United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 22, 2013 Decided July 2, 2013
No. 12-5246
MORTGAGE BANKERS ASSOCIATION,
APPELLANT
v.
SETH D. HARRIS, SUED IN HIS OFFICIAL CAPACITY, ACTING
SECRETARY OF UNITED STATES DEPARTMENT OF LABOR, ET
AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:11-cv-00073)
Michael W. Steinberg argued the cause for appellant.
With him on the briefs were Sam S. Shaulson and David M.
Kerr.
Anthony J. Steinmeyer, Assistant Director, U.S.
Department of Justice, argued the cause for appellees. With
him on the brief were Stuart F. Delery, Principal Deputy
Assistant Attorney General, Ronald C. Machen Jr., U.S.
Attorney, and Douglas N. Letter, Director.
Sundeep Hora and Adam W. Hansen were on the brief for
intervenors-appellees Jerome Nickols, et al.
2
Before: TATEL and BROWN, Circuit Judges, and
SENTELLE, Senior Circuit Judge.
Opinion for the Court by Circuit Judge BROWN.
BROWN, Circuit Judge: The tandem of Paralyzed
Veterans of America v. D.C. Arena L.P., 117 F.3d 579 (D.C.
Cir. 1997) and Alaska Professional Hunters Ass’n v. FAA,
177 F.3d 1030 (D.C. Cir. 1999) (“Alaska Hunters”)
announced an ostensibly straightforward rule: “When an
agency has given its regulation a definitive interpretation, and
later significantly revises that interpretation, the agency has in
effect amended its rule, something it may not accomplish
[under the APA] without notice and comment.” Alaska
Hunters, 177 F.3d at 1034. The only question properly before
this three-judge panel is a narrow one: what is the role of
reliance in this analysis?1 Is it, as the government contends, a
“separate and independent requirement,” Oral Arg. 10:42–
10:45, or is it just one of several factors courts can look to in
order to determine whether an agency’s interpretation
qualifies as definitive,2 as Mortgage Bankers Association
(“MBA”) suggests? We find ourselves in general agreement
with the industry association that there is no discrete reliance
1
Bound as we are by Paralyzed Veterans and Alaska Hunters,
we decline the government’s invitation to “call” for “the full Court
[to] * * * lay the Paralyzed Veterans doctrine to rest.” Letter of
Clarification, No. 12-5246 (D.C. Cir. Mar. 25, 2013) (quoting
Appellee Br. 47).
2
Our case law uses the terms “definitive” and “authoritative”
interchangeably. Compare Paralyzed Veterans, 11 F.3d at 586
(“authoritative interpretation”), with Alaska Hunters, 177 F.3d at
1034 (“definitive interpretation”).
3
element. Reliance is just one part of the definitiveness
calculus.
Fortunately, this is as far as our inquiry need go. Having
conceded the existence of two definitive — and conflicting —
agency interpretations, the government acknowledged at oral
argument that petitioner “prevail[s] if . . . the only reason
[courts] look to reliance is to find out if there is a definitive
interpretation.” Oral Arg. 10:56–11:10. So stipulated, we
reverse the District Court order dismissing MBA’s Motion for
Summary Judgment and remand the case with instructions to
vacate the 2010 Administrator Interpretation significantly
revising the agency’s 2006 Opinion Letter. If the Department
of Labor (“DOL”) wishes to readopt the later-in-time
interpretation, it is free to. We take no position on the merits
of their interpretation. DOL must, however, conduct the
required notice and comment rulemaking.
I
Petitioner MBA is a national trade association
representing over 2,200 real estate finance companies with
more than 280,000 employees nationwide. Mortgage Bankers
Ass’n v. Solis, 864 F. Supp. 2d 193, 197 (D.D.C 2012). We
focus here on the mortgage loan officers who typically assist
prospective borrowers in identifying and then applying for
various mortgage offerings. Though the recent financial crisis
has thrust members of this profession into the forefront of the
news, our concern here is more mundane: the method and
manner of their pay.
Under the Fair Labor Standards Act (“FLSA”), 29 U.S.C.
