Untitled Texas Attorney General Opinion

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

October 3, 2016

Mr. David Mattax Opinion No. KP-0115
Commissioner of Insurance
Texas Department of Insurance , Re: Under what circumstances Texas courts
Post Office Box 149104 afford deference to agency interpretations of
Austin, Texas 78714-9104 statutes (RQ-0110-KP)

Dear Commissioner Mattax:

You ask "under what circumstances Texas courts afford deference to agency interpretations
of statutes, such that notice-and-comment rulemaking would be entitled to greater weight than an
agency bulletin." 1 As background, you explain that the Department of Insurance ("Department")
"uses bulletins to efficiently give public notice of a variety of topics." Request Letter at 1. You
provide as an example Commissioner Bulletin #B-0012-16, which "notified the public of the
requirements of House Bill 574 from the 84th Legislature."2 Id. You observe that such notices
"arguably could also go through notice-and-comment rulemaking under the Texas Administrative
Procedure Act," and you question under what circumstances such rulemaking would be given
greater deference by the courts than an agency bulletin. Id. Because Texas agency deference is
commonly understood from its roots in federal jurisprudence, we must first briefly overview
federal agency deference before turning to its Texas counterpart.

I. Federal Agency Deference

Common understandings of agency deference tend to derive from federal caselaw. The
foundation of the federal agency deference, known as Chevron deference, is that a federal court
must "give effect to the unambiguously expressed intent of Congress"3 but that when a statute
contains an ambiguity or is silent on an i~sue, the court must defer to an agency's interpretation as

'Letter from Mr. David Mattax, Comm'r of Ins., Tex. Dep't of Ins., to Honorable Ken Paxton, Tex. Att'y
Gen. at I (June I 0, 20 I 6), https://www.texasattomeygeneral.gov/opinion/requests-for-opinions-rqs ("Request
Letter").
2Although you refer to Commissioner Bulletin #8~0012-16 as an example of the Department's use of agency

bulletins, you do not ask any questions directly related to the content of that bulletin, and this opinion should not be
construed to address the specific pronouncements in the bulletin.
3
Chevron U.S.A., Inc. v. Nat. Res. Def Council, Inc., 467 U.S. 837, 843 (1984).
Mr. David Mattax - Page 2 (KP-0115)

long as that interpretation is "reasonable. " 4 These are commonly known as Chevron Step 1
(whether the statute is ambiguous) and Chevron Step 2 (whether the agency interpretation is
reasonable). Over time, the U.S. Supreme Court has added elements to its test for when to apply
agency deference, which can, now be summarized as follows:

Step Oa: Is the question one of deep economic and political significance, such that
Congress would not have deferred the matter to an agency? 5

Step Ob: Has the agency used formal procedures?6 If so, federal courts skip to Step
1. If not, federal courts weigh other factors in deciding whether to
nonetheless apply Chevron deference. 7 And if Chevron deference is not
warranted, federal courts may nonetheless use Skidmore deference. 8

Step Oc: If interpretation is informal, use balancing test to determine whether to treat
interpretation as formal. 9

Step 1: Courts give effect to unambiguous Congressional intent. 10

Step 2: If the statute is silent or ambiguous, courts defer to the agency's reasonable
interpretation. 11

One example of the expansiveness of federal Chevron deference is City of Arlington v.
FCC, where the Court held that judges should defer not just to agency interpretations of their own

4
1d. at 865.
5
King v. Burwell, 135 S. Ct. 2480, 2489 (2015). Instead of deferring to the relevant agency, the Court waded
through the test and context of the Affordable Care Act on its own. Id. at 2492-95. Notably, the Court arrived at the
same conclusion the federal agency argued, but not because the agency was entitled to deference. Id. at 2495-96.
6
See United States v. Mead Corp., 533 U.S. 218, 230 (2001) ("Thus, the overwhelming number of our cases
applying Chevron deference have reviewed the fruits of notice-and-comment rulemaking or formal adjudication.").
7
Id. at 230.:-J 1 ("That said, and as significant as notice-and-comment is in pointing to Chevron authority, the
want of that procedure here does not decide the case, for we have sometimes found reasons for Chevron deference
even when no such administrative formality was required and none was afforded.").
8
1d. at 228 ("The weight [accorded to an administrative] judgment in a particular case will depend upon the
thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later
pronouncements, and all those factors which give it power to persuade, iflacking power to control." (quoting Skidmore
v. Swift & Co., 323 U.S. 134, 140 (1944))).
9
Informal interpretations are given much less deference, known as Skidmore deference. Skidmore v. Swift &
Co., 323 U.S. 134 (1944).
10
Chevron, 467 U.S. at 842--43.
11
1d. at 843.
Mr. David Mattax - Page 3 (KP-0115)

