Reply Brief — Garco Construction, Inc., Petitioner v. Robert M. Speer, Acting Secretary of the Army

No. 17-225

In the

Supreme Court of the United States

GARCO CONSTRUCTION, INC.,

Petitioner,

v.

ROBERT M. SPEER, ACTING SECRETARY

OF THE ARMY,

Respondent.

On Petition for a Writ of Certiorari to the United

States Court of A ppeals for the Federal Circuit

REPLY BRIEF

Steven D. Meacham

Peel Brimley LLP

3333 East Serene Avenue,

Suite 200

Henderson, NV 89074

(702) 990-7272

William S. Consovoy

Counsel of Record

Bryan K. Weir

Jennifer L. Mascott

Consovoy McCarthy Park PLLC

George Mason University

A ntonin Scalia Law School

Supreme Court Clinic

3033 Wilson Boulevard, Suite 700

Arlington, VA 22201

(703) 243-9423

will@consovoymccarthy.com

Counsel for Petitioner

December 19, 2017

277765

A

(800) 274-3321 • (800) 359-6859

i

TABLE OF CONTENTS

Page

TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . i

TABLE OF CITED AUTHORITIES . . . . . . . . . . . . . . . ii

REPLY BRIEF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

I.

The government neither defends Seminole

Rock/Auer deference nor denies the issue’s

importance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

II. This is an appropriate case for deciding

whether to overrule Seminole Rock/Auer

deference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

ii

TABLE OF CITED AUTHORITIES

Page

CASES

Auer v. Robbins,

519 U.S. 452 (1997) . . . . . . . . . . . . . . . . . . . . . . . passim

Christopher v. SmithKline Beecham Corp.,

567 U.S. 142 (2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Decker v. Nw. Envtl. Def. Ctr.,

568 U.S. 597 (2013) . . . . . . . . . . . . . . . . . . . . . 3, 8, 9, 11

Gutierrez-Brizuela v. Lynch,

834 F.3d 1142 (10th Cir. 2016) . . . . . . . . . . . . . . . . . . 11

Henson v. Santander Consumer USA Inc.,

137 S. Ct. 1718 (2017) . . . . . . . . . . . . . . . . . . . . . . . . . 10

Patterson v. McLean Credit Union,

485 U.S. 617 (1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Pearson v. Callahan,

555 U.S. 223 (2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Rodriguez de Quijas v.

Shearson/American Express, Inc.,

490 U.S. 477 (1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Saucier v. Katz,

533 U.S. 194 (2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

iii

Cited Authorities

Page

Scenic America, Inc. v. Department of Transp.,

138 S. Ct. 2 (2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 4

Sturgeon v. Frost,

136 S. Ct. 1061 (2016) . . . . . . . . . . . . . . . . . . . . . . . . . . 7

United States v. Barnes,

295 F.3d 1354 (D.C. Cir. 2002) . . . . . . . . . . . . . . . . . . . 5

United States v. Lee,

79 F. Supp. 2d 1280 (D.N.M. 1999) . . . . . . . . . . . . . . 10

Yourman v. Giuliani,

229 F.3d 124 (2d Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . 7

OTHER AUTHORITIES

Air Force Instruction 10-245, Space Command

Supp. 1 (June 2, 2003) . . . . . . . . . . . . . . . . . . . . . . . . 8, 9

1

REPLY BRIEF

The Brief in Opposition (“BIO”) does not defend

Seminole Rock/Auer deference (“Auer deference”) on

the merits; it does not deny that Auer raises a litany of

practical concerns; and it does not challenge the conclusion

recently reached by several Justices that the Court should

decide this important question. In short, the government

does not contest that the issue is worthy of review.

The government instead portrays this case as a poor

candidate for reexamining Auer deference. But there

are no “vehicle” obstacles to deciding the issue in this

case. The Court clearly has jurisdiction. And, in contrast

to previous petitions seeking review of this issue, Auer

deference was the basis of decision below, the question has

been the focus of certiorari-stage briefing, and it will be

the focus of party and amicus briefing at the merits stage.

