# Record and brief — Perez v. Mortg. Bankers Ass'n, 134 S. Ct. 2820 (2014) (No. 13-1041) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385015_0961%3A0 ## Record - **Collection:** Supreme Court brief - **Document type:** Record and brief - **Published:** January 1, 2014 ## Text No. 13-1041 Vide 13-1052 Title Docketed: Thomas E. Perez, Secretary of Labor, et al., Petitioners Vv Mortgage Bankers Association, et al March 3, 2014 Linked with 13A636 Lower Ct United States Court of Appeals for the Distnct of Columbia Circuit Case Nos (12-5246) Decision Date: July 2, 2013 Rehearing Denied: October 2, 2013 Questions Presented ~~~Date~—~ Dec 18 2013 Dec 19 2013 Jan 17 2014 Jan 21 2014 Feb 18 2014 Feb 28 2014 Mar 24 2014 Mar 26 2014 May 2 2014 May 20 2014 May 21 2014 Jun 9 2014 Jun 16 2014 Jun 26 2014 Jul 7 2014 ~~~~~~~Proceedings and Orders~~—~~—~—~ ~~~ ~~~ Application (13A636) to extend the time to file a petition for a writ of certiorari from December 31, 2013 to January 30, 2014, submitted to The Chief Justice Application (13A636) granted by The Chief Justice extending the time to file until January 30, 2014 Application (13A636) to extend further the time from January 30, 2014 to February 28 2014, submitted to The Chief Justice Application (13A636) granted by The Chief Justice extending the time to file until February 28, 2014 Consent to the fling of amicus curiae briefs, in support of efher party or of neither party, received from counsel for respondent. VIDED. Petition for a wrt of certiorari filed. (Response due April2, 2014) Order extending time to file response to petition to and including May 2, 2014 Bnef amici curiae of Administrative Law Scholars filed. VIDED. Brief of respondent Mortgage Bankers Association in opposition filed. VIDED DISTRIBUTED for Conference of June 5, 2014. Reply of petitioner Thomas E. Perez, Secretary of Labor filed. (Distributed) DISTRIBUTED for Conference of June 12, 2014 Petition GRANTED The petition for a writ of certiorari in No. 13-1052 is granted. The cases are consolidated and a total of one hour is allotted for oral argument Motion to dispense with printing the joint appendix filed by petitioner Thomas E Perez, Secretary of Labor The time to file the joint append& and petitioners’ bnefs on the mens is extended to and including August 13, 2014. VIDED Jul 7 2014 Jul 21 2014 Aug 112014 Aug 112014 Aug 20 2014 Aug 20 2014 Sep 4 2014 Sep 9 2014 Sep 22 2014 Sep 26 2014 Oct 9 2014 Oct 16 2014 Oct 16 2014 Oct 16 2014 Oct 16 2014 Oct 16 2014 Oct 16 2014 Oct 16 2014 Oct 16 2014 Oct 16 2014 Oct 16 2014 Oct 16 2014 Oct 16 2014 Oct 27 2014 Oct 28 2014 Nov 10 2014 Nov 10 2014 Nov 10 2014 Dec 1 2014 Mar 9 2015 The time to file respondents’ brief(s) on the merits is extended to and including September 25, 2014. VIDED Motion to dispense with printing the joint appendix filed by petitioner GRANTED. The time to file the joint appendix and petitioner's briefs on the ments is further extended to and including August 20, 2014. VIDED The time to file respondents’ brief(s) on the merits is further extended to and including October 9, 2014. VIDED Brief of petitioners Thomas E. Perez, Secretary of Labor, et al. filed. VIDED. Brief of petitioners in No. 13-1052, Jerome Nickols, et al. filed. SET FOR ARGUMENT on Monday, December 1, 2014. VIDED Consent to the fling of amicus curiae briefs in support of either party or of neither party from counsel for the respondents. VIDED Record requested from U.S.C.A. Dist. of Columbia Circuit. Record received from U.S.D.C. Dist. of Columbia Circuit. The record is electronic and located on PACER. Brief of respondents Mortgage Bankers Association, et al. filed. VIDED. Brief amicus curiae of National Mining Association filed. VIDED. Brief amici curiae of National Federation of Independent Business, et al. filed. VIDED. Brief amici curiae of Washington Legal Foundation and Allied Educational Foundation filed. VIDED. Brief amici curiae of Cato Institute, et al. filed. VIDED. Brief amici curiae of American Hospital Association, et al. filed. VIDED. Brief amici curiae of Utiity Air Regulatory Group and American Forest & Paper Association filed. VIDED. Brief amicus curiae of Quicken Loans Inc. fied. VIDED. Brief amicus curiae of Thomas Jefferson Institute for Pubic Policy fied. VIDED. Brief amicus curiae of Center for Constitutional Jurisprudence filed. VIDED. Motion for divided argument filed by petitioners Jerome Nickols, et al. VIDED. Brief amici curiae of State and Local Government Associations filed. VIDED. (Distributed) Brief amici curiae of Chamber of Commerce of the United States of America, et al. filed. VIDED. CIRCULATED. Opposition of petitioners Perez, et al. to motion of Nickols, et al. for divided argument fied. VIDED Motion for divided argument filed by petitioners Jerome Nickols, et al. DENIED. Reply of petitioners Thomas E. Perez, Secretary of Labor fled. VIDED. (Distributed) Reply of petitioners in No. 13-1052, Jerome Nickols, et al., filed. (Distributed) Argued. For petitioners: Edwin S. Kneedler, Deputy Solicitor General, Department of Justice, Washington, D. C. For respondents: Allyson N. Ho, Dallas, Tex. Judgment REVERSED. Sotomayor, J., delivered the opinion of the Court, in which Roberts, C. J., and Kennedy, Ginsburg, Breyer, and Kagan, JJ., joined, and in which Alto, J., joined except for Part Ill-B. Alito, J., filed an opinion concuring in part and concurring in the judgment. Scalia, J., and Thomas, J., filed opinions concurring in the judgment. VIDED Apr 102015 JUDGMENT ISSUED. PETITION FOR WRIT OF CERTIORARI — Lom 104] BRIEFS In the Supreme ~ of the Gnited States THOMAS E. PEREZ, SECRETARY OF LABOR, ET AL., PETITIONERS v. MORTGAGE BANKERS ASSOCIATION, ET AL. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT PETITION FOR A WRIT OF CERTIORARI DONALD B. VERRILLI, JR. Solicitor General Counsel of Record STUART F. DELERY Assistant Attorney General EDWIN S. KNEEDLER Deputy Solicitor General ANTHONY A. YANG Assistant to the Solicitor General DOUGLAS N. LETTER ANTHONY J. STEINMEYER Attorneys Department of Justice Washington, D.C. 20530-0001 SupremeCtBriefs@usdoj.gov (202) 514-2217 Library of Conress Law Libtary QUESTION PRESENTED The Administrative Procedure Act (APA), 5 U.S.C. 551 et seq., generally provides that “notice of proposed rule making shall be published in the Federal Regis- ter,” 5 U.S.C. 553(b), and, if such notice is required, the rulemaking agency must give interested persons an opportunity to submit written comments, 5 U.S.C. 553(c). The APA further provides that its notice-and- comment requirement “does not apply * * * to interpretative rules,” unless notice is otherwise re- quired by statute. 5 U.S.C. 553(b)(A). No other stat- ute requires notice in this case. The question present- ed is: Whether a federal agency must engage in notice- and-comment rulemaking before it can significantly alter an interpretive rule that articulates an interpre- tation of an agency regulation. (1) PARTIES TO THE PROCEEDING Petitioners are Thomas E. Perez, Secretary of La- bor; the Department of Labor; and Laura A. Fortman, Principal Deputy Administrator, Wage and Hour Divi- sion, Department of Labor. Respondent Mortgage Bankers Association was plaintiff-appellant below. Respondents Beverly Buck, Ryan Henry, and Je- rome Nickols were intervenors-appellees below. (ID) TABLE OF CONTENTS Page Sern. csssenieracansensupiniomiminaneateinntainnestniisenienniiianaiatiaidmaiiuiiiel 1 eT cistrnictscancenrnincnstaindtnsitnninennstsiiininntenniininiiimaaaimmainiieiiies 1 Statutory provisions involved ...............siececcessseccessessecserscsseensenees 2 Bt Pcsicerntsnsicnncnnsensannnscnneamncncintinninaeminincemiuninmenisnameddintninntel 2 Reasons for granting the petition...................-ccssescessesserseveeseenens 9 A. The court of appeals erred in holding that an interpretive rule that alters the agency’s previous interpretation of a substantive regulation must be promulgated through notice-and-comment TTT sisi csiniiiietiteiaeiaeahitainen inten initiiintiinaaetsiniit 10 B. The courts of appeals are divided on the question Ti icicicinccicilcinnitncinisnninnitaiiiainlinpaaiunitindiisitnininaiiiasiaseais 16 C. Review is warranted to resolve an important and recurring question of administrative law...................++ 19 SR cinncccmssinenenentiivniciensnniuiaiapstitiaiieseninaissainbiniiitapaatiaitiitamasis 22 Appendix A — Court of appeals opinion (July 22, 2013)....... la Appendix B — District court opinion (June 6, 2012)........... 13a Appendix C — Administrator’s Interpretation RE 49a Appendix D — Opinion Letter (Sept. 8, 2006)...................... 70a Appendix E — Court of appeals order denying rehearing iia HACIITITTiintintsacnncntsiinsniennitansedinnsanaiesianiaial 85a Appendix F — Statutory provisions .......................sccessesseeees 87a TABLE OF AUTHORITIES Cases: Abraham Lincoln Mem1l Hosp. v. Sebelius, ee tN ED ciiesitniscintisisetitaitiiparanienneneaneenitini 19 Alaska Prof Hunters Ass’n v. FAA, 177 F.3d 1030 le EE BEE denentnniencnaninsninnnveninninininnnptiinniaaaiaial 8,11, 19 Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697 (1945)............+. 3 Chrysler Corp. v. Brown, 441 U.S. 281 (1979)............... 13, 15 (IIT) Cases—Continued: Page Environmental Integrity Project v. EPA, 425 F.3d a pas MAP, UII ictcticsehehinaeeteimennseeinineniiiiionelianmicin 15 Erringer v. Thompson, 371 F.3d 625 (9th Cir. 2004) ......... 18 FCC v. Fox Television Stations, Inc., 556 U.S. 502 SIs iisicietisheestsiiiiliinadageildiciebdeiabaiaitanibiiaapaiaiiatamneiad 11, 12 Good Samaritan Hosp. v. Shalala, 508 U.S. 402 Sarai icceschesciiilpaiadeiiahitaianiiiapiuaidiieliainieaia Diaseeelielinianiiadassldidalaenieits 14 Hoctor v. United States Dep't of Agric., 82 F.3d 165 STIs SITIITTITTA coisccnsesicsocenvesiinceeinpcieniiniiiniainaeibinlpiasuibianasetnien 14 Leavitt v. Baystate Health Sys., 547 U.S. 1054 (2006).......20 Lincoln v. Vigil, 508 U.S. 182 (1998) ...............scsecceesseeseesees 12 Long Island Care at Home, Ltd. v. Coke, 551 U.S. Sarr sisccnsedihescetaeeabteiiapnihilianamenianiabiadiiniaiddindeanaiite 12 MetWest Inc. v. Secretary of Labor, 560 F.3d 506 is SI TTI iene ania 7 Miller v. California Speedway Corp., 536 F.3d 1020 IN NEAIINE. SITITTTcssnicspeiennieniesitnbapsiiebiinineniniaiaitaneitiiniiantempiutnieitiands 17, 18 NLRB v. Bell Aerospace Co., 416 U.S. 267 (1974)............... 15 Norton v. Southern Utah Wilderness Alliance, Be sicsinncttsiantiapenineniinmenitigrniimnneatinnsnenee 13 Paralyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997), cert. denied, ee ST cccinicssiinenstintennicnnsaentianeiniiiiaibiacmnsinniel 6, 10 SBC Inc. v. FCC, 414 F.3d 486 (8d Cir. 2005).................0. 17 Shalala v. Guernsey Mem Hosp., 514 U.S. 87 (ir inssessireersisetaniceiiienscinaiteninsiiimaneapanamaatiasesibimaiiataiiinns 12, 15, 20, 21 Shell Offshore Inc. v. Babbitt, 238 F.3d 622 Sa TT AITTTTIEI cichrhinehiceseierntenrnieridepanineanainiineeneansiasieniiabnataiiinaniinaiee 17 Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 Cases—Continued: Page Tripoli Rocketry Ass'n v. United States Bureau of Alcohol, Tobacco, Firearms & Explosives, Ne 6 Vermont Yankee Nuclear Power Corp. v. NRDC, ee es I cercncereieenessninnsesedastncimapticensiinnaniis 11, 16, 19 Warder v. Shalala, 149 F.3d 73 (1st Cir. 1998), cert. denied, 526 U.S. 1064 (1999)................-s-ssssesecseseenseeees 18 Wong Yang Sung v. McGrath, 339 U.S. 33 (1950).............. 16 Woods v. Interstate Realty Co., 337 U.S. 535 (1949) .......... 18 Statutes and regulations: Administrative Procedure Act, 5 U.S.C. 551 CO, ccccstimiatmmintenene 2, 8, 9, 10, 11, 21 Sn ITE aicssinsstnibintninntidesiininiieeneniinadiaiiamniniamasiediaiael 3, 11 SOEs ITT sinisiichsicchitieiimiasiiteiteiaaticinmceitiaabaaniaiiaints 2,12, 15 ns hcsinitissiccinsiininindinaniticisiigiaaaieaidishintaiaammtall 2, 10, 12 Nicaea iiaialaieibaiaieileadliceinaiaiiaaail 16 ITE hsitisstininisncscisiseiiiienincinenisciaieniiiiiiuidiiiniiaiaiieaiiamauel 16 i SarTTrTTTITtc TTT chiinieniincitenintnincelieaiiaannsiaiaiiiiiaeaibnaai 2, 16, 19 ts UIT cishicsinteiiicesitensinidiniatianniasauniiaiiiineammmnabinaie’ 3,11 a I io ciccricinnternintineitccinsicesblinininoiaia 3, 6, 10, 11 rs ta sosctniesiehintiencesthsecnscintdiptahaeaaanitacaaiapatniaaiattal 3,11 Fair Labor Standards Act of 1938, 29 U.S.C. 201 CGD, cnnetsnmnemnmseseremmenmneiamemnecmnnnel 3 one 3 Fe te Se aenicrnnennnnninicarinnittcnemncanenienintinpacannamat 3 es SE cenrccesemensptennncenemnnenieivionnmnat 3, 11 Portal-to-Portal Act of 1947, 29 U.S.C. 251 et seg. ........... 3,7 I iccccnissiniictneneicsimmcinnniieninieininenemeninmuel 3, 4 eT ss nscsrcneerineateiaininendtiteninmanieeematinl 4 Se: | 20 VI Statute and regulations—Continued: Page EE ae aN ee ee RT 20 29 C.F.R.: iia aaa aaa 4 I keihin i aaa aiid 4 TE scene nanan ea RET 4,7 IT icciicreoniiriaeeieeiiiiaenineiaiigmnininunitel 5 Miscellaneous: is Se ee et ED cerserrtesscnnenerenstnneneimnenenenesinnnes 4 Final Report of the Attorney General’s Committee on Administrative Procedure, S. Doc. No. 8, 77th SE, Fe es GD cctrcscccecccerennenennnesenemenesimenennes 13 Richard W. Murphy, Hunters for Administrative Common Law, 58 Admin. L. Rev. 917 (2006)................... 