§ 201 et seq., an old law DOL must adapt to new
circumstances, employers are generally required to pay
overtime wages to employees who work longer than 40 hours
4
per week. See 29 U.S.C. § 207(a). The Act provides several
exceptions to this rule. Those “employed in a bona fide
executive, administrative, or professional capacity[,] . . . or in
the capacity of outside salesman,” for example, are exempt
from the statute’s minimum wage and maximum hour
requirements. 29 U.S.C. § 213(a)(1). Whether mortgage loan
officers qualify for this “administrative exemption” is a
difficult and at times contentious question. So difficult, in
fact, DOL has found itself on both sides of the debate. In
2006, the agency issued an opinion letter concluding on the
facts presented that mortgage loan officers with archetypal job
duties fell within the administrative exemption. Just four
years later, in 2010, Deputy Administrator Nancy J. Leppink
issued an “Administrator’s Interpretation” declaring that
“employees who perform the typical job duties” of the
hypothetical mortgage loan officer “do not qualify as bona
fide administrative employees.” J.A. 259. The 2010
pronouncement “explicitly withdrew the 2006 Opinion
Letter.” Mortgage Bankers Ass’n, 864 F. Supp. 2d at 201.
Citing Paralyzed Veterans and its progeny, MBA
challenged DOL’s decision to change their “definitive
interpretation” without first undergoing notice-and-comment
rulemaking as a violation of the APA. Compl. ¶ 38. [J.A. 22]
The District Court rejected the argument. After assuring itself
that Paralyzed Veterans remains good law, see Mortgage
Bankers Ass’n, 864 F. Supp. 2d at 204–05, the court read our
recent decision in MetWest Inc. v. Secretary of Labor, 560
F.3d 506 (D.C. Cir. 2009), to require a showing of
“substantial and justifiable reliance on a well-established
agency interpretation.” See id. at 207 (internal quotation
marks and emphasis omitted). Although petitioner had argued
reliance in the alternative, the court concluded MBA was
unable to “satisfy the standard for demonstrating reliance
recognized in MetWest.” Id. at 208. The court then denied
5
MBA’s Motion for Summary Judgment, but not before
dismissing the association’s substantive challenge to the 2010
interpretation as inconsistent with the agency’s 2004
regulation, 29 C.F.R. § 541.203(b). The present appeal
followed.
II
On its face, the Paralyzed Veterans analysis contains just
two elements: definitive interpretations (“definitiveness”) and
a significant change (“significant revision”).3 But as with
most things doctrinal, the devil is in the details.
Despite its age, few cases discuss Paralyzed Veterans at
length.4 One critical question — and a dispositive one here —
3
The doctrine’s operative assumption — the belief that a
definitive interpretation is so closely intertwined with the regulation
that a significant change to the former constitutes a repeal or
amendment of the latter — is established law in this Circuit, see,
e.g., Envtl. Integrity Project v. EPA, 425 F.3d 992, 997–98 (D.C.
Cir. 2005), but the Courts of Appeals are split on the issue.
According to one recent survey, the Fifth Circuit has adopted our
approach and “the Eighth and Third Circuits have mentioned [it] in
dicta,” but “[t]he First, Second, Fourth, Sixth, Seventh, and Ninth
Circuits agree that changes in interpretations do not require notice
and comment because both the original and current position
constitute interpretive rules.” Warshauer v. Solis, 577 F.3d 1330,
1338 (11th Cir. 2009); see also United States v. Magnesium Corp.
of Am., 616 F.3d 1129, 1138–39 (10th Cir. 2010) (noting a slightly
different circuit split between the Third, Fifth, and Sixth Circuits on
one hand, and the First and Ninth Circuit on the other).
4
It need not reflect poorly on the doctrine that so few of our
cases haven taken up Paralyzed Veterans’s banner — and still
fewer have used its reasoning to invalidate an agency interpretation
for failing to conduct notice and comment rulemaking. See
6
concerns the role of reliance. Borrowing heavily from
MetWest and Honeywell International, Inc. v. NRC, 628 F.3d
568 (D.C. Cir. 2010), two recent cases that draw on our
Alaska Hunters decision, DOL suggests that the Paralyzed
Veterans analysis contains an independent third element:
substantial and justified reliance. MBA takes a different
approach to Alaska Hunters altogether. In its view, that case
stands only for the proposition that reliance can elevate an
otherwise non-definitive interpretation into a definitive
interpretation; as such, it falls squarely within the existing
definitiveness element. Of the two, we believe MBA’s
approach better explains Alaska Hunters.