What the government instead seems to suggest, is

that this case is an imperfect vehicle because its facts

may not implicate each and every troubling aspect of

Auer deference. But this has never been the standard for

granting cases raising purely doctrinal issues, particularly

those cases in which the Court is reexamining precedent.

The concern is misplaced in any event. As Justice

Gorsuch (joined by The Chief Justice and Justice Alito)

has emphasized, agency deference in the governmentcontracting setting is especially problematic. Accordingly,

this is not just an appropriate case to reexamine Auer—it

is an ideal one. The Court should grant the petition and

decide this recurring question.

2

I.

The government neither defends Seminole Rock/

Auer deference nor denies the issue’s importance.

The doctrinal problems with this anachronistic

interpretative canon are well documented. Auer is

indefensible on the merits. Petition (“Pet.”) 17-23. No

principle of stare decisis justifies retaining it. Pet. 2326. And the unmatched latitude it grants agencies to

interpret their own ambiguous regulations distorts

administrative law in ways this Court never could have

foreseen. Auer deference is an ill-conceived and unevenly

applied interpretive canon that warrants reconsideration.

Auer is practically troubling too. It encourages

agencies to bypass notice-and-comment rulemaking and

rewards them for issuing vague regulations that deny fair

notice to those who must comply with these directives. Pet.

15-17. This harms individuals—often the disadvantaged

who lack access to the resources needed to stay abreast of

unclear, ever-changing regulatory commands. Pet. 18-20.

It harms States. Amicus Brief of the State of Utah et al.

(“States Br.”) 6-15. And it harms businesses operating in

every sector. Amicus Brief of the Chamber of Commerce

(“Chamber Br.”) 5-8.

For good reason, then, several Justices have urged

reconsideration of Auer deference. Pet. 1. Yet given the

chance to defend Auer, the government takes a pass.

It does not argue that Auer was rightly decided or rely

on stare decisis to justify upholding it. Nor does the

government characterize the issue as unworthy of review

for other reasons.1 In short, the government has declined

1. In passing, the government identifies petitions raising

this question that have been denied. BIO 15 n.3. But because

3

to contest that this is an important question that the Court

should settle in accordance with Rule 10(c).

II. This is an appropriate case for deciding whether to

overrule Seminole Rock/Auer deference.

Given the government’s implicit concession that this

question is worthy of review, the only remaining issue

is whether this is an appropriate case to decide it. The

government’s attempt to characterize this petition as a

“poor vehicle,” BIO 11, is misplaced for several reasons.

Foremost, none of the government’s complaints

raise a genuine vehicle problem. No “‘difficult and close’

jurisdictional issues ... would have to be settled” before

reaching the deference issue. Scenic America, Inc. v.

Department of Transp., 138 S. Ct. 2, 3 (2017) (Gorsuch, J.,

respecting denial of certiorari). The question presented

was the basis of decision below. Pet. 12; BIO 11. And the

issue has been fully briefed at the certiorari stage and

will be the focus at the merits stage. Decker, 568 U.S. at

615-16 (Roberts, C.J., concurring).

Rather than making arguments as to why this case

is an inappropriate vehicle for deciding the issue, the

government is simply of the view that this is not the

best case to decide it. But perfection is not the measure

this issue “goes to the heart of administrative law,” it should be

decided in an appropriate case. Decker v. Nw. Envtl. Def. Ctr., 568

U.S. 597, 616 (2013) (Roberts, C.J., concurring). In at least one of

these petitions, for example, the issue may not have been squarely

presented. Brief in Opposition, United Student Aid Funds, Inc. v.

Bible, No. 15-861 (March 7, 2016). That is not a concern here. Pet.

26-27; infra at 7-8; Chamber Br. 13-14; States Br. 20.

4

of suitability for review. Regardless, the government is

mistaken even accepting its premise that this issue should

be settled only when the stars align. This is an ideal case

to decide whether Auer should be overruled.

First, the government worries that a contracting

case presents an unusual posture. But like any Auer

case, the dispute turned on the proper interpretation of a

controlling regulation. Pet. 12. Here, the Federal Circuit

credited the government’s interpretation of the regulation

because that reading was not “plainly erroneous.” App.

