §§ 11120-11132.5) or Public Utilities Code § 454.