Alaska Hunters is an exceptional case with an otherwise
straightforward premise. In 1963, the Federal Aviation
Administration’s Alaska office (the “Alaskan Region”) began
a thirty year practice of “uniformly advis[ing] all guides,
lodge managers and guiding services in Alaska that they
could meet their regulatory responsibilities by complying with
the requirements of [14 C.F.R. Part 91] only.” Alaska
Hunters, 177 F.3d at 1035. It was not until 1997 that officials
in FAA’s Washington, D.C. headquarters formally pushed
back against the regional office’s long-standing
interpretation.5 Through a “Notice to Operators” published in
Appellee Br. 40–41 (counting Alaska Hunters and arguably
Environmental Integrity Project as the lone exceptions). Paralyzed
Veterans may very well serve as a prophylactic that discourages
agencies from attempting to circumvent notice and comment
requirements in the first instance. We are unable to quantify these
effects by reference to case citations alone.
5
It is “uncertain” whether the D.C.-based officials had
knowledge of the Alaskan Region’s interpretive position prior to
the 1990s — that is, before FAA consolidated power in its national
headquarters following a near three-decade-long experiment with a
7
the Federal Register without notice and opportunity for
comment, the agency announced that certain Alaskan guides
would now have to comply with other, more onerous
regulations. Individuals who had “opened lodges and built up
businesses dependent on aircraft” in reliance on the Alaskan
Region’s interpretation promptly brought suit challenging the
agency’s about-face. Id. at 1035.
In relevant part, FAA argued Paralyzed Veterans was
“inapposite” because the Alaskan Region’s interpretation was
not definitive; it “represented simply a local enforcement
omission, in conflict with the agency’s policy in the rest of the
country.” Id. at 1034–35. We disagreed. Although a local
office’s interpretation of a regulation or provision of advice to
a regulated party “will not necessarily constitute an
authoritative administrative position, particularly if the
interpretation or advice contradicts the view of the agency as
a whole,” the situation in Alaska Hunters was “quite
different.” Id. at 1035.
For one thing, there was no evidence in the record of any
conflicting interpretation. The Alaskan Region uniformly
enforced its interpretive position for thirty years and both
FAA and the National Transportation Safety Board had at
some point referred to it as FAA policy. See id. at 1035. And
even if “FAA as a whole somehow had in mind an
interpretation different from that of its Alaskan Region,
guides and lodge operators in Alaska had no reason to know
this.” Id. All the regulated parties had before them was the
decentralized organizational structure “that transferred much
authority to regional organizations.” Alaska Hunters, 177 F.3d at
1032.
8
formal,6 uncontradicted, and uniformly-applied interpretation
of a local office — an interpretation Alaskan guide pilots
reasonably relied on for three decades. Such advice might not
necessarily qualify as definitive, but here, we concluded, it
“became an authoritative departmental interpretation, an
administrative common law applicable to Alaskan guide
pilots” that could not be rewritten without notice and
comment rulemaking. Id.
Alaska Hunters’s takeaway is clear: reliance is but one
factor courts must consider in assessing whether an agency
interpretation qualifies as definitive or authoritative. Or to put
matters more precisely, because regulated entities are unlikely
to substantially — and often cannot be said to justifiably —
rely on agency pronouncements lacking some or all the
hallmarks of a definitive interpretation, significant reliance
functions as a rough proxy for definitiveness. The converse
also holds true. Agency pronouncements effectively ignored
by regulated entities are unlikely to bear the marks of an
authoritative decision. See Ass’n of Am. R.R., 198 F.3d at
949–50 (finding no definitive interpretation in part because
“[n]othing in th[e] record suggests that railroads relied on the
[agency statements] in any comparable way” to the Alaska
guides).7 This is more art than science. Courts must weigh the
6
“[T]he regional office’s position was reflected in official
agency adjudications holding that Alaskan guides need not comply
with commercial pilot standards.” Ass’n of Am. R.R. v. DOT, 198
F.3d 944, 949 (D.C. Cir. 1999).
7
Obviously, this is not to suggest any measure of reliance will
automatically render an interpretation definitive.
9
role reliance plays on a case-by-case basis to ascertain its
value.