statutes but also to agency interpretations of what statutes are theirs. 12 Despite this expansive
doctrine, there are signs the Court is trending toward reigning in Chevron deference. 13 Overall,
the touchstone of the federal inquiry is whether an agency interpretation is reasonable.

II. Texas Agency Deference

The Texas Supreme Court has established elements that vary to a degree from federal
Chevron deference. The Texas Supreme Court entertained a number of different deference
arguments over the course of a half century before issuing a ruling in Railroad Commission of
Texas v. Texas Citizens for a Safe Future & Clean Water that consolidated Texas agency deference
law. 14 Texas Citizens clarified that Texas courts engage in an analysis "similar" to the federal
Chevron analysis, which can be broken down into four steps, and two sub-steps: 15

Step Oa: Is the agency interpretation formal and entitled to deference or informal and
not entitled to deference?

Step Ob: How long-standing is the agency interpretation? The more duration, the
more deference.

Step 1: Does the agency have authority to enforce the statute (i.e., is the statute
within the agency's area of expertise)?

Step 2: Does the agency interpretation conflict with the plain language of statute?

Step 3: Is the agency interpretation reasonable?

Step 4: Courts will generally uphold agency interpretation.

Each step warrants a closer look.

12
133 S. Ct. 1863, 1867-70 (2013).
13
See, e.g., Sturgeon v. Frost, 136 S. Ct. 1061, 1070 (2016). There, a unanimous Court rejected an argument
that received agency deference at the court of appeals:
We reject the interpretation ... adopted by the Ninth Circuit. The court's reading of the
phrase ... may be plausible in the abstract, but it is ultimately inconsistent with both the text and
context of the statute as a whole. Statutory language "cannot be construed in a vacuum. It is a
fundamental canon of statutory construction that the words of a statute must be read in their context
and with a view to their place in the overall statutory scheme."
Id. (quoting Roberts v. Sea-Land Servs., Inc., 132 S. Ct. 1350, 1357 (2012)).
14 R.R. Comm 'n of Tex. v. Tex. Citizens for a Safe Future & Clean Water, 336 S.W.3d 619 (Tex. 2011).
15
1d. at 625.
Mr. David Mattax - Page 4 (KP-0115)

A. Formal v. Informal

At the outset, we address the deference Texas courts give to a formal rule in comparison
with a publication like an agency bulletin. 16 The Texas Supreme Court has explained that to the
extent courts defer to an agency's interpretation of a statute, such deference "applies to formal
opinions adopted after formal proceedings, not isolated comments during a hearing or opinions"
included in a court filing. Fiess v. State Farm Lloyds, 202 S.W.3d 744, 747 (Tex. 2006). The
Court has indicated that formal rules adopted by an agency after notice and an opportunity for
public comment fulfill this qualifier. See Tex. Dep 't ofIns. v. Am. Nat'! Ins. Co., 410 S.W.3d 843,
855 (Tex. 2012) (deferring to a formally-promulgated Department rule). Likewise, courts will
uphold final orders "formally adopted after an adjudication" if the issuing agency's interpretation
satisfies the other requirements for deference. Tex. Citizens, 336 S.W.3d at 625. No Texas state
court has addressed the extent to which it would defer to an agency bulletin like those promulgated
by the Department. However, as we understand it, the Department's issuance of agency bulletins
lacks the formal adoption process that exists for promulgating rules. Unlike federal agency
deference, there is no recent Texas Supreme Court case granting agency deference to an informal
interpretation. 17 Thus, a Texas state court would give significantly less deference to an agency
bulletin than to a formal rule on the same issue, and given the Texas Supreme Court's comments
in Fiess and Texas Citizens, it is possible that a Texas court may not give any deference to an
informal agency bulletin.