8a, 13a (citing Auer v. Robbins, 519 U.S. 452, 461 (1997)).

The salient features of this case thus are no different than

any other raising this issue.

In fact, the circumstances of this case make it a strong

candidate for review. Deference is especially pernicious in

the government-contracting setting. Scenic America, 138

S. Ct. at 2 (Gorsuch, J., respecting denial of certiorari).

To be certain, “courts sometimes defer to an agency’s

interpretations of statutory law under Chevron ... and its

progeny.” Id. “But whatever one thinks of that practice in

statutory interpretation cases it seems quite another thing

to suggest that the doctrine (or something like it) should

displace the traditional rules of contract interpretation

too.” Id.; Chamber Br. 8-13.

Yet even if the Court eventually concludes that

Chevron is inapplicable to contract interpretation, Auer

deference still would leave a hole big enough to swallow the

rule. As here, the contract can (and usually does) provide

that it is subject to all agency regulations, which in turn

set forth most of the rules governing the relationship. Pet.

5-14. Thus, excising Chevron from government contracting

5

would be a pyrrhic victory unless Auer is overruled. The

agency still would prevail in a dispute “over the meaning

of an ambiguous term in [an] agreement” even if it received

no deference on its reading of the contract itself. Cf. Scenic

America, 138 S. Ct. at 2 (Gorsuch, J., respecting denial

of certiorari).

Second, the government argues that this case is a

poor vehicle because the concern that Auer leads agencies

to bypass notice-and-comment rulemaking “has no

application here.” BIO 16. Garco agrees that base access

regulations are exempt from notice and comment under

Section 553. Pet. 2-4. But as Judge Sentelle once put it:

“Just so, but so what?” United States v. Barnes, 295 F.3d

1354, 1369 (D.C. Cir. 2002) (Sentelle, J., dissenting). It

is unrealistic and baseless to suggest that a case is an

inappropriate vehicle for deciding a purely legal issue

unless it factually implicates every criticism of the

challenged doctrine.

It is unrealistic here given the sheer number of

problems with Auer. Pet. 14-23. For example, one issue in

this setting is that Auer allows the agency—a financially

interested party—to unilaterally decide whether it owes

money to its contracting partner. Pet. 19-20. But that

particular due process concern may be absent in noncontracting cases. Accordingly, the government could

easily say that the absence of this problem makes those

cases poor vehicles. Simply put, if the Court awaits a

petition implicating every concern Auer raises, it will

never have the chance to decide this concededly important

question.

6

The concern is baseless because the Court has never

held a petition squarely raising a purely legal question

to such a standard. Take, for example, what the Court

faced in Pearson v. Callahan, 555 U.S. 223 (2009). There

was increasing concern with the requirement that lower

courts decide, for qualified immunity purposes, whether

a constitutional right had been violated before deciding

whether that right was “clearly established.” Saucier

v. Katz, 533 U.S. 194 (2001). While Saucier was subject

to many attacks, two stood out. It forced rulings on

constitutional issues at “the pleading stage” even though

“the answer to whether there was a violation may depend

on a kaleidoscope of facts not yet fully developed.” Pearson,

555 U.S. at 238-39. And it “encourag[ed] courts to decide

unclear legal questions in order to clarify the law for the

future” even though many of the decisions would be “of

doubtful precedential importance” given their dependence

on “uncertain assumptions about state law.” Id. at 238.

The facts of Pearson did not implicate either criticism.

It was decided at summary judgment, id. at 228-29, and

liability rested on a Fourth Amendment issue that did not

implicate thorny state law issues, id. at 228-30. Yet that

did not deter the Court from granting review to revisit

Saucier.

The Court should follow that instinct here. Like

Pearson, this petition offers the Court an appropriate

opportunity to decide an “important matter involving

internal Judicial Branch operations.” Id. at 233-34. That

it may not implicate every criticism of Auer deference

should not deter the Court from granting review.

7

Third, the government claims the Court should not

hear this case because its interpretation of the regulation

would be upheld with or without Auer deference. BIO 1216. Again, though, that was not the basis of the Federal

Circuit’s ruling. The court below held only that the

government’s reading was not plainly erroneous under the

deferential Auer standard. App 10a-13a. The Auer issue

therefore is squarely presented, and the government does

not say otherwise. That the government, on remand, may

seek affirmance on an alternative ground is no basis for

denying certiorari. See, e.g., Sturgeon v. Frost, 136 S. Ct.