DOL pushes back against this framework by treating
reliance as a separate and independent third element.8 That,
the agency claims, is exactly what our MetWest decision did
in (1) addressing reliance only in the alternative, i.e., after
assuming a definitive interpretation, see MetWest, 560 F.3d at
510–11, and (2) speaking of Alaska Hunters’s “substantial
and justifiable reliance on a well-established agency
interpretation,” id. at 511, a phrase “most natural[ly] read[]”
to distinguish definitiveness and reliance as “separate
8
The agency never develops the implications of its alternative
vision, but we think two points obvious. First, by dissociating
reliance from definitiveness and calling it an independent
requirement, DOL believes courts will have to address the reliance
issue in all cases, including cases like the present in which
definitiveness has been established. Second, DOL assumes the third
element would be satisfied only if the reliance is equal to or greater
than that of Alaska Hunters, a unique case. Meaning, the Paralyzed
Veterans doctrine would only ever apply where the parties can
demonstrate substantial and justified reliance akin to that of the
Alaska Guides — a reliance interest the government describes as
“especially strong” since affected parties uprooted their lives to
move to Alaska to start businesses. Appellee Br. 19; see also
MetWest, 628 F.3d at 511; Mortgage Bankers Ass’n, 864 F. Supp.
2d at 207 (“[T]his Court is convinced that MetWest intended to set
the bar for what a plaintiff must establish to satisfy the reliance
component of the Paralyzed Veterans doctrine.”). If adopted, this
position effectively renders Paralyzed Veterans dead letter law by
limiting its application to a most extreme fact pattern — one
unlikely to ever be duplicated.
10
requirements,” Appellee Br. 23–24; see also Mortgage
Bankers Ass’n, 864 F. Supp. 2d at 205–08.9
We do not think this characterization of MetWest’s dicta
could possibly be correct. “Definitive” is a term of art as used
in the Paralyzed Veterans context. Once a court has classified
an agency interpretation as such, it cannot be significantly
revised without notice and comment rulemaking. No
intervening decision of this Court ever read Alaska Hunters to
require anything to the contrary, and that includes Association
of American Railroads, the lone pre-MetWest case DOL cites
as having treated “reliance and definitive interpretation as two
independent requirements.” Appellee Br. 24.10 Whether
reliance played a significant role in the analysis, see, e.g.,
Alaska Hunters, 177 F.3d at 1035–36; Ass’n of Am. R.R., 198
F.3d at 950; or took a back seat where the definitive nature of
the interpretation was treated as self-evident, see Envtl.
Integrity Project, 425 F.3d at 998; Monmouth Med. Ctr. v.
Thompson, 257 F.3d 807, 814 (D.C. Cir. 2001), we have
always considered it as part of the first element. In short, we
have been too consistent in our treatment of these so-called
agency flip-flops to now read dictum in MetWest as sub
9
Because Honeywell unceremoniously adopts MetWest’s
language and approach, see Honeywell, 568 F.3d at 579–80, we
focus our discussion primarily on MetWest.
10
See Ass’n of Am. R.R., 198 F.3d at 948 (“We find nothing in
these materials, individually or taken together, that comes even
close to the definitive interpretation that triggered notice and
comment rulemaking in Alaska Professional Hunters.”); see also
Devon Energy Corp. v. Kempthorne, 551 F.3d 1030, 1041 (D.C.
Cir. 2008); Air Transp. Ass’n of Am. v. FAA, 291 F.3d 49, 56–58
(D.C. Cir. 2002); Envtl. Integrity Project, 425 F.3d at 997–98.
11
silentio reconfiguring the doctrine in the absence of either a
unanimous Irons footnote or a decision of the en banc court.
Finally, we disagree with the suggestion that the only
way to protect agencies from inadvertently locking in
disfavored, informally promulgated positions is to impose a
separate and independent reliance element. Practically
speaking, reliance considered as part of the definitiveness
determination will more than adequately protect agencies
from this ossification threat. We thus decline DOL’s
invitation to spin a third requirement from whole cloth.
Emphatically, that is an issue for the full Court to take up at
its discretion, not this three-judge panel.
III
In view of the government’s concession that the case
need go no further than this, we reverse the District Court
order denying MBA’s Motion for Summary Judgment and
remand the case with instructions to vacate DOL’s 2010
Administrator Interpretation.
So Ordered.