16 Richard J. Pierce, Jr., Distinguishing Legislative Rules from Interpretative Rules, 52 Admin. L. Rev. Antonin Scalia, Vermont Yankee: The APA, the D.C. Circuit, and the Supreme Court, 1978 Sup. Ct. Rev. TT tivsntetniieentreceenatmemmnimmanninbienimmnninens 16 U.S. Dep’t of Justice, Attorney General’s Manual on the Administrative Procedure Act (1947).................+. 13, 15 U.S. Gov’t Accountability Office, GAO-09-205, Federal Rulemaking (2009) .........scsssssesesssecsseerssssseceseeessess 21 Wage & Hour Div., U.S. Dep’t of Labor: Opinion Letter (May 17, 1999), 1999 WL 100240) ......... 4 Opinion Letter (Feb. 16, 2001), 2001 WL 1558764.......... 4 14D Charles Alan Wright et al., Federal Practice and Procedure (4th ed. 2018)...........ccccccccscccsccscscoccesccccsescees 20 In the Supreme Court of the GAnited States No. THOMAS E.. PEREZ, SECRETARY OF LABOR, ET AL., PETITIONERS Vv. MORTGAGE BANKERS ASSOCIATION, ET AL. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT PETITION FOR A WRIT OF CERTIORARI The Solicitor General, on behalf of the Secretary of Labor and the other federal petitioners, respectfully petitions for a writ of certiorari to review the judg- ment of the United States Court of Appeals for the District of Columbia Circuit in this case. OPINIONS BELOW The opinion of the court of appeals (App., infra, la- 12a) is reported at 720 F.3d 966. The opinion of the district court (App., infra, 13a-48a) is reported at 864 F. Supp. 2d 193. JURISDICTION The judgment of the court of appeals was entered on July 2, 2013. A petition for rehearing was denied on October 2, 2013 (App., infra, 85a-86a). On Decem- ber 19, 2013, the Chief Justice extended the time with- in which to file a petition for a writ of certiorari to and (1) 2 including January 30, 2014. On January 21, 2014, the Chief Justice further extended the time to February 28, 2014. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATUTORY PROVISIONS INVOLVED The pertinent statutory provisions are set forth in the appendix to the petition. App., infra, 87a-99a. STATEMENT 1. a. This case concerns whether the Administra- tive Procedure Act (APA), 5 U.S.C. 551 et seq., re- quires a federal agency to follow notice-and-comment rulemaking procedures before it may alter an “inter- pretive” rule that articulates an interpretation of an agency regulation. The APA defines “rule making” as an “agency pro- cess for formulating, amending, or repealing a rule.” 5 U.S.C. 551(5). The Act further defines “rule” to encompass a broad range of agency “statement/s]” serving various functions, including statements that are “designed to * * * interpret * * * law” as well as statements that are designed “to implement * * * or prescribe law.” 5 U.S.C. 551(4). More specifically, the Act defines “rule” to “mean{[] the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency.” /bid. Section 4 of the APA, 5 U.S.C. 553, governs the process of agency rulemaking. Section 4(a) provides that “[gleneral notice of proposed rule making shall be published in the Federal Register, unless persons subject thereto are named and either personally served or otherwise have actual notice thereof.” 3 5 U.S.C. 553(b). Section 4(b) further provides that, if “notice [is] required by this section,” the agency, after giving such notice, “shall give interested persons an opportunity to participate in the rule making through submission of written [comments]” and consider those comments before promulgating the rule. 5 U.S.C. 553(c). Section 4, however, provides that the APA’s notice- and-comment requirement “does not apply” to “inter- pretative rules, general statements of policy, or rules of agency organization, procedure, or practice.” 5 U.S.C. 553(b)(A). b. Congress enacted the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C. 201 et seq., to protect work- ers by establishing federal minimum-wage and over- time guarantees. See Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 706-707 & n.18 (1945); see also 29 U.S.C. 206 (minimum wage), 207 (overtime pay). The FLSA, however, exempts from its minimum-wage and over- time requirements “any employee employed in a bona fide executive, administrative, or professional capacity * * * or in the capacity of outside salesman (as such terms are defined and delimited from time to time by regulations of the Secretary, subject to the provisions of [5 U.S.C. 551-559]).” 29 U.S.C. 213(a)(1). Congress contemplated that, in the course of its administration of the FLSA, the Department of Labor (Department) would from time to time modify or re- scind its administrative measures such as regulations, rulings, and interpretations. See 29 U.S.C. 259(a). The Portal-to-Portal Act of 1947, 29 U.S.C. 251 et seq., accordingly provides that an employer sued for al- leged FLSA violations “shall [not] be subject to any liability” for failing “to pay minimum wages or over- 4 time compensation” under the FLSA if the employer establishes that its “act or omission complained of was in good faith in conformity with and in reliance on any written administrative regulation, order, ruling, ap- proval, or interpretation, of [the Administrator of the Department’s Wage and Hour Division],” even if that agency guidance has since been “modified or rescind- ed.” 29 U.S.C. 259(a) and (b)(1). The Department has promulgated regulations us- ing notice-and-comment rulemaking that define and delimit the categories of FLSA-exempt employees. See, e.g., 29 C.F.R. Pt. 541 (1998); 3 Fed. Reg. 2518 (Oct. 20, 1938) (original Part 541 regulations). In 2004, the Department revised those regulations using notice-and-comment rulemaking. 29 C.F.R. Pt. 541. The current regulations provide, in pertinent part, that “an employee whose primary duty is selling fi- nancial products does not qualify for the administra- tive exemption.” 29 C.F.R. 541.203(b). 2. This case involves the Department’s interpreta- tion of its FLSA regulations in the context of mort- gage-loan officers. In 1999 and 2001, the Wage and Hour Division issued Opinion Letters in which it in- terpreted the then-existing regulations and concluded that mortgage-loan officers are not FLSA-exempt employees, 2.e., the FLSA’s minimum-wage and over- time requirements apply to those employees.’ After the Department revised its FLSA regulations in 2004, respondent Mortgage Bankers Association (MBA or Association), a national trade association ' See Wage & Hour Div., U.S. Dep’t of Labor, Opinion Letter (Feb. 16, 2001), available at 2001 WL 1558764; Wage & Hour Div., U.S. Dep’t of Labor, Opinion Letter (May 17, 1999), available at 1999 WL 1002401. 5 representing real-estate-finance companies, requested an opinion from the Wage and Hour Division on whether mortgage-loan officers are FLSA exempt. App., infra, 3a, 20a n.3. In 2006, the Division’s Ad- ministrator issued a letter opining that mortgage-loan officers are exempt administrative employees under those regulations. Jd. at 70a-84a. In 2010, the Wage and Hour Division revisited the issue and revised its interpretation of the governing regulations in an Administrator’s Interpretation. App., infra, 49a-69a. That Interpretation reanalyzed provisions of the 2004 regulations and considered judicial decisions addressing the administrative ex- emption. /d. at 50a-69a. The Department concluded that “employees who perform the typical job duties of a mortgage loan officer, as described” in the Interpre- tation, “have a primary duty of making sales for their employers and, therefore, do not qualify” for the ex- emption for “administrative” employees under the FLSA’s implementing regulations. App., infra, 49a- 50a, 52a, 69a. At the same time, the Department withdrew its 2006 Opinion Letter, explaining that the Letter had been based on an erroneous reading of a regulation addressing work performed incidental to, and in conjunction with, an employee’s own sales or © solicitations (29 C.F.R. 541.500(b)). App., infra, 59a & n.3. The Department did not utilize notice-and- comment rulemaking to issue its 1999, 2001, and 2006 Opinion Letters or its 2010 Administrator’s Interpre- tation. 3. a. Respondent MBA filed this APA action in district court to vacate and set aside the 2010 Admin- istrator’s Interpretation. App., infra, 13a-14a, 28a. Respondents Buck, Henry, and Nickols (former mort- 6 gage-loan officers) intervened. 2/13/2012 Order 1-2 (Doc. 25). MBA argued that the 2010 Administrator’s Inter- pretation was invalid on two grounds. First, the Asso- ciation argued that the interpretation was procedural- ly invalid because APA notice-and-comment rulemak- ing was required for the agency to be able to express its revised reading of its regulation in an interpretive rule. App., infra, 28a. Second, the Association argued that the interpretation is substantively invalid because it is inconsistent with the regulations it interprets and, thus, was “arbitrary, capricious, an abuse of discre- tion, and otherwise not in accordance with law.” Ibid. (citation omitted). The government argued that, as relevant here, the Administrator’s Interpretation was an “interpretive” rule and that the APA exempts such “interpretive rules” from notice-and-comment rulemaking. Gov't Cross Mot. to Dismiss 14-15 (Doc. 15) (citing 5 U.S.C. 553(b)(A)); see id. at 15 n.8 (“There is no dispute be- tween the parties that the 2010 [Administrator’s In- terpetation] is an interpretive rule.”). MBA acknowl- edged that the government was “correct” that the 2010 Administrator’s Interpretation was an interpre- tative rule, but argued that its status as an interpreta- tive rule is “of no moment” because an “‘interpretative rule[]} * * * still may be subject to notice-and- comment rulemaking’ under Paralyzed Veterans [of Am. v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997), cert. denied, 523 U.S. 1003 (1998),] and its progeny.” MBA Reply in Supp. of Mot. for Summ. J. 7 n.10 (Doc. 17) (quoting Tripoli Rocketry Ass’n v. United States Bureau of Alcohol, Tobacco, Firearms & Explosives, 337 F. Supp. 2d 1, 12 (D.D.C. 2004)). 7 b. The district court granted summary judgment to the government. App., infra, 13a-48a. First, the district court concluded that the De- partment did not have to use notice-and-comment rulemaking to revise its prior interpretation of its regulations. App., infra, 32a-44a. The district court explained that the D.C. Circuit’s Paralyzed Veterans precedents controlled, id. at 32a-37a, but concluded that they would require notice-and-comment rulemak- ing only if the affected party had “substantial[ly] and justifiabl[y] reli[ed] on a [prior] well-established agen- cy interpretation,” id. at 40a (quoting MetWest Inc. v. Secretary of Labor, 560 F.3d 506, 511 (D.C. Cir. 2009) (emphasis omitted)). See id. at 37a-4la. The court found that the Association had failed to establish such reliance. Jd. at 4la-44a. The court stated, inter alia, that the Portal-to-Portal Act’s defense for good-faith reliance on a prior agency interpretation undermined the Association’s argument that notice-and-comment rulemaking was required to protect the reliance inter- ests of its members. /d. at 43a-44a. Second, the district court upheld the Administra- tor’s Interpretation on its merits. App., infra, 44a- 47a. The court concluded that the agency’s interpre- tation of its FLSA regulations was “persuasive,” find- ing it “clear” on the face of the regulations that the Association’s contrary position was based on a mis- reading of 29 C.F.R. 541.203(b). App., infra, 44a, 46a. The court accordingly held that the 2010 interpreta- tion was “not arbitrary, capricious, an abuse of discre- tion, or otherwise not in accordance with the law.” Jd. at 47a. 4. a. On appeal, MBA argued only that the 2010 Administrator’s Interpretation was procedurally inva- 8 lid under Paralyzed Veterans. See MBA C.A. Br. 2, 20-21. The Association abandoned its contention that the interpretation was arbitrary, capricious, an abuse of discretion, or otherwise contrary to law. See id. at 1-56; MBA C.A. Reply Br. 1-29. b. The D.C. Circuit reversed and remanded with instructions to vacate the 2010 Administrator’s Inter- pretation. App., infra, la-12a. The court of appeals explained that, under its Par- alyzed Veterans cases, “[w]hen 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 com- ment.” App., infra, 2a (quoting Alaska Prof’l Hunters Ass’n v. FAA, 177 F.3d 1030, 1034 (D.C. Cir. 1999)) (brackets in original). That conclusion, the ecurt ex- plained, rests on the “operative assumption” tha: “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.” /d. at 5a n.3. The court of appeals further concluded that the relevant analysis under Paralyzed Veterans “contains just two elements: definitive interpretations (‘defini- tiveness’) and a significant change (‘significant revi- sion’).” App., infra, at 5a. The court of appeals thus rejected the government’s argument that the rule of Paralyzed Veterans incorporates an element of reli- ance. Jd. at 6a-12a. The court held that although reliance can in some contexts be relevant to whether a