B. Duration

Additionally, a longer-duration interpretation can help an agency interpretation receive
deference. In Texas Citizens, the Court noted, "we agree with the Commission that an agency's
long-standing construction of a statute, especially in light of subsequent legislative amendments,
is particularly worthy of our deference." 18 This notion is similar to the Court's doctrine that it will
defer to an appellate court's construction of a statute that the Legislature has not overtumed. 19

16
Your request concerns "Texas courts," so we will address Texas state courts. While Texas state courts
engage in an analysis similar to federal courts when considering to what extent to defer to an agency's construction
ofa statute, Texas state courts "have never expressly adopted the [federal] Chevron or Skidmore doctrines" for doing
so. R.R. Comm 'n of Tex. v. Tex. Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 625 (Tex. 2011).
Distinctions between the state and federal doctrines exist, and we limit this opinion to a discussion of when Texas
state courts afford deference to an agency's construction of a statute.
17
See Mead Corp., 533 U.S. at 230-32 (discussing possibility of granting federal agency deference to
informal interpretations). Typically, however, federal courts are more likely to grant lesser Skidmore deference to
such interpretations. Id. at 228.
18
Texas Citizens, 336 S.W.3d at 632.
19
See Grapevine Excavation, Inc. v. Maryland Lloyds, 35 S.W.3d I, 5 (Tex. 2000) ("It is a firmly established
statutory construction rule that once appellate courts construe a statute and the Legislature re-enacts or codifies that
statute without substantial change, we presume that the Legislature has adopted the judicial interpretation."). It is
worth noting, however, the Court has held that "neither legislative ratification nor judicial deference to an
administrative interpretation can work a contradiction of plain statutory language." Pretzer v. Motor Vehicle Bd., 138
Mr. David Mattax - Page 5 (KP-0115)

Thus, while a long-standing interpretation does not appear to be absolutely required, it is certainly
an important factor for determining how much deference an agency interpretation will receive.

C. Area of Expertise

In Texas Citizens, the Court observed that it "should afford no deference to an agency's
interpretation of a statute that does not lie within its administrative expertise or pertain to a
nontechnical issue of law."20 There, the question was whether the Railroad Commission was
entitled to agency deference under a statute that required it to consider "the. public interest" when
issuing a certain permit. The Court held that

the Commission interpreted the public interest finding in such a way as to ensure
that it will only consider matters within its expertise .... [T]he Commission's
determination that "public interest" does not include traffic-safety matters is
reasonable under the Act's statutory scheme. We further conclude it is reasonable
given the Commission's unique competence as the state's agency overseeing oil
and gas production. 21

As such, the Court recognized that an agency's expertise is a mandatory prerequisite for deferring
to its interpretation of a statute.

D. Ambiguity '

"[D]eferring to an agency's construction is appropriate only when the statutory language
is ambiguous." Hallmark Mktg. Co. v. Hegar, 488 S.W.3d 795, 799 (Tex. 2016) (explaining that
"statutory ambiguity is the quickest path to administrative deference"). Though the heart of the
federal deference inquiry is reasonableness, the heart of the Texas inquiry is ambiguity. Two years
after the Court consolidated its agency deference jurisprudence, it made it abundantly clear that
this core element is where agencies attempting to obtain deference will fail:

It is true that courts grant deference to an agency's reasonable interpretation of a
statute, but a precondition to agency deference is ambiguity; "an agency's opinion
cannot change plain language." There is no ambiguity about the ambiguity
requirement, nor with the unassailable rule that agency interpretations cannot
contradict statutory text. Here, the Comptroller's interpretation is contrary to the
Tax Code. 22