1061, 1072 (2016).

In fact, the government specifically argued below

that it could prevail without deference. Gov’t C.A. Br.

19. And when a court agrees, it frequently will say so.

See, e.g., Yourman v. Giuliani, 229 F.3d 124, 130 (2d Cir.

2000). That the Federal Circuit declined the government’s

invitation to decide this case without invoking Auer

suggests it “would have reached a different result under

a less deferential standard.” BIO 16. 2

2. Oddly, the government appears to fault Garco for not asking

the Federal Circuit to ignore the Auer framework. BIO 15-16. Garco

had no choice but to accept this deferential framework’s applicability

given this Court’s “prerogative of overruling its own decisions.”

Rodriguez de Quijas v. Shearson/American Express, Inc., 490

U.S. 477, 484 (1989). The government cannot be suggesting that

Garco should have asked the Federal Circuit to ignore controlling

precedent. Not only would it have been improper, there is of course

no requirement for Garco to engage in this futile act. That is why,

when this Court reconsiders precedent, more often than not the

issue is raised for the first time on certiorari or is addressed at the

Court’s invitation. Patterson v. McLean Credit Union, 485 U.S. 617,

617-19 (1988) (collecting cases).

8

On that score, the Federal Circuit explained that the

government’s reading of the regulation was not necessarily

the better one. It found “merit to Garco’s argument that

the plain meaning of ‘wants and warrants’ in isolation

suggests a check only for wants and warrants.” App. 9a.

That is, the Federal Circuit was not convinced that the

government could prevail without deference. Again, not

that it matters to the Court’s resolution of the question

presented, but there is every indication that “deference

to the agency ma[de] the difference.” Decker, 568 U.S. at

617 (Scalia, J., concurring in part and dissenting in part).

That the government now defends its reading of

the regulation based on an argument it never made

below is telling. The government newly argues that the

regulation merely “implemented an earlier Air Force

Space Command directive, which ‘specified requirements

for background checks’ for contractor employees.” BIO 1213 (citing Instruction 10-245). The reference to an “NCIC

wants and warrants check,” the government argues, was

just a “synonym for the type of NCIC criminal-history

background check that was already mandated by the Air

Force Space Command.” BIO 13.

But there is a reason why the government never

made this argument below: the cited section of this new

directive applies only to “[i]nstallation service contracts”

and directed bases to “include measures to preclude

the unmonitored presence of cleaning or other service

personnel.” Air Force Instruction 10-245, Space Command

Supp. 1, § 2.17.3 (June 2, 2003) (emphasis added). It does

not apply to Garco.

9

For construction contractors such as Garco, the

Air Force Space Command directed bases to develop

procedures to “check[] for outstanding warrants” in the

NCIC so that the “Visitor Control Center and Industrial/

Contractor gates” could “ensure quick and efficient

processing of personnel requiring entry” via “contractor

authority lists.” Id. at § 2.16.3.2. That is precisely what

Malmstrom did, Pet. 3-4, which is why the government

relied below only on the Malmstrom-specific “wants and

warrants” regulation to justify barring Talcott (Garco’s

subcontractor) employees from the base. Gov’t C.A. Br.

4-5, 11-12, 16-25.

But even if the newly discovered directive had

relevance here, it would not bolster the government’s

argument. If anything, the directive seems to require a

more robust background check than the base-specific rule

did. Yet it offers no guidance on who would be excluded

from Malmstrom as a result of that check, unless the

directive is interpreted to exclude all felons. But not

even the government supports that reading given that

the revised Malmstrom regulation excludes only those

individuals with “outstanding wants or warrants, sex

offenders, violent offenders, those who are on probation,

and those who are in a pre-release program.” App. 60a.