prior agency interpretation was sufficiently definitive, reliance is not itself a distinct requirement under Paralyzed Veterans. Id. at 9a. 9 The court of appeals observed that the government “conceded the existence of two definitive—and con- flicting—agency interpretations.” App., infra, 3a. The court accordingly held that, under its Paralyzed Veterans jurisprudence, the 2010 Administrator In- terpretation, which significantly revised the agency’s 2006 Opinion Letter, must be vacated. Jbid. The court emphasized that it took “no position on the mer- its of [the 2010] interpretation” and stated that the Department was entitled to “readopt” that interpreta- tion in the future but must “conduct the required notice and comment rulemaking” before it does. Jbid. Finally, the court of appeals recognized that “the Courts of Appeals are split on the issue” whether Paralyzed Veterans correctly requires notice-and- comment rulemaking to modify an interpretive rule. App., infra, 5a n.3. The court observed, however, that it was bound by its own precedent and “decline[d] the government’s invitation to ‘call’ for ‘the full Court [to] * * * lay the Paralyzed Veterans doctrine to rest.’” Jd. at 2a n.1 (second brackets in original). ce. The court of appeals denied respondents Buck, Henry, and Nickols’ petition for rehearing en banc. App., infra, 85a-86a. REASONS FOR GRANTING THE PETITION This case concerns an important and recurring question of administrative law: Whether a federal agency is required to conduct notice-and-comment rulemaking before it may correct or significantly revise its own interpretation of a substantive regula- tion. The D.C. Circuit’s rule that such formal rule- making is required is contrary to the unambiguous text of the Administrative Procedure Act and conflicts with this Court’s teachings on the proper scope of 10 APA review. Moreover, the D.C. Circuit in this case eliminated the need for plaintiffs even to show reli- ance on the prior regulatory interpretation that an agency seeks to revise. An agency thus must now undertake notice-and-comment rulemaking simply to explain to the public that the agency has corrected or revised its previous legal interpretation of a regula- tion in some significant way—even if no one has ever relied on the prior interpretation. As the D.C. Circuit acknowledged, the courts of appeals are divided over whether the APA ever re- quires an agency to use notice-and-comment rulemak- ing to alter its prior interpretation of a regulation. App., infra, 5a n.3. The adverse impact of the D.C. Circuit’s doctrine from Paralyzed Veterans of Ameri- ca v. D.C. Arena L.P., 117 F.3d 579 (1997), cert. de- nied, 523 U.S. 1003 (1998), is especially significant because nearly all federal agencies are subject to suit in the District of Columbia and because of the promi- nent role that the D.C. Circuit plays in federal admin- istrative law as a result. This Court’s review is war- ranted. A. The Court Of Appeals Erred In Holding That An In- terpretive Rule That Alters The Agency’s Previous In- terpretation Of A Substantive Regulation Must Be Promulgated Through Notice-And-Comment Rule- making This case is controlled by two fundamental rules of administrative law. First, the APA itself expressly exempts the formulation, amendment, and repeal of interpretive rules from the Act’s notice-and-comment rulemaking provisions. 5 U.S.C. 553(b)(A); see 5 U.S.C. 551(5). Second, the APA “sets forth the full extent of judicial authority to review executive agency 11 action for procedural correctness.” FCC v. Fox Tele- vision Stations, Inc., 556 U.S. 502, 513 (2009) (citing Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 545-549 (1978)). The D.C. Circuit’s Para- lyzed Veterans doctrine, which requires agencies to engage in notice-and-comment rulemaking to revise an interpretive rule that construes a substantive agency regulation, cannot be squared with those prin- ciples.” 1. Section 4 of the APA generally directs that a “notice of proposed rule making shall be published in the Federal Register.” 5 U.S.C. 553(b). If such notice is required, the agency must also give interested per- sons “an opportunity to participate in the rule making through submission of written [comments].” 5 U.S.C. 553(c). Section 4, however, specifies that, unless “no- tice or hearing is required by statute,” the APA’s notice-and-comment rulemaking requirement “does not apply * * * to interpretative rules.” 5 U.S.C. 553(b)(A) (emphasis added).* The APA’s definition of “rule making” demon- strates that this exemption from the notice-and- comment rulemaking requirement applies not only when an agency formulates an interpretive rule in the * Although Paralyzed Veterans articulated its notice-and- comment requirement in dictum, the D.C. Circuit later elevated that requirement to a holding in Alaska Professional Hunters Ass'n v. FAA, 177 F.3d 1030 (D.C. Cir. 1999). * No other statute requires notice in this case. The FLSA vests the Secretary of Labor with authority to “define[] and delimit[]” the scope of the minimum-wage and overtime exemption in Sec- tion 213(a)(1) by issuing “regulations * * * subject to the provisions of subchapter II of chapter 5 of title 5,” 29 U.S.C. 213(aX{1), ie., subject to the APA’s administrative-procedure provisions at 5 U.S.C. 551-559. 12 first instance, but also when it issues a subsequent interpretive rule that revises or supersedes the first. Because the Act defines “rule making” to be an “agen- cy process for formulating, amending, or repealing a rule,” 5 U.S.C. 551(5) (emphasis addeil), the statutory provisions in Section 4 that govern “rule making”— and specifically the exemption for “interpretive rules” —necessarily apply to any agency process for “formu- lating, amending, or repealing” (ibid.) any “agency statement of general or particular applicability and future effect designed to * * * interpret * * * law,” 5 U.S.C. 551(4) (defining “rule”). Likewise, the APA more generally “makes no distinction * * * between initial agency action and subsequent agency action undoing or revising that action.” Fox Televi- sion Stations, Inc., 556 U.S. at 515. The statutory direction that all “interpretative rules” are exempt from notice-and-comment rulemak- ing (unless a statute requires otherwise) is unambigu- ous. This Court has thus repeatedly made clear that “{ijnterpretive rules do not require notice and com- ment.” Shalala v. Guernsey Mem’'l Hosp., 514 U.S. 87, 99 (1995); see also, e.g., Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 173 (2007) (“[AJn agency need not use [notice-and-comment procedures] when producing an ‘interpretive’ rule.”); Lincoln v. Vigil, 508 U.S. 182, 196 (1993) (“The [APA’s] notice- and-comment requirements apply * * * only toso- called ‘legislative’ or ‘substantive’ rules; they do not apply to ‘interpretative rules.’”). 2. The reason for that principle is plain. An “in- terpretive rule” is a statement “‘issued by an agency to advise the public of the agency’s construction of the statutes and rules which it administers.’” Guernsey 13 Mem Hosp., 514 U.S. at 99 (quoting Chrysler Corp. v. Brown, 441 U.S. 281, 302 n.31 (1979)). Such state- ments “do not have the force and effect of law” (ibid.); they “merely [reflect] the agency’s present belief concerning the meaning” of the statutes and legisla- tive rules that do. Final Report of the Attorney Gen- eral’s Committee on Administrative Procedure, S. Doc. No. 8, 77th Cong., Ist Sess. 27 (1941) (Final Report); see U.S. Dep’t of Justice, Attorney General’s Manual on the Administrative Procedure Act 30 n.3 (1947) (APA Manual) (citing Final Report for defini- tion of interpretive rules).* And because those state- ments reflect the agencies’ own views, not binding legislative rules that would have the force of law, Congress presumably determined that it would be an unwarranted encroachment to force agency deci- sionmakers to dedicate limited agency time and re- sources to undertake notice-and-comment rulemaking simply to inform the public about the agency’s views on the meaning of relevant statutory and regulatory provisions. Cf. Richard J. Pierce, Jr., Distinguishing Legislative Rules from Interpretative Rules, 52 Ad- min. L. Rev. 547, 571 (2000) (Pierce) (“{Slince an in- terpretative rule does not have the force of law, an agency does not have to issue a rule that has the force of law in order to amend a prior interpretative rule.”). That conclusion carries particular force in the con- text of a case like this, where an agency has deter- mined that one of its prior public statements about the meaning of a regulatory provision is, in fact, errone- ous. Agencies should be encouraged to announce their * This Court has repeatedly found the Attorney General’s manu- al interpreting the APA to be persuasive. See Norton v. Southern Utah Wilderness Alliance, 542 U.S. 55, 63-64 (2004) (citing cases). 14 changed views promptly and publicly, rather than allow the public to be misled by an earlier agency interpretation. It is “no favor to the public to discour- age the announcement of agencies’ interpretations by burdening the interpretive process with cumbersome formalities.” Hoctor v. United States Dep’t of Agric., 82 F.3d 165, 167 (7th Cir. 1996) (Posner, C.J.). The result produced under Paralyzed Veterans al- so runs counter to this Court’s teachings. The Court has held that, where an agency has concluded that its prior “interpretation of its regulation” should be mod- ified, “the Secretary is not estopped from changing a view she believes to have been grounded upon a mis- taken legal interpretation.” Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 517 (1994) (quoting Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 417 (1993)) (citation and brackets omitted). Yet that is what the Paralyzed Veterans doctrine does. By requiring an agency to undertake notice-and-comment rulemaking simply to change its prior interpretation of a substan- tive regulation, the court of appeals has effectively required the agency to promulgate a new substantive regulation using notice-and-comment rulemaking. 3. The “operative assumption” behind the D.C. Circuit’s Paralyzed Veterans doctrine is “the belief that a definitive [agency] interpretation is so closely intertwined with the [substantive] regulation [being interpreted] that a significant change to the [interpre- tation] constitutes a repeal or amendment of the [reg- ulation].” App., infra, 5a n.3; see also id. at 2a (the changed interpretation “in effect amend[s]” the un- derlying regulation). That assumption is incorrect. When an agency issues an interpretive rule, it is- sues a “statement * * * designed to * * * 15 interpret * * * law,” 5 U.S.C. 551(4) (emphasis added), not change or amend it. This Court has thus determined that an “interpretive rule” reflects “the agency’s construction of the statutes and rules which it administers” and, unlike the substantive provisions being interpreted, “do[es] not have the force and ef- fect of law.” Guernsey Mem’ Hosp., 514 U.S. at 99; see Chrysler Corp., 441 U.S. at 302 n.31 (“substantive rules * * * ‘have the force and effect of law’” but “‘interpretive rules’ * * * do not”) (quoting APA Manual 30 n.3). Accordingly, as explained above (pp. 11-12, supra), the APA by its terms defines “rule making” to include the “amend[ment] or repeal[]” of an interpretive rule and specifically exempts such rulemaking from mandatory notice-and-comment procedures. The conflict between the APA and the D.C. Cir- cuit’s Paralyzed Veterans doctrine is also reflected in the court’s extension of that doctrine to agency adju- dication. The D.C. Circuit has held that if an agency adopts an interpretation of one of its regulations in an agency adjudication (rather than in an interpretive rule), the agency cannot later alter that interpretation by interpretive rule without notice-and-comment rulemaking. See Environmental Integrity Project v. EPA, 425 F.3d 992, 994-995, 997-998 (2005) (holding that EPA orders in licensing proceedings were “defin- itive interpretation[s]” of substantive regulations that could not be modified by a later interpretive rule ab- sent notice-and-comment rulemaking). Yet the agen- cy would be able to modify the same interpretation in a subsequent adjudication to which the APA’s rule- making provisions do not apply. See NLRB v. Bell Aerospace Co., 416 U.S. 267, 292, 294 (1974) (finding it 16 “plain” that agency may “announc[e] new principles in an adjudicative proceeding”; rejec.ing view that “rulemaking was required because * * * [the agency’s interpretation] would be contrary to its prior decisions”); see also 5 U.S.C. 551(6) and (7) (agency “adjudication” involves matters “other than rule mak- ing”). That anomalous result underscores the artifi- cial and nonstatutory foundation of the Paralyzed Veterans doctrine. 