S.W.3d 908, 915 (Tex. 2004). In other words, the Legislature cannot be deemed to acquiesce to an incorrectjudicial
decision or administrative interpretation.
20
Texas Citizens, 336 S.W.3d at 630.
21/d.
22 Combs v. Health Care Servs. Corp., 401 S.W.3d 623, 630 (Tex. 2013) (quoting Fiess, 202 S.W.3d at 747).
Mr. David Mattax - Page 6 (KP-0115)

Or as the Court framed it elsewhere: "[a]gency deference has no place when statutes are
unambiguous-the law means what it says-meaning [courts] will not credit a contrary agency
interpretation that departs from the clear meaning of the statutory language." TracFone Wireless,
Inc. v. Comm 'non State Emergency Commc 'ns, 397 S.W.3d 173, 182 (Tex. 2013).

Importantly, Texas courts seldom conclude that a statute is ambiguous. This is largely due
to the fact that the Texas Supreme Court has a well-developed, tiered process for assessing the
meaning of statutes as a matter oflaw: 23 text, context, and canons of construction. 24 In construing
statutes, Texas courts will first look to the plain language of the statute itself, recognizing that the
text of the statute is the best indication of the Legislature's intent. Combs v. Roark Amusement &
Vending, L.P., 422 S.W.3d 632, 635 (Tex. 2013). If a statute's meaning is clear, courts will apply
its words according to their common meaning without the use of rules of construction or extrinsic
aids. City of Rockwall v. Hughes, 246 S.W.3d 621, 626 (Tex. 2008). After all, "an agency's
opinion cannot change plain language." Fiess, 202 S.W.3d at 747.

In addition to examining the text, courts are also to examine the context of the statute. The
Texas Supreme Court has recently elaborated:

When construing statutes, or anything else, one cannot divorce text from
context. The meaning of words read in isolation is frequently coµtrary to the
meaning of words read contextually in light of what surrounds them. Given the
enormous power of context to transform the meaning of language, courts should
resist rulings anchored in hyper-technical readings of isolated words or phrases.
The import of language, plain or not, must be drawn from the surrounding context,
particularly when construing everyday words and phrases that are inordinately
context-sensitive. 25

To assess context, the Court "look[s] to a wide variety of sources, including dictionary
definitions, treatises and commentaries, our own prior constructions of the word in other contexts,
the use and definitions of the word in other statutes and ordinances, and the use of the words in
our rules of evidence and procedure. " 26 ·

Finally, ifthe court is unable to discern the meaning of a statute from the text and context
of the statute, it will then "resort to canons of construction or other aids such as which statute is
more specific." Hallmark Mktg. Co., 488 S.W.3d at 800. Through the Code Construction Act, the
Legislature has provided a number of statutory canons to assist in determining the meaning of a

23
Sw. Royalties, Inc. v. Hegar, 2016 WL 3382151, at *4 (Tex. 2016) ("Whether statutory language is
ambiguous is a matter of law for courts to decide, and language is ambiguous only if the words yield more than one
reasonable interpretation.").
24
0ther members of the judiciary are focusing their judicial frameworks for construing statutes along the lines
of the Texas model. See Brett M. Kavanaugh, Fixing Statutory Interpretation, 129 HARV. L. REV. 2118, 2144 (2016).
Judge Kavanaugh asserts that the "best reading" of a statute's plain language "depends on (I) the words themselves,
(2) the context of the whole statute, and (3) any other applicable semantic canons." Id. at 2144-45.
25 In re Office of the Attorney Gen. of Tex., 456 S.W.3d 153, 155-56 (Tex. 2015).
26
Jaster v. Comet II Constr., Inc., 438 S.W.3d 556, 563 (Tex. 2014).
Mr. David Mattax - Page 7 (KP-0115)

potentially ambiguous statute. See TEX. Gov'T CODE §§ 311.001-.035; see also id. § 311.003
("The rules provided in this chapter are not exclusive .... "). In addition to these legislative canons,
Texas courts have developed and utilized numerous additional canons to aid in the construction of
statutes. See, e.g., TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432, 441 (Tex. 2011)
(explaining the canon of noscitur a sociis, or "it .is known by its associates"); Univ. of Tex. at
Arlington v. Williams, 459 S.W.3d 48, 52 (Tex. 2015) (explaining the canon of ejusdem generis,
or the notion that "general terms and phrases should be limited to matters similar in type to those
specifically enumerated"); see also ANTONIN SCALIA & BRYAN A. GARNER, READING LA w: THE
INTERPRETATION OF LEGAL TEXTS 53-336 (2012) (identifying fifty-seven canons of statutory
construction used by courts to interpret statutes).