This new argument thus inevitably suffers from the

same flaw as the old ones: after this dispute arose, the

base made a “large change” and issued a rule reflecting

a policy markedly different from the one in place when

this contract was signed. App. 110a. The government, in

other words, has “vividly illustrated that it can write a

rule saying precisely what it means.” Decker, 568 U.S. at

616 (Scalia, J., concurring in part and dissenting in part);

10

Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718,

1723 (2017) (“[D]ifferences in language like this convey

differences in meaning.”).

The government thus falls back to the argument that,

despite its fidelity to the text, Garco’s reading is untenable

because it would potentially open the base to convicted

terrorists and spies. BIO 14. But that farfetched scenario

could happen even under the revised regulation, which

“clarified” that only sex offenders, violent criminals, and

those with a want or warrant, on probation, or in a prerelease program are excluded. BIO 17. A person convicted

under the Espionage Act, therefore, would not be barred

by that regulation. See, e.g., United States v. Lee, 79 F.

Supp. 2d 1280, 1284 (D.N.M. 1999) (“Dr. Lee is alleged to

have violated the Atomic Energy Act ... and the Espionage

Act ... neither of which involves crimes of violence or

narcotic drugs.”). It is difficult to label Garco’s reading of

the regulation as absurd when the base’s “clarified” rule

is subject to the same line of attack.

Of course, Talcott would never have brought such an

individual on the base, and any suggestion to the contrary

finds no record support. The company had worked on the

base for over 20 years without incident. Pet. 5. Moreover,

the base has the authority to deny access to anyone it

wishes at any time, and it may update the access criteria

to reflect its policy priorities or to address concerns

it might have with existing regulations. But what the

government may not do is change the base-access rules

after Garco accepts the contract, withhold payment from

its subcontractor for its increased labor costs, and then

hide behind deference to avoid upholding its end of the

bargain. If the government believes that it can win this

11

dispute without deference, it can try to do so on remand

if the Court overrules Auer.

Fourth, the government believes that review is

unwarranted because this “interpretation ... has no

ongoing significance beyond this case.” BIO 18. Yet the

agency, once challenged, can always revise the regulation

and then label the backward-looking dispute insignificant.

But it is the canon’s retroactive effect that makes Auer

so problematic. If agencies truly wanted to diminish this

issue’s significance, they would disclaim the “flexibility”

Auer affords them to issue regulatory “clarification[s]”

that have this painfully “retroactive effect.” Decker, 568

U.S. at 620 (Scalia, J., concurring in part and dissenting in

part). It is this leverage, though, that makes it so enticing

for agencies to issue “vague and open-ended regulations

that they can later interpret as they see fit.” Christopher

v. SmithKline Beecham Corp., 567 U.S. 142, 158 (2012).

Regardless, this issue is significant to Talcott,

a small Montana business that has been fighting for

nearly a decade to recover almost $500,000 from the

government. Pet. 6-13. It also is significant to the countless

other businesses often victimized by the retroactive

“clarification” Auer permits. Chamber Br. 6-8. Few

individuals and regulated entities can enlist “an army of

perfumed lawyers and lobbyists” to “remain alert to the

possibility that the agency will reverse its current view

180 degrees anytime based merely on the shift of political

winds.” Gutierrez-Brizuela v. Lynch, 834 F.3d 1142, 1152

(10th Cir. 2016) (Gorsuch, J., concurring). Especially now

that these clarifications “appear almost anywhere,” it is

nearly impossible to “keep track of an agency’s shifting

views.” Chamber Br. 6-7.

12

In the end, problems of this kind may not meet the

government’s definition of significant. But they do meet the

Court’s. Pet. 14-17. This important and recurring question

of administrative law should be decided.

CONCLUSION

The petition for writ of certiorari should be granted.

Respectfully submitted,

Steven D. Meacham

William S. Consovoy

Peel Brimley LLP

Counsel of Record

3333 East Serene Avenue, Bryan K. Weir

Jennifer L. Mascott

Suite 200

Consovoy McCarthy Park PLLC

Henderson, NV 89074

George Mason University

(702) 990-7272

A ntonin Scalia Law School

Supreme Court Clinic

3033 Wilson Boulevard, Suite 700

Arlington, VA 22201

(703) 243-9423

will@consovoymccarthy.com

Counsel for Petitioner

December 19, 2017