4. Section 4 of the APA (5 U.S.C. 553) specifies the “maximum procedural requirements which Congress was willing to have the courts impose upon agencies in conducting rulemaking” proceedings. Vermont Yan- kee, 435 U.S. at 524. That provision “settled ‘long- continued and hard-fought contentions, and enacts a formula upon which opposing social and political forc- es have come to rest.’” Jd. at 523 (quoting Wong Yang Sung v. McGrath, 339 U.S. 33, 40 (1950)); see Antonin Sealia, Vermont Yankee: The APA, the D.C. Circuit, and the Supreme Court, 1978 Sup. Ct. Rev. 345, 359- 370 (1978). The D.C. Circuit has thus disregarded a fundamental principle of administrative law by estab- lishing notice-and-comment requirements for inter- pretive rules that Congress has expressly exempted. Cf. Richard W. Murphy, Hunters for Administrative Common Law, 58 Admin. L. Rev. 917, 918 (2006) (ex- plaining that “[aJeademic commentary on [the Para- lyzed Veterans doctrine] has been scathing”; citing critiques). B. The Courts Of Appeals Are Divided On The Question Presented As the D.C. Circuit recognized, “the Courts of Ap- peals are split on the [Paralyzed Veterans] issue.” App., infra, 5a n.3. The Fifth Circuit has joined the 17 D.C. Circuit in concluding that an agency must con- duct notice-and-comment rulemaking to alter a prior interpretive rule construing an agency regulation. Shell Offshore Inc. v. Babbitt, 238 F.3d 622, 629-630 (5th Cir. 2001).° The First and Ninth Circuits, howev- er, have held that the APA permits agencies to modify their interpretive rules without notice and comment. That division of authority warrants this Court’s re- view. In Miller v. California Speedway Corp., 536 F.3d 1020 (9th Cir. 2008), cert. denied, 555 U.S. 1208 (2009), the Ninth Circuit addressed a challenge to the De- partment of Justice’s interpretation of a regulation promulgated under the Americans with Disabilities Act. The district court in Miller held that the De- partment had “fundamentai[ly] modififed] its previous interpretation” of that regulation and, invoking Para- lyzed Veterans’ analysis, held that the interpretive change “had to be adopted through notice-and- comment rulemaking.” Jd. at 1027. The court of ap- peals reversed with two alternative holdings. The court first held that the first interpretation of the regulation was not attributable to the Department and that the Department’s subsequent interpretation thus did not reflect a change. /d. at 1031-1032. But as relevant here, the court of appeals further held that, “even if the DOJ’s interpretation constituted a change in {its] understanding of [the regulation)” and that change was “unanticipated,” the Department was “not required to proceed by notice and comment.” /d. at ® The Third Circuit has cited the Paralyzed Veterans doctrine favorably in dictum. SBC inc. v. FCC, 414 F.3d 486, 498, 501 (3d Cir. 2005) (concluding that agency “did not modify or substantively change [its] prior interpretation of the regulation”). 18 1033. The court explained that “an agency can modify an interpretive rule without notice and comment,” and the interpretations at issue were “interpretive rules.” Ibid. (citing and following holding in Erringer v. Thompson, 371 F.3d 625, 630 (9th Cir. 2004)). Miller conflicts with the D.C. Circuit’s decision in this case. By reversing the district court’s adoption of the Paralyzed Veterans doctrine and broadly holding that “an agency can modify an interpretive rule with- out notice and comment,” 536 F.3d at 1033, the Ninth Circuit has placed itself squarely on the other side of the conflict. Cf. Woods v. Interstate Realty Co., 337 U.S. 535, 537 (1949) (“[W]Jhere a decision rests on two or more grounds, none can be relegated to the catego- ry of obiter dictum.”). Similarly, the First Circuit in Warder v. Shalala, 149 F.3d 73, 75-79 (1st Cir. 1998), cert. denied, 526 U.S. 1064 (1999), held that an agency was entitled to change its interpretation of Medicare regulations without notice-and-comment rulemaking. The agen- cy’s interpretive rule (HCFAR 96-1) was challenged on the ground that it “changed [the agency’s] policy” governing Medicare reimbursement for a device. /d. at 81. The First Circuit rejected that contention “both [on] the law and the facts.” Jbid. As relevant here, the court held that, even if the “later rule [was] incon- sistent with * * * [an earlier] agency interpreta- tion,” notice-and-comment rulemaking was “(un]ne- cessary” to promulgate that interpretive rule. Jd. at 81 (brackets omitted); see id. at 79 (“The APA ex- empts ‘interpretive rules’ from its notice and comment procedures.”). In addition, the Seventh Circuit has stated that the Paralyzed Veterans doctrine “conflicts with the APA’s 19 rulemaking provisions * * * and with [Seventh Circuit] precedent.” Abraham Lincoln Mem'l Hosp. v. Sebelius, 698 F.3d 536, 560 (7th Cir. 2012). The court explained that although the D.C. Circuit holds that “[o]Jnce an agency gives its regulation an inter- pretation, it can only change that interpretation * * * through the process of notice and comment rulemaking,” ibid. (quoting Alaska Prof’l Hunters Ass’n v. FAA, 177 F.3d 1030, 1033-1034 (D.C. Cir. 1999)) (brackets in original), the APA “exempt{s] all interpretive rules from notice and comment.” Jbid. (emphasis added).° C. Review Is Warranted To Resolve An Important And Recurring Question Of Administrative Law This case raises a fundamental and recurring ques- tion about the structure and meaning of the APA and the obligations that Congress elected to impose on administrative agencies. As noted above, this Court has recognized that the APA’s rulemaking provision (5 U.S.C. 553) is “a formula upon which opposing social and political forces * * * c[a]me to rest.” Vermont Yankee, 435 U.S. at 523. That provision— including its unqualified exemption for interpretive rules—thus specifies the “maximum procedural re- quirements which Congress was willing to have the courts impose upon agencies” for rulemaking. /d. at 524. Yet the D.C. Circuit has held, in its Paralyzed ® The Seventh Circuit’s Paralyzed Veterans discussion followed its conclusion that the challenged agency decision “did not consti- tute a departure from a previous position” but, “[e]ven if” it did, “the Decision properly qualifies as an adjudication” that did not require notice and comment. Abraham Lincoln Mem'l Hosp., 698 F.3d at 558. It is therefore not clear that the court’s Paralyzed Veterans discussion was necessary to its decision. 20 Veterans doctrine, that an agency, before it can issue a statement to “advise the public of the agency’s [cur- rent] construction of” its own regulations, Guernsey Mem’ Hosp., 514 U.S. at 99 (citation omitted), must first ask the public for its views using notice-and- comment rulemaking. And in this case, the D.C. Cir- cuit has now further held that the doctrine requires notice-and-comment rulemaking even if no one has meaningfully relied on the interpretive rule that an agency seeks to modify.’ The adverse impact of that ruling is particularly significant because venue lies in the District of Columbia over APA actions against most federal agencies. See 28 U.S.C. 1391(e)(1); 14D Charles Alan Wright et al., Federal Practice and Procedure §§ 3815-3816, at 331-334, 344-348 (4th ed. 2013); see also, e.g., 28 U.S.C. 2348. Because of that ever- present potential for challenge in the D.C. Circuit, that court’s fundamentally misguided Paralyzed Vet- erans doctrine can present a formidable in terrorem barrier for agencies seeking to correct or revise their ’ The government previously argued that the Paralyzed Veter- ans doctrine was erroneous in a certiorari petition presenting a different question on which the Court denied a writ of certiorari. See Pet. at I, 24-25, Leavitt v. Baystate Health Sys., 547 U.S. 1054 (2006) (No. 05-936). The government made that argument in Baystate because the court of appeals had rested its conclusion that the government ruling at issue in Baystate had implicitly conceded that a prior interpretive rule was invalid in part on the court’s view that, if the prior rule had been valid, then the subse- quent ruling in Baystate would have been invalid under Paralyzed Veterans. See id. at 5-6, 18-19, 24-25. Baystate, however, did not involve an actual application of the Paralyzed Veterans doctrine, and it thus did not present the question that is now presented for the Court’s review. See id. at I (question presented). 21 interpretations of regulations. Many complex gov- ernment programs are heavily dependent upon inter- pretive rules to inform the public about the agency’s understanding of the details of the regulatory regime. The Medicare program, for instance, has “thousands of pages of interpretative rules that address myriad details that are not explicitly resolved by the legisla- tive” regulations. Pierce, 52 Admin. L. Rev. at 553; see, e.g., Guernsey Mem’'l Hosp., 514 U.S. at 97-99, 101-102. Under the provisions of the APA that Con- gress enacted, the agency should be free to revisit its intepretations expeditiously through new interpretive rules. Notice-and-comment rulemaking, by contrast, is a “long and costly” process that “often requires many years and tens of thousands of person hours to complete.” Pierce, 52 Admin. L. Rev. at 550-551; see U.S. Gov’t Accountability Office, GAO-09-205, Federal Rulemaking 5, 19 (Apr. 2009) (case study finding average of over four years to complete notice-and- comment rulemaking and that some “rules that were not major took nearly as long or longer to be pub- lished”). Certiorari is warranted for this Court to review the D.C. Circuit’s Paralyzed Veterans doctrine, resolve the circuit conflict on the issue, and restore the free- dom and procedural framework that Congress incor- porated in the APA for agencies to interpret the regu- latory programs they have adopted. 22 CONCLUSION The petition for a writ of certiorari should be granted. Respectfully submitted. DONALD B. VERRILLI, JR. Solicitor General STUART F.. DELERY Assistant Attorney General EDWIN S. KNEEDLER Deputy Solicitor General ANTHONY A. YANG Assistant to the Solicitor General DOUGLAS N. LETTER ANTHONY J. STEINMEYER Attorneys FEBRUARY 2014 APPENDIX A UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT 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) Argued: Mar. 22, 2013 Decided: July 2, 2013 OPINION Before: TATEL and BROWN, Circuit Judges, and SENTELLE, Senior Circuit Judge. Opinion for the Court by Circuit Judge BROWN. (la) 2a 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?’ Is it, as the govern- ment contends, a “separate and independent require- ment,” 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 defini- tive,” as Mortgage Bankers Association (“MBA”) sug- gests? We find ourselves in general agreement with the industry association that there is no discrete reli- ance element. Reliance is just one part of the defini- tiveness calculus. ' 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) (quot- ing Appellee Br. 47). * Our case law uses the terms “definitive” and “authoritative” in- terchangeably. Compare Paralyzed Veterans, 11 F.3d at 586 (“authoritative interpretation”), with Alaska Hunters, 177 F.3d at 1034 (“definitive interpretation”). 3a 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 “pre- vail[s} if . . . the only reason [courts] look to reli- ance 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 in- structions to vacate the 2010 Administrator Interpre- tation 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 interpreta- tion. DOL must, however, conduct the required notice and comment rulemaking. I Petitioner MBA is a national trade association rep- resenting 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 identify- ing 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 man- ner of their pay. Under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seg., an old law DOL must adapt to new circumstances, employers are generally required to pay 4a overtime wages to employees who work longer than 40 hours per week. See 29 U.S.C. § 207(a). The Act provides several exceptions to this rule. Those “em- ployed in a bona fide executive, administrative, or pro- fessional capacity[,} . . . or in the capacity of out- side salesman,” for example, are exempt from the statute’s minimum wage and maximum hour require- ments. 29 U.S.C. § 213(a)(). Whether mortgage loan officers qualify for this “administrative exemption” is a difficult and at times contentious question. So diffi- cult, 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 ad- ministrative exemption. Just four years later, in 2010, Deputy Administrator Nancy J. Leppink issued an “Administrator’s Interpretation” declaring that “em- ployees 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 “defini- tive interpretation” without first undergoing notice- and-comment rulemaking as a violation of the APA. Compl. 