Rather than find a statute ambiguous and then defer to an agency construing it, Texas courts
will often rely on these canons of statutory construction to determine for themselves the
unambiguous meaning of a statute. See, e.g., Sw. Royalties, Inc., 2016 WL 3382151, at **4-5
(Tex. 2016) (using multiple canons of construction to determine that statutory language "is not
ambiguous"). For example, the Texas Supreme Court has explained that "if an undefined term has
multiple common meanings, it is not necessarily ambiguous; rather, [courts] will apply the
definition most consistent with the context of the statutory scheme." Id. at *4. It should come as
no surprise that the Texas Supreme Court has only found statutes to be ambiguous in a handful of
occasions since it clarified the requirements for agency deference in Texas Citizens. See, e.g., Tex.
Citizens, 336 S.W.3d at 628; 27 Am. Nat'! Ins. Co., 410 S.W.3d at 853-54. 28

E. Reasonableness

In the rare case a Texas court finds a statute to be ambiguous, a Texas court then analyzes
whether the agency's interpretation of the statute is reasonable. Tex. Citizens, 336 S.W.3d at 628.
The agency's construction need not be "the only-or the best-interpretation in order to warrant
[a court's] deference." Id. In other words, ambiguity and reasonableness are distinct but related
requirements. Only if a statute is ambiguous may the court consider whether the agency
interpretation is reasonable. But ambiguity also encompasses reasonableness. As the Texas
Supreme Court has made clear after Texas Citizens, an ambiguous statute has more than one
reasonable interpretation. Id.

F. Serious Consideration

If the statute an agency is charged with administering has more than one reasonable
interpretation, and the agency's formal, long-standing interpretation is reasonable, the deference

27
The statute at issue in Texas Citizens allowed the Railroad Commission to approve a permit if it was "in
the public interest," a phrase the Court acknowledged to be "amorphous." Texas Citizens, 336 S.W.3d at 626, 630.
28
In Texas Department of Insurance v. American National Insurance Co., a statute used but did not define
the terms "stop-loss insurance" and "reinsurance." 410 S.W.3d 843, 854 (Tex. 2012). The various insurance statutes
offered inconsistent interpretations of what those terms meant. Id. The Court deferred to the agency's reasonable
interpretation that it promulgated through notice-and-comment rulemaking. Id. at 855.
Mr. David Mattax - Page 8 (KP-0115)

is still not absolute. The Texas Supreme Court has framed the issue in two ways that at least
provide a theoretical mechanism for a court to not defer: a court will "generally uphold" or give
"serious consideration" to the agency interpretation. 29 Our research failed to yield a case where
the agency ran the other elements of the gauntlet and still failed to receive deference. But the
framing nonetheless indicates the Texas Supreme Court's resistance to deference. By comparison,
this element of federal agency deference provides that federal courts will defer to the agency if the
other elements of deference are met. 30

G. Constitutional Underpinnings of the Narrow, Texas Agency Deference

One might rightfully question why the Texas Supreme Court so rarely defers to agencies.
Practically speaking, the Court has made clear that this is because of its view of statutes (or
contracts) so rarely being ambiguous. 31 But there is also a more fundamental concern than notions
of ambiguity undergirding a narrow view of agency deference: the constitution. We know from
the structure of the federal and state constitutions that Congress and the Legislature write laws, the
executive branches .are to enforce them as written, and the judiciary interprets the laws. 32 The U.S.
Supreme Court expounded on the role of the judiciary in the all-too-familiar case of Marbury v.
Madison: "It is emphatically the province and duty of the judicial department to say what the law
is .... If two laws conflict with each other, the courts must decide on the operation of each."33
Constitutionally speaking, Texas courts will not lightly yield their constitutional role to interpret
the law to the executive branch. 34 Agency deference results in one branch of government wielding

29
Health Care Servs. Corp., 401 S.W.3d at 629 (quoting Texas Citizens, 336 S. W.3d at 624-25).
30
See Chevron, 467 U.S. at 844 ("Sometimes the legislative delegation to an agency on a particular question
is implicit rather than explicit. In such a case, a court may not substitute its own construction of a statutory provision
for a reasonable interpretation made by the administrator of an agency.").