7 38. [J.A. 22] The District Court reject- ted the argument. After assuring itself that Para- lyzed Veterans remains good law, see Mortgage Ban- kers Ass’n, 864 F. Supp. 2d at 204-05, the court read our recent decision in MetWest Inc. v. Secretary of 5a 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 omit- ted). Although petitioner had argued reliance in the alternative, the court concluded MBA was una- ble to “satisfy the standard for demonstrating reli- ance recognized in MetWest.” Jd. at208. The court then denied MBA’s Motion for Summary Judgment, but not before dismissing the association’s substan- tive challenge to the 2010 interpretation as incon- sistent 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 con- tains just two elements: definitive interpretations (“definitiveness”) and a significant change (“signifi- cant revision”).? But as with most things doctrinal, the devil is in the details. ® The doctrine’s operative assumption—the belief that a defini- tive interpretation is so closely intertwined with the regulation that a significant change to the former constitutes a repeal or amend- ment 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 Cir- cuits agree that changes in interpretations do not require notice and comment because both the original and current position con- stitute interpretive rules.” Warshauer v. Solis, 577 F.3d 1330, 6a Despite its age, few cases discuss Paralyzed Vet- erans at length.‘ One critical question—and a dis- positive one here—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 alto- gether. In its view, that case stands only for the proposition that reliance can elevate an otherwise non-definitive interpretation into a definitive inter- pretation; as such, it falls squarely within the ex- isting definitiveness element. Of the two, we be- lieve MBA’s approach better explains Alaska Hun- ters. 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 dif- ferent circuit split between the Third, Fifth, and Sixth Circuits on one hand, and the First and Ninth Circuit on the other). * It need not reflect poorly on the doctrine that so few of our cases haven taken up Paralyzed Veteran’s banner—and still fewer have used its reasoning to invalidate an agency interpretation for failing to conduct notice and comment rulemaking. See 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. 7a 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. head- quarters formally pushed back against the regional office’s long-standing interpretation.° Through a “Notice to Operators” published in the Federal Register without notice and opportunity for com- ment, 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 air- craft” in reliance on the Alaskan Region’s interpre- tation promptly brought suit challenging the agen- cy’s about-face. Jd. at 1035. In relevant part, FAA argued Paralyzed Veter- ans was “inapposite” because the Alaskan Region’s interpretation was not definitive; it “represented ° It is “uncertain” whether the D.C.-based officials had know- ledge of the Alaskan Region’s interpretive position prior to the 1990s—that is, before FAA consolidated power in its national head- quarters following a near three-decade-long experiment with a de- centralized organizational structure “that transferred much au- thority to regional organizations.” Alaska Hunters, 177 F.3d at 1032. 8a simply a local enforcement omission, in conflict with the agency’s policy in the rest of the country.” /d. at 1034-35. We disagreed. Although a local of- fice’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 contra- dicts the view of the agency as a whole,” the situa- tion in Alaska Hunters was “quite different.” Jd. at 1035. For one thing, there was no evidence in the rec- ord 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 Re- gion, guides and lodge operators in Alaska had no reason to know this.” Jd. All the regulated parties had before them was the formal,® uncontradicted, and uniformly-applied interpretation of a iocal office —an interpretation Alaskan guide pilots reasonably relied on for three decades. Such advice might not necessarily qualify as definitive, but here, we con- cluded, it “became an authoritative departmental ® “(Tyhe 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). 9a interpretation, an administrative common law appli- cable to Alaskan guide pilots” that could not be re- written without notice and comment rulemaking. Id. Alaska Hunters’s takeaway is clear: reliance is but one factor courts must consider in assess- ing whether an agency interpretation qualifies as definitive or authoritative. Or to put matters more precisely, because regulated entities are un- likely to substantially—and often cannot be said to justifiably—rely on agency pronouncements lacking some or all the hallmarks of a definitive interpreta- tion, significant reliance functions as a rough proxy for definitiveness. The converse also holds true. Agency pronouncements effectively ignored by reg- ulated 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 “[nJothing in th[e] record suggests that railroads relied on the [agency statements] in any comparable way” to the Alaska guides).’ This is more art than science. Courts must weigh the role reliance plays on a case-by-case basis to ascer- tain its value. DOL pushes back against this framework by treating reliance as a separate and independent ’ Obviously, this is not to suggest any measure of reliance will automatically render an interpretation definitive. 10a third element.* That, the agency claims, is exactly what our MetWest decision did in (1) addressing reliance only in the alternative, 7.e., after assuming a definitive interpretation, see MetWest, 560 F.3d at 510-11, and (2) speaking of Alaska Hunters’s “sub- stantial 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 requirements,” Appellee Br. ®* The agency never develops the implications of its alternative vision, but we think two points obvious. First, by dissociating reli- ance 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 ef- fectively renders Paralyzed Veterans dead letter law by limiting its application to a most extreme fact pattern—one unlikely to ever be duplicated. lla 23-24; see also Mortgage Bankers Ass’n, 864 F. Supp. 2d at 205-08.° We do not think this characterization of Met- West’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 in- terpretation as such, it cannot be significantly re- vised 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.” 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 interpreta- tion 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 ® Because Honeywell unceremoniously adopts MetWest’s lan- guage and approach, see Honeywell, 568 F.3d at 579-80, we focus our discussion primarily on MetWest. © 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 com- ment 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. 12a have always considered it as part of the first ele- ment. 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 silentio reconfigur- ing 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 posi- tions is to impose a separate and independent reli- ance element. Practically speaking, reliance con- sidered as part of the definitiveness determination will more than adequately protect agencies from this ossification threat. We thus decline DOL’s invita- tion 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. Ill 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. 13a APPENDIX B UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA Civil Action No. 11-0073 (RBW) MORTGAGE BANKERS ASSOCIATION, PLAINTIFF v. HILDA SOLIS, SECRETARY OF LABOR; NANCY LEPPINK, ACTING WAGE AND HOUR ADMINISTRATOR; AND THE UNITED STATES DEPARTMENT OF LABOR, DEFENDANTS [June 6, 2012] MEMORANDUM OPINION The plaintiff, the Mortgage Bankers Association (“Association”), seeks declaratory and injunctive relief in this civil lawsuit brought against the defendants, Hilda Solis, in her official capacity as Secretary of the United States Department of Labor (“DOL”), Nancy Leppink, in her official capacity as Deputy Adminis- trator of the Wage and Hour Division of the DOL, and the DOL itself, under the Administrative Procedure Act (“APA”), 5 U.S.C. § 702 (2006). Complaint for Declaratory and Injunctive Relief (“Compl.”) 1% 1. Specifically, the plaintiff seeks judicial review of the l4a defendants’ issuance of DOL Administrative Interpre- tation 2010-1 (“2010 AI”), which conflicts with a prior position taken by the DOL. /d. 19 2, 26-27. Cur- rently before the Court is the Association’s Motion for Summary Judgment and the DOL’s Cross Motion to Dismiss or, in the Alternative, for Summary Judgment. Upon consideration of the complaint, the parties’ cross- motions, all memoranda of law and the exhibits sub- mitted with the motions, and the administrative rec- ord,’ the Court concludes that it must grant in part and deny in part the DOL’s cross-motion and deny the Association’s motion for summary judgment. ' In addition to the documents already identified, the Court con- sidered the following submissions in reaching its decision: (1) the Memorandum of Points and Authorities in Support of Plaintiff’s Motion for Summary Judgment (“P1.’s Mem.”), (2) the Defendants’ Cross-Motion to Dismiss or, in the Alternative, for Summary Judg- ment (“Defs.’ Mot.”), (3) the Plaintiff’s Reply in Support of its Mo- tion for Summary Judgment and Opposition to Defendants’ Motion to Dismiss or in the Alternative for Summary Judgment (“P1.’s Re- ply”), and (4) the Defendants’ Reply to Plaintiff’s Opposition to De- fendants’ Cross Motion to Dismiss or, in the Alternative, for Sum- mary Judgment (“Defs.’ Reply”). 15a I. BACKGROUND A. Statutory and Regulatory Framework This case concerns the Fair Labor Standards Act (“F LSA” or “Act”), 29 U.S.C. §§ 201-219 (2006), and the reguiations promulgated by the DOL to implement the Act. See Defendants’ Cross Motion to Dismiss or, in the Alternative, for Summary Judgment (“Defs.’ Mot.”) at 1. Enacted by Congress in 1938, Compl. 9 14, the FLSA generally requires that covered employers pay overtime wages to their employees who work more than 40 hours per week, unless they are exempted by the Act from this requirement. 29 U.S.C. § 207(a)(1). Section 213(a)(1) of the FLSA provides for such an exemption, stating that “any employee employed in a bona fide executive, administrative, or professional capacity[,] . . orin the capacity of outside salesman (as such terms are defined and delimited from time to time by regulations of the Secretary[,] . . .)” is exempt from the “[m]inimum wage and maximum hour re- quirements” otherwise required by the Act. 29 U.S.C. § 213(a)(1). The Wage and Hour Division of the DOL (“Wage and Hour Division”) is responsible for “administering and enforcing the FLSA, and it periodically issues reg- ulations that define the scope of the FLSA’s exemp- tions and interpretations of those regulations.” Defs.’ Mot. at 4. After the passage of the FLSA, the Wage and Hour Division “promulgated regulations defining and delimiting the FLSA’s exemptions from overtime pay requirements.” Compl. 1 14. Those regulations were most recently amended on August 23, 2004. See 16a Administrative Record (“A.R.”) at 8-78 (Defining and Delimiting the Exemptions for Executive, Administra- tive, Professional, Outside Sales and Computer Em- ployees, 69 Fed. Reg. 22122-19) (Apr. 23, 2004) (codi- fied at 29 C.F.R. § 541)). As revised, the regulations state that the administrative exemption of section 213(a)(1) of the FLSA applies to an employee: (1) Compensated on a salary or fee basis at a rate of not less than $455 perweek . . .. ; (2) Whose primary duty is the performance of of- fice or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and (3) Whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. 29 C.F.R. § 541.200(a). The 2004 regulations were ac- companied by a preamble “Summary,” which explained that the administrative “exemption is intended to be limited to those employees whose duties relate to the administrative as distinguished from the production operations of a business.” 69 Fed. Reg. 22122, 22141 (internal quotation marks omitted). The 2004 regula- tions also provide examples that illustrate how the ad- ministrative duties exemption can be applied to em- ployees in various occupations, including the following example regarding the financial services industry: Employees in the financial services industry gen- erally meet the duties requirements for the admin- istrative exemption if their duties include work 17a such as collecting and analyzing information re- garding the customer’s income, assets, investments or debts; determining which financial products best meet the customer’s needs and financial circum- stances; advising the customer regarding the ad- vantages and disadvantages of different financial products; and marketing, servicing or promoting the employer’s financial products. However, an employee whose primary duty is selling financial products does not qualify for the administrative exemption. 29 C.F.R. § 541.203(b) (entitled “Administrative ex- emption examples”). B. Factual and Procedural Background 1. Pre-2004 Interpretation of the Administrative Exemption The following facts are not in dispute and are taken from either the Association’s complaint or the admini- strative record filed in this case. The plaintiff is a national trade association that represents the real estate finance industry. Compl. 17. The Association “has over 2,200 member compa- nies, including all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, life insurance companies, and others in the mortgage lending field.” Jd. These companies employ over 280,000 individuals throughout the United States. Id. The Association’s primary goals are “to ensure the continued strength of the nation’s residen- tial and commercial real estate market, to expand home 18a ownership and extend access to affordable housing to all Americans.” /d. From as early as 1964, and until March 24, 2010, the DOL announced its interpretation of the FLSA through the issuance of “{o]pinion {lJetters.” Jd. 1 15. These opinion letters were written in response to in- quiries from private parties seeking guidance about the application of the FLSA to their business activities. Id. Access to the opinion letters was available through several avenues, including, in recent years, electronic legal research databases and the DOL’s own website. See id. And as the plaintiff correctly points out, the District of Columbia Circuit has held that “DOL Opin- ion Letters . . . constitute final agency action subject to judicial review.” Jd. 1% 16 (citing Nat'l Automatic Laundry & Cleaning Council v. Shultz, 443 F.2d 689, 701-02 (D.C. Cir. 1971) (holding that although the opinion letters lack formality, they are intended as a “deliberative determination of the agency’s position” and thus are subject to judicial review)). The administrative record in this case contains two opinion letters issued by the DOL prior to the 2004 amendment of its regulations. The first, dated July 23, 1997, “:#d. The court noted that “[i]Jt need not reflect poorly on the doctrine that so few of our cases have taken up Paralyzed Veterans’s banner—and still fewer have used its reasoning to invalidate an agency inter- pretation for failing to conduct notice and comment rulemaking.” App. 6a n.4 (citing government’s brief “counting Alaska Hunters and arguably Environmen- tal Integrity Project as the lone exceptions”). Indeed, the court reasoned, “Paralyzed Veterans may very 12 well serve as a prophylactic that discourages agencies from attempting to circumvent notice and comment requirements in the first instance.” Ibid. 7. The private-party intervenors (but not the government) filed a petition for rehearing en banc. App. 85a. The D.C. Circuit denied the petition, not- ing that no member of the court called for a vote on the petition. Id. at 85a-86a. On remand, the district court issued an order vacating the 2010 administra- tor interpretation. ¢ REASONS FOR DENYING THE PETITIONS I. Serious Mootness Concerns Would Likely Prevent This Court From Reaching And Resolving The Question Presented Executive action taken after the petitions were filed raises serious mootness concerns with respect to the petitions. As noted above, the President di- rected the Secretary of Labor to “propose revisions to modernize and streamline the existing overtime regulations.” Presidential Memorandum, Updating & Modernizing Overtime Regulations, 79 Fed. Reg. 15,209, 15,211 (Mar. 18, 2014). Every indication is that the Secretary will include in the “proposed revi- sions” the Department’s 2010 interpretation at issue in this case—just as the D.C. Circuit invited the De- partment to do. App. 3a (“If the Department of Labor * * * wishes to readopt the later-in-time interpretation, it is free to.”). Indeed, White House officials told 13 reporters in advance of the President’s directive that “loan officers” are among those who will be affected by the new rulemaking. Michael D. Shear & Steven Greenhouse, Obama Will Seek Broad Expan- sion of Overtime Pay, N.Y. TIMES, Mar. 11, 2014, www. nytimes.com/2014/03/12/us/politics/obama-will-seek-broad- expansion-of-overtime-pay.html?_r=0. The underlying issue in this case is the applica- tion of the FLSA with respect to loan officers. Adop- tion of a new regulation to that end—through notice and comment rulemaking—obviates the need for the Department of Labor to defend its 2010 administrator interpretation. At the very least, there is a serious concern that the new rulemaking will moot the issue of the validity of the Department’s 2010 administra- tor interpretation on the same subject. That alone militates strongly against this Court’s review at this time. EUGENE GRESSMAN ET AL., SUPREME COURT PRAC- TICE 505 (9th ed. 2007) (noting that potential agency action on the underlying issue may prevent certiora- ri). At best, this Court would be left with two private- party intervenors challenging a rarely used D.C. Circuit doctrine that, for the reasons stated below, does not present a certworthy question. , II. The Asserted Circuit Split Is More Theo- retical Than Real Contrary to petitioners’ claims, Paralyzed Veter- ans has not caused any deep rift among the circuits. “Despite its age, few cases discuss Paralyzed Veterans 14 at length,” App. 6a, and the only cases that do so were decided on other grounds. See, e.g., United States v. Magnesium Corp. of Am., 616 F.3d 1129, 1140 (10th Cir. 2010) (Gorsuch, J.) (““[W]Je have no need to wade into such deep waters to decide the appeal before us.”); Warshauer v. Solis, 577 F.3d 1330, 1339 (11th Cir. 2009) (“We need not (and do not) take sides in this debate.”). Petitioners’ best evidence of a split is dicta— the Seventh Circuit’s assertion that Paralyzed Veter- ans “conflicts with the APA’s rulemaking provisions, which exempt all interpretive rules from notice and comment, and with our own precedent.” Abraham Lincoln Mem’ Hosp. v. Sebelius, 698 F.3d 536, 560 (7th Cir. 2012) (Castillo, D.J., sitting by designation). There was no occasion for the Seventh Circuit to de- cide the question in that case, however, because no interpretation of an agency regulation was involved, id. at 556, and because the challenged agency posi- tion “did not constitute a departure from a previous position.” Id. at 558. Thus, Paralyzed Veterans by its own terms did not apply, and the D.C. Circuit would not have required notice and comment either. The Seventh Circuit’s decision in Abraham Lincoln Memo- rial thus does not evidence a clean split—much less an “intractable” one requiring this Court’s resolution. As the Eleventh Circuit has correctly observed, while “some tension exists” among the circuits, the cases generally “have the potential to be distin- guished on their facts.” Warshauer, 577 F.3d at 1338-39 & n.4. That is likely why the parties here 15 characterize the split so differently—with the private- party intervenors alleging a 5-4 split, the government claiming a 2-2 split, and amici asserting a 2-6 split. Careful inspection of the petitions’ cited cases con- firms the conclusion that the split is largely illusory. Indeed, the cases cited as conflicting with Paralyzed Veterans likely would have come out the same way had they been decided by the D.C. Circuit.° That is because the cases cited by petitioners as evidence of a split were mostly decided on the grounds that the prior agency interpretation was either not substantially different than the later in- terpretation, or not definitive in the first place, so that one or more of the prerequisites to triggering notice and comment under Paralyzed Veterans was lacking. See, e.g., Abraham Lincoln Mem’! Hosp., 698 F.3d at 557; Miller v. Cal. Speedway Corp., 536 F.3d 1020, 1033 (9th Cir. 2008); Erringer v. Thompson, 371 F.3d 625, 630 (9th Cir. 2004); St. Francis Health Care Ctr. v. Shalala, 205 F.3d 937, 947 (6th Cir. 2000); Warder v. Shalala, 149 F.3d 73, 82 (1st Cir. 1998); * The D.C. Circuit’s opinion in this case acknowledged the asserted split(s) but also recognized the lack of clarity. App. 5a- 6a n.3 (noting that the Eleventh Circuit has identified a poten- tial 6-2 split while the Tenth Circuit has described “a slightly different” 2-4 split) (citing Magnesium Corp., 616 F.3d at 1139). As Judge Gorsuch wrote for the Tenth Circuit, “the Third, Fifth, and Sixth Circuits apparently adopt{] the D.C. Circuit’s view and the First and Ninth Circuits seemingly tak[e] the contrary position.” Magnesium Corp., 616 F.3d at 1139 (emphases added). 16 Chief Probation Officers of Cal. v. Shalala, 118 F.3d 1327, 1337 (9th Cir. 1997); Chai v. Carroll, 48 F.3d 1331, 1340-41 (4th Cir. 1995). Practically none of the cases petitioners cite as conflicting with Paralyzed Veterans even mentions the doctrine, because it is typically not the issue. Petitioners’ cited cases thus do not involve true agency “flip-flopping” that would even implicate Paralyzed Veterans.° For example, in Warder, 149 F.3d at 79-82, the First Circuit did not require notice and comment on a revised interpretation of a Medicare regulation where the court “very much doubt[ed]” that the revised interpretation “added something new to [the agency’s] policies.” Id. at 82. Without a significant revision to the agency’s rules, the same result would have ob- tained in the D.C. Circuit under Paralyzed Veterans." The same thing is true of Chief Probation Officers of California, 118 F.3d at 1327 (White, Ret. J., sitting by designation). The Ninth Circuit held in that case * The private-party intervenors’ question presented bears scant resemblance to Paralyzed Veterans. No court has held that agencies “are categorically prohibited from revising their interpretative rules unless such revisions are made through notice-and-comment rulemaking.” See Nickols Pet. i. " The same result would also have obtained in the Fifth Circuit, which has expressly approved Paralyzed Veterans. See Shell Offshore Inc. v. Babbitt, 238 F.3d 622, 629 (5th Cir. 2001). Like the D.C. Circuit, the Fifth Circuit holds that the APA requires an agency to engage in notice and comment only “before substantially altering a well established regulatory interpreta- tion.” Ibid. (emphases added). 17 that notice and comment were not required because there was no substantial change in the agency’s interpretation—and went on to explain that inter- pretive rule changes sometimes require notice and comment when they modify other rules “having the force of law.” Jd. at 1333 n.6. That result is entirely consistent with Paralyzed Veterans.* Similarly, in St. Francis Health Care, 205 F.3d at 947, the Sixth Circuit held that the agency’s new interpretation did not require notice and comment— but that does not mean that the Sixth Circuit is implacably hostile to Paralyzed Veterans. The Sixth Circuit itself implicitly recognized as much in Dismas Charities, Inc. v. U.S. Department of Justice, 401 F.3d 666, 682 (6th Cir. 2005), which expressly rejected the argument that the court’s decision in St. Francis Health Care precluded notice and comment for ail interpretive rules. As the Sixth Circuit put it, “once an agency gives a regulation an interpretation, notice and comment will often be required before the in- terpretation of that regulation can be changed.” Ibid. * Another Ninth Circuit case relied upon by petitioners, Erringer, 371 F.3d at 625, further demonstrates the absence of a clean conflict. Erringer involved agency interpretations of pro- visions in a Medicare manual, and the Ninth Circuit held that the subsequent interpretations were consistent with a prior rule having the force of law (making them interpretive rules). Jd. at 632. The court noted: “Any rule that effectively amends a prior legislative rule is legislative and must be promulgated under notice and comment rulemaking.” Ibid. (emphases added). That is the same proposition for which Paralyzed Veterans stands. 18 Again, that is entirely consistent with Paralyzed Veterans.” Other cases cited by petitioners do not conflict with Paralyzed Veterans because the agency’s previ- ous interpretation lacked the definitiveness required by Paralyzed Veterans to trigger notice and comment. Thus in California Speedway, 536 F.3d at 1020, the Ninth Circuit did not require notice and comment where the agency had not bound itself to a prior de- finitive interpretation of the regulation at issue. Id. at 1031-32. That result creates no meaningful con- fet with Paralyzed Veterans, which requires that the agency’s interpretation be sufficiently definitive be- fore any change in that interpretation must be the product of notice and comment rulemaking.” * So too with the Third Circuit’s decision in SBC Inc. v. FCC, 414 F.3d 486 (3d Cir. 2005). While the Third Circuit acknowledged that “if an agency’s present interpretation of a regulation is a fundamental modification of a previous interpre- tation, the modification can only be made in accordance with the notice and comment requirements of the APA,” id. at 498, the court emphasized that the order at issue “did not modify or substantively change the FCC’s prior interpretation of the reg- ulation.” Jd. at 501. Thus, the APA’s notice and comment requirements did not apply, nor would they have in the D.C. Circuit under Paralyzed Veterans. * As evidence of a conflict, petitioners rely upon an alterna- tive rationale in California Speedway that assumed the “inter- pretation constituted a change in [its] understanding of [the regulation].” Id. at 1033. But at best that alternative holding is little more than a theoretical disagreement with Paralyzed Vet- erans, given the Ninth Circuit’s agreement with the D.C. Cir- cuit’s resolution of the “precise question” before it. Jd. at 1024 (Continued on following page) 19 In sum, the split identified by petitioners is more theoretical than real. The courts of appeals are not sharply divided over Paralyzed Veterans (much less “intractably divided,” Nickols Pet. 14), and this Court’s review is therefore unwarranted. Ii, The Question Presented Arises Infrequently And Has Limited Practical Importance As the D.C. Circuit recognized in its opinion, App. 6a, the question presented does not occur very often—much less “perpetually.” Nickols Pet. 32. Thus its practical importance is decidedly limited because very rarely has Paralyzed Veterans led to judicial invalidation of agency action—as even peti- tioners’ amici forthrightly acknowledge. Amicus Br. of Administrative Law Scholars 8 (noting that “(bletween 1997 and 2013, the D.C. Circuit applied the dictum in Paralyzed Veterans sporadically”). This Court’s review is unwarranted for that reason, too. Indeed, by the government’s own count in its briefing below, there are at most two other cases in which the D.C. Circuit has invalidated an agency’s interpretive rule for lack of notice and comment: Environmental Integrity Project v. EPA, 425 F.3d 992, 996 (D.C. Cir. 2005), and Alaska Professional Hunt- ers, 177 F.3d at 1030. Given that track record, it is hard to see how Paralyzed Veterans “can present a (“We agree with the D.C. Circuit and reverse the judgment of the district court.”). 