31
Health Care Servs. Corp., 401 S.W.3d at 630 ("[A] precondition to agency deference is ambiguity; 'an
agency's opinion cannot change plain language.' There is no ambiguity about the ambiguity requirement, nor with
the unassailable rule that agency interpretations cannot contradict statutory text." (quoting Fiess, 202 S.W.3d at 747)
(footnote omitted)).
32
U.S. CONST. arts. I-III; TEX. CONST. arts. 11-V.
33
5 U.S. 137, 177 (1803).
34 This also helps explain why the Court does not give credence to such things as the statements of individual
legislators. See, e.g., Moline! v. Kimbrell, 356 S. W.3d 407, 414 (Tex. 2011) ("Statements made during the legislative
process by individual legislators or even a unanimous legislative chamber are not evidence of the collective intent of
the majorities of both legislative chambers that enacted a statute .... Construing clear and unambiguous statutes
according to the language actually enacted and published as law-instead of according to statements that did not pass
through the law-making processes, were not enacted, and are not published as law-ensures that ordinary citizens are
able to rely on the language of a statute to mean what it says .... It is the Legislature's prerogative to enact statutes;
it is the judiciary's responsibility to interpret those statutes according to the language the Legislature used .... ");
Klein v. Hernandez, 315 S. W.3d I, 11 (Tex. 20 I 0) (Willett, J., concurring) ("The statute itself is what constitutes the
law; it alone represents the Legislature's singular will, and it is perilous to equate an isolated remark or opinion with
an authoritative, watertight index of the collective wishes of 181 individual legislators, who may have 181 different
motives and reasons for voting the way they do." (quotation marks omitted)). And it also helps explain why the Court
disregards legislators' attempts after the passage of a law to claim it means something other than what was written.
Mr. David Mattax - Page 9 (KP-0115)

the power of two, or (if a legislative delegation is involved) all three. Now, the drum beat of a
chorus of commentators and even federal appellate judges are calling into question whether
Chevron is constitutional. 35 As James Madison framed the issue in Federalist No. 47, "[n]o
political truth is ... stamped with the authority of more enlightened patrons of liberty" than the
separation of powers. The Federalist No. 47 (James Madison).

See, e.g., Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 444 (Tex. 2009) ("It has been our consistent view
that '[e]xplanations produced, after the fact, by individual legislators are not statutory history, and can provide little
guidance as to what the legislature collectively intended."' (quoting In re Doe, 19 S.W.3d 346, 352 (Tex. 2000)).
35
See Gutierrez-Brizuela v. lynch, No. 14-9585, 2016 WL 4436309, at *7 (10th Cir. Aug. 23, 2016)
(Gorsuch, J., concurring) ("Transferring the job of saying what the law is from the judiciary to the executive
unsurprisingly invites the very sort of due process (fair notice) and equal protection concerns the framers knew would
arise ifthe political branches intruded on judicial functions.").
Mr. David Mattax - Page 10 (KP-0115)

SUMMARY

Texas state courts consider deferring to an agency's
interpretation of a statute only when the agency adopts the
construction as a formal rule or opinion after formal proceedings.
Even when the agency has formally adopted a construction, a state
court will defer to that construction only upon finding that ambiguity
exists in the statute at issue and that the agency's construction is
reasonable and consistent with the statute's plain language.

Very truly yours,

KEN PAXTON
Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

BRANTLEY STARR
Deputy First Assistant Attorney General

VIRGINIA K. HOELSCHER
Chair, Opinion Committee