20 formidable in terrorem barrier for agencies.” USG Pet. 20. And although the private-party intervenors speculate (at 33) that Paralyzed Veterans will lead agencies to “behave entirely differently,” they offer nothing to suggest that has actually been the case in the nearly 20 years since Judge Silberman issued his opinion for the D.C. Circuit in Paralyzed Veterans. To the extent the doctrine has had the salutary effect of providing an incentive to agencies to engage in notice and comment before issuing interpretations that contradict their prior interpretations, as Judge Brown noted in her opinion for the D.C. Circuit, App. 6a n.4, that is hardly cause for concern. Nonetheless, the government worries about the application of Paralyzed Veterans to the Medicare program, arguing that given the complexity of that program, the Department of Health and Human Services “should be free to revisit its interpretations expeditiously.” USG Pet. 21. Yet the D.C. Circuit’s sole application of Paralyzed Veterans in the context of that program reveals no cause for concern, as the court actually rebuffed an attempt to use Paralyzed Veterans to set aside a Medicare interpretation. Monmouth Med. Ctr. v. Thompson, 257 F.3d 807, 814 (D.C. Cir. 2001). And in a district court case—which involved the Secretary’s decision to apply a new cost formula retroactively to bar a non-profit medical center from seeking reimbursement for $2.4 million in services it had already rendered in prior years—the Secretary did not appeal the district court’s remand of the 21 Secretary's decision based on Paralyzed Veterans. Montefiore Med. Ctr. v. Leavitt, 578 F. Supp. 2d 129, 133 (D.D.C. 2008). The occasional invocation of Par- alyzed Veterans in connection with the Medicare pro- gram—apparently only twice in nearly two decades— scarcely hampers the Department’s ability to admin- ister that program. There is simply no need for this Court to review a’ doctrine so sparingly applied, even if the circuits were deeply divided on the question, which they are not. IV. Paralyzed Veterans Is Correct And Consis- tent With This Court’s Decision In Vermont Yankee The government argues that Paralyzed Veterans “disregarded” this Court’s teaching in Vermont Yankee that § 553 of the APA “specifies the ‘maximum pro- cedural requirements which Congress was willing to have the courts impose upon agencies in conduct- ing rulemaking’ proceedings.” USG Pet. 16 (quoting Vt. Yankee Nuclear Power Corp. v. Nat. Res. Def. Council, Inc., 485 U.S. 519, 524 (1978)). But Para- lyzed Veterans does no such thing. It does not impose any extrinsic procedures of its own. It simply safe- guards the “procedural requirements” that are at the heart of § 553: notice and opportunity for public comment. 22 As Judge Silberman explained in his opinion for the D.C. Circuit in Paralyzed Veterans: Under the APA, agencies are obliged to en- gage in notice and comment before formulating regulations, which applies as well to “re- peals” or “amendments.” See 5 U.S.C. § 551(5). To allow an agency to make a fundamental change in its interpretation of a substantive regulation without notice and comment obvi- ously would undermine those APA require- ments. That is surely why the Supreme Court has noted (in dicta) that APA rulemak- ing is required where an interpretation “adoptis} a new position inconsistent with * * * existing regulations.” 117 F.3d at 586 (quoting Shalala v. Guernsey Mem'l Hosp., 514 U.S. 87, 100 (1995)) (alterations in origi- nal). Similarly, in Alaska Professional Hunters, Judge Randolph’s opinion for the D.C. Circuit elaborated on the rationale underlying Paralyzed Veterans: We [in Paralyzed Veterans] explained why an agency has less leeway in its choice of the method of changing its interpretation of its regulations than in altering its construction of a statute. “Rule making,” as defined in the APA, includes not only the agency’s process of formulating a rule, but also the agency’s process of modifying a rule. 5 U.S.C. § 551(5). See Paralyzed Veterans, 117 F.3d at 586. When an agency has given its regulation a 23 definitive interpretation, and later signifi- cantly revises that interpretation, the agency has in effect amended its rule, something it may not accomplish without notice and comment. 177 F.3d at 1034.” And so an agency abrogating its own author- itative interpretation of a regulation “should be regarded * * * as having actually ‘amended’ its regu- lation without notice and comment in contravention of section 553.” Paralyzed Veterans, 117 F.3d at 586. Far from imposing new procedural require- ments not found in the APA, Paralyzed Veterans correctly insures that agencies comply with the APA, thereby keeping faith with Vermont Yankee. “ The D.C. Circuit restated its explanation in Syncor In- ternational Corp. v. Shalala, 127 F.3d 90, 94-95 (D.C. Cir. 1997): We should note, in order to be complete (although this variation is not implicated in the case before us), that an interpretative rule can construe an agency’s sub- stantive regulation as well as a statute. See Para- lyzed Veterans, 117 F.3d at 586; American Mining Congress [v. Mine Safety & Health Admin., 995 F.2d 1106, 1107-08 (D.C. Cir. 1993)]. In that event, the in- terpretative rule is, in a sense, even more binding on the agency because its modification, unlike a modifi- cation of an interpretative rule construing a statute, will likely require a notice and comment procedure. Otherwise, the agency could evade its notice and comment obligation by “modifying” a substantive rule that was promulgated by notice and comment rule- making. See Paralyzed Veterans, 117 F.3d at 586. 24 Paralyzed Veterans is therefore consistent. with this Court’s cases, and correct besides.” Charges that the Paralyzed Veterans doctrine limits needed agency flexibility in a manner incon- sistent with this Court’s decisions are thus over- blown—particularly given two inherent limitations of the doctrine. First, if the previous agency determina- tion was not definitive, Paralyzed Veterans will not apply. Ass’n of Am. R.R.s v. Dep’t of Transp., 198 F.3d 944, 948 (D.C. Cir. 1999). Second, if there is no “sig- nificant[ ] revis{ion]” to the rule in question, Paralyzed Veterans will not apply. Air Transp. Ass’n of Am. v. FAA, 291 F.3d 49, 58 (D.C. Cir. 2002). Those two “ It is true enough, as petitioners’ amici point out (at 9), that the D.C. Circuit's Paralyzed Veterans doctrine has not been popular in the legal academy. But amici’s claim that “alll scholars * * * have reacted critically to the Paralyzed Veterans doctrine” is overblown. See, e.g., Magnesium Corp., 616 F.3d at 1140 (Gorsuch, J.) (articulating academic criticisms of the doctrine and then pointing out that “[o]ther scholars take a different view” (citing Richard W. Murphy, Hunters for Adminis- trative Common Law, 58 ApMIN. L. REv. 917, 923 (2006))); see also Ryan DeMotte, Note & Comment, Interpretative Rulemak- ing & the Alaska Hunters Doctrine: A Necessary Limitation on Agency Discretion, 66 U. Pitt. L. REv. 357, 373-74 (2005) (ap- proving of Paralyzed Veterans and arguing that academic crit- icisms of the doctrine are “largely overstated”). In all events, as Judge Gorsuch correctly pointed out, “(t]he academic debate also proceeds beyond the legal realm we inhabit to the policy realm usually reserved for others, contend- ing variously that [Paralyzed Veterans] does and does not pro- mote sound policy.” Magnesium Corp., 616 F.3d at 1140 n.12. Those contentions, of course, should be directed at the legisla- ture, not the courts. 25 limitations simply prevent capricious agency flip- flopping on established positions. They do not create insurmountable hurdles for run-of-the-mill course corrections in administration. If an issue is signifi- cant enough to warrant wholesale changes to the actual substance of a rule, it is significant enough to be considered through APA procedures. That was the point of the Act, and there is no conflict between Paralyzed Veterans and Vermont Yankee on this score. V. This Case IsA Poor Vehicle Even if the question presented warranted this Court’s review, this case is a poor vehicle and the petitions should be denied for that reason alone. The highly unusual facts of this case do not lend themselves to broad review of the Paralyzed Veterans doctrine as a general matter. The record does not reveal why the Department completely reversed course without notice or an opportunity for public comment. Additionally, no exigent circumstances have been cited that might have explained the De- partment’s action. Indeed, had there been some exigency, the Department could have invoked the APA's “good cause” exception to the notice and com- ment requirements, 5 U.S.C. § 553(bX3XB), and this litigation could have been entirely avoided. The Department cited no change in the statute or the regulations. Nor did the Department cite any change in the mortgage banking industry—or in 26 the job duties of loan officers. Instead, the Depart- ment (under a new administration) simply considered the same question a second time and reached a completely different outcome—without any warning. Thankfully, such extreme (and unexplained) agency flip-flopping is rare. And for good reason: Changes in course * ** cannot be solely a matter of political winds and currents. The Administrative Procedure Act requires that the pivot from one administration’s priorities to those of the next be accomplished with at least some fidelity to law and legal process. Otherwise, government becomes a matter of the whim and caprice of the bureaucracy, and regulated entities will have no assur- ance that business planning predicated on today’s rules will not be arbitrarily upset to- morrow. N.C. Growers’ Ass’n, Inc. v. UFW, 703 F.3d 755, 772 (4th Cir. 2012) (Wilkinson, J., concurring). At the end of the day, if petitioners are right that the question presented is “perpetually recurring,” then it will arise again soon enough in a better ve- hicle for this Court’s review—and there is no reason to think future cases will evade review. The highly unusual circumstances here, however, and the serious mootness concerns make this case a poor vehicle for exploring the contours of an agency’s right to change its mind. 27 CONCLUSION The petitions for a writ of certiorari should be denied. Respectfully submitted, SAMUEL S. SHAULSON ALLYSON N. Ho MORGAN, LEWIS & Counsel of Record BOCKIUS LLP JOHN C. SULLIVAN 101 Park Avenue MORGAN, LEWIS & New York, New York 10178 BOCKIUS LLP MICHAEL W. STEINBERG ge ons MorGAN, LEWIS & _ i Dallas, Texas 75201 KIUS LLP , 214.466.4000 1111 Pennsylvania erie ncesieais Avenue, N.W. eaten armeteenes Washington, DC 20004 Counsel for Respondent Mortgage Bankers Association BRIEF KECORD oo AND . ae Met 24 20% No. 13-1041 —o—ee=E>=>E>>_eeeeEeEeeE OOO CE —_ OLE Jn the Supreme Court of the Anited States THOMAS E. PEREZ, SECRETARY OF LABOR, ET AL., PETITIONERS Vv. MORTGAGE BANKERS ASSOCIATION, ET AL. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT REPLY BRIEF FOR THE PETITIONERS DONALD B. VERRILLI, JR. Solicitor General Counsel of Record Department of Justice Washington, D.C. 20530-0001 SupremeCtBriefs@usdoj.gov (202) 514-2217 TABLE OF AUTHORITIES Cases: Page Ball Mem Hosp. v. Leavitt, No. 04-2254, 2006 WL NEED MITT esccctsibimisisticiniinaintuibihasianisidiaatinnscicitaneaaniets 9 Cresote Council v. Johnson, 555 F. Supp. 2d 36 EEE MINUTE cacetcinstenbniceindabinsetuinaciiitaneniaicinasnianininidatiipiintiaciadeninnssi 9 Iyengar v. Barnhart, 233 F. Supp. 2d 5 (D.D.C. 2002)......10 Miller v. California Speedway Corp., 536 F.3d 1020 (9th Cir. 2008), cert. denied, 555 U.S. 1208 (2009) ......... 6,7 Montefiore Med. Ctr. v. Leavitt, 578 F. Supp. 2d 129 SE URETITL ITT cceseisissunisnsciisiessensiiieaaaiiiiassinadeainaiaiibaasieiiatinimieisiend 9 Paralyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997), cert. denied, 523 U.S. ET iciieviinhiieiaieienciiaintnicaiailbaiiiaabiieanniitaigeiniciiaiintianiemnnmnnenees 1 Swigart v. Fifth Third Bank., 870 F. Supp. 2d 500 a IIT ccsitaiscdonnstcaninariniasiininkicnemenninmeneniannmnee 5 Torch Operating Co. v. Babiitt, 172 F. Supp. 2d 113 es I iicchiicseicseuhnnchanaeniitidailibiueeditasiataiiaiahainiemninienin 10 Vermont Yankee Nuclear Power Corp. v. NRDC, 435 UTE crcesencnsnsssintenpemennnnseemantinmminninapinamnnnned 8, 10 United States v. Title Ins. & Trust Co., 265 U.S. 472 SST iesiouileeibciibilieinaileiiihdaesibitiiiaa ais aaa pal eaasanauminens 7 Warder v. Shalala, 149 F.3d 73 (1st Cir. 1998), cert. re 6, 7 Woods v. Interstate Realty Co., 337 U.S. 535 (1949) ............ 7 Statutes, regulation and rule: Administrative Procedure Act, 5 U.S.C. 551 et seq.: iis SI ccccnsnecnnesssnersccesisncssvrnsesnsnmnensenmonnenmennnniens 1 ide SEINE ccsvecsszervcssenrnenemtnneeneenemmenmeseemncsatintes 1 Bae Cas ED crcnennenseremnemsemeenereecsnnonenemenmmnameninnenienenened 5 CA ike GD cxcemecensneversrnennisnansanecnniicsemevcsnnennes Peeemeumeinen 4 (f) Il Rule—Continued: Page Sn I Sadle SIPTTIIET cesipinieseecienisvaneesibsincinniieinieiainnnineissieunbiamndanneianed 3 Miscellaneous: | 79 Fed. Reg. 22,122 (Apr. 20, 2014)..............cssssssscseresseseseeresees 5 Presidential Memorandum, Updating and Modern- izing Overtime Regulations, 79 Fed. Reg. 15,211 SESE, SEA TTIIEI Eh crssindeecbiiieiutinntesieianictinignandinebasiphetinegitimminemnenens 3 Office of the Press Secretary, The White House, Fact Sheet: Opportunity for All: Rewarding Hard Work by Strengthening Overtime Protections (Mar. 13, 2014), http:/Awww.whitehouse.gov/the- press-office/2014/03/13/fact-sheet-opportunity-all- In the Supreme Court of the Gnited States No. 13-1041 THOMAS E.. PEREZ, SECRETARY OF LABOR, ET AL., PETITIONERS v. MORTGAGE BANKERS ASSOCIATION, ET AL. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT REPLY BRIEF FOR THE PETITIONERS Congress has expressly and unqualifiediy exempt- ed the amendment and repeal of “interpretative rules” from the rulemaking requirements of the Administra- tive Procedure Act (APA). 5 U.S.C. 553(b)(A); see 5 U.S.C. 551(5). The D.C. Circuit nonetheless holds, in conflict with other courts of appeals, that APA notice-and-comment rulemaking is required to amend an interpretive rule that interprets a substantive reg- ulation whenever the interpretive change significantly alters the agency’s previously definitive reading of the regulation. Pet. App. 2a, 5a (following Paralyzed Vet- erans of Am. v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997), cert. denied, 523 U.S. 1003 (1998)); see Pet. 16-19. The D.C. Circuit has extended its Paralyzed Veterans doctrine to agency adjudicative interpreta- tions, Pet. 15, and even to suits in which no one is shown to have relied on the agency’s previous con- (1) 2 struction. Pet. 8, 10. Review is warranted to correct the D.C. Circuit’s fundamentally mistaken approach to this important and recurring question of administra- tive law. The D.C. Circuit’s holding cannot be squared with the APA’s unambiguous text and this Court’s prece- dents. Pet. 11-15. Indeed, respondent Mortgage Bank- ers Association (MBA) makes no attempt to grapple with that text. Br. in Opp. (Br.) 21-25. MBA instead seeks to avoid review by identifying (Br. 12-13) pur- ported mootness “concerns”; asserting (Br. 13-19) the relevant division of authority to be “largely illusory”; and arguing (Br. 19-21) that the question of adminis- trative law presented here is of “limited” practical im- portance. None of those contentions withstands scru- tiny or warrants a denial of review. 1. MBA’s avoidance of the statutory text is telling. See Br. 21-25; cf. Pet. 2-3, 10-14. Rather than attempt to explain whether the D.C. Circuit’s position can be reconciled with the APA’s text, MBA simply reiterates (Br. 22-23) the D.C. Circuit’s view that an agency amendment of an existing interpretive rule that signif- icantly changes the agency’s interpretation of a sub- stantive regulation should be “regarded” as amending the substantive regulation. But agency interpreta- tions no more “amend” substantive regulations than judicial interpretations “amend” the statutes being interpreted. And here, Congress has expressly ex- empted such agency “interpretative rules” from no- tice-and-comment rulemaking. MBA argues (Br. 25) that the Paralyzed Veterans doctrine “simply prevent[s] capricious agency flip- flopping on established positions.” But this suit dis- proves that contention. MBA has not challenged the 3 district court’s holdings that (a) the government’s (fully explained) interpretive change was neither arbi- trary nor capricious, and that (b) the underlying sub- stantive regulations make it “clear” that the agency’s revised interpretation corrected an error in its earlier reading. Pet. 7-8. MBA’s brief in opposition likewise fails to dispute those substantive holdings. According- ly, as this case comes to this Court, it cleanly presents the important question whether an agency interpreta- tive change that is itself substantively valid and rea- sonable is nonetheless procedurally defective because it was issued without notice-and-comment rulemaking. See Sup. Ct. R. 15.2. 2. MBA’s multiple non-merits-based reasons for opposing review are without merit. a. MBA first asserts (Br. 12-13) that, if this Court grants review, it would “likely” be prevented from resolving the question presented because future agen- cy rulemaking could raise mootness concerns. That speculative assertion is unavailing. After the government filed its certiorari petition, the President noted that some regulations addressing exemptions from the overtime provisions of the Fair Labor Standards Act (FLSA) had become “outdated.” Presidential Memorandum, Updating and Moderniz- ing Overtime Regulations, 79 Fed. Reg. 15,211 (Mar. 13, 2014). The President further directed the Secre- tary of Labor to propose revisions to “modernize and streamline” such regulations. [bid. The White House Press Office noted that although the FLSA “appl[ies] broadly to private-sector workers,” workers who per- form certain duties are exempt from the Act’s over- time protections if they earn more than a salary “threshold” set by regulation. Office of the Press Sec- 4 retary, White House, Fact Sheet: Opportunity for AU: Rewarding Hard Work by Strengthening Overtime Protections (Mar. 13, 2014), http://;www.whitehouse. gov/the-press-office/2014/03/13/fact-sheet-opportunity -all-rewarding-hard-work-strengthening-overtime-pr. That threshold, the Press Office explained, has “failed to keep up with inflation” and has thus rendered many workers exempt from the Act’s protections. /bid. Petitioner cites (Br. 12) a newspaper article sug- gesting that regulatory revisions might require over- time pay for many types of workers, including “loan officers.” But if the Secretary were to update and increase the salary threshold in 29 C.F.R. 541.600(a), workers who earn less than the increased threshold would be placed in the category of non-exempt em- ployees protected by the FLSA’s overtime require- ments, even if their job duties would otherwise render them exempt. See ibid. Such a regulatory change would have no effect on this case. The Department of Labor (Department) has in- formed this Office that there has been no determina- tion at this early stage of the rulemaking process that the Department will propose a regulatory revision that might reinstate the agency’s specific mortgage- loan-officer interpretation that the D.C. Circuit has vacated in this case. But even if future regulations would address that specific mortgage-loan-officer issue, MBA provides no basis for concluding that this Court would be frustrated in its ability to resolve the important APA question that the certiorari petition presents. Because the Department is still identifying potential regulatory changes, it has yet to issue a notice of proposed rulemaking (NPRM) in response to the President’s directive. And once such notice is 5 given, the time necessary to produce a final rule is normally quite long. The last significant proposed revision to the FLSA’s overtime regulations prompted over 75,000 comments and led to a final rule that took more than a year after the NPRM to publish. See 69 Fed. Reg. 22,122 (Apr. 20, 2004). MBA identifies no basis to conclude that a final rule revising the FLSA’s overtime regulations will likely be completed by July 2015, by which time the Court presumably will have rendered its decisions for the October 2014 Term. Even if the Secretary of Labor were to adopt spe- cific mortgage-loan-officer regulations before this Court could resolve this case, such regulations would not moot MBA’s challenge to the Department’s 2010 interpretation of the present overtime regulations. “[M]any of MBA’s members” have been sued by mort- gage-loan officers seeking overtime compensation under the FLSA. Compl. 1 34. Such members have been able to invoke the Portal-to-Portal Act’s defense against FLSA liability (29 U.S.C. 259(a)) in light of an earlier 2006 interpretation (Pet. App. 70a-84a) in which the Department concluded that the regulations exempt typical mortgage-loan officers from the Act’s overtime requirements. See, e.g., Swigart v. Fifth Third Bank, 870 F. Supp. 2d 500, 509-512 (S.D. Ohio 2012) (jury trial not yet scheduled). The 2010 inter- pretation, however, both rejected as flawed and “withdr[ew]” the 2006 interpretation, Pet. App. 67a- 69a, thus effectively eliminating the Portal-to-Portal Act defense for compensation earned after that 2010 withdrawal. As a result, the 2010 interpretation will remain important to claims for overtime earned be- tween the date of that interpretation and the effective date of any future regulation governing overtime pay 6 for mortgage-loan officers. MBA thus would appear to retain a sufficient continuing interest, on behalf of its members, in vacating the 2010 interpretation to sustain an ongoing case or controversy. Accordingly, MBA’s mootness concerns are misplaced. b. MBA argues (Br. 13-19) that this Court’s review is unwarranted because the 2-2 division of authority identified by the government is “largely illusory,” Br. 15. MBA bases that view on its assertion (ibid.) that the courts of appeals whose decisions conflict with the D.C. Circuit’s Paralyzed Veterans doctrine rendered their decisions in cases that themselves “would have come out the same way had they been decided by the D.C. Circuit,” ibid. Those contentions are fundamen- tally mistaken for at least two reasons. First, this case is the vehicle in which the govern- ment is seeking review by this Court. The relevant question is whether this case would have been decided the same way by the courts of appeals on the other side of the circuit split. The answer is no because the First and Ninth Circuits have issued decisions with holdings that squarely reject the analysis espoused by the D.C. Circuit. See Pet. 17-18. MBA does not sug- gest otherwise. MBA instead focuses (Br. 16, 18) on the alternative grounds for upholding the particular interpretive rules in Miller v. California Speedway Corp., 536 F.3d 1020 (9th Cir. 2008), cert. denied, 555 U.S. 1208 (2009), and Warder v. Shalala, 149 F.3d 73 (1st Cir. 1998), cert. denied, 526 U.S. 1064 (1999). As MBA notes (Br. 16, 18), the Miller and Warder courts both indicated that the interpretive rules before them had not altered prior agency interpretations of agency regulations. Even in the D.C. Circuit, such interpretive rules can 7 be issued without notice-and-comment rulemaking. But as the government’s petition explains (Pet. 17-18), both Miller and Warder further held that, even if the defendant agencies had changed their prior reading of their regulations as the Miller and Warder plaintiffs had argued, the APA entitled the agencies to change their interpretive rules without notice-and-comment rulemaking. See Miller, 536 F.3d at 1033; Warder, 149 F.3d at 79, 81. The fact that Miller and Warder rest on alternative holdings does not diminish their conflict with the D.C. Circuit’s jurisprudence. It is settled that, “where a decision rests on two or more grounds, none can be relegated to the category of obiter dictum.” Woods v. Interstate Realty Co., 337 U.S. 535, 537 (1949). Each independent holding in Miller and Warder thus “is the judgment of the court, and of equal validity with the other.” United States v. Title Ins. & Trust Co., 265 U.S. 472, 485 (1924) (citation omitted). Accordingly, the First Circuit’s and Ninth Circuit’s decisions are in conflict with the D.C. Circuit’s Paralyzed Veterans doctrine because they hold that the APA entitles an agency to alter its own interpretive rule to change its interpretation of a substantive agency regulation without using notice-and-comment rulemaking. Second, even if the division in the courts of appeals were not significant in itself, this Court’s review would be warranted because the D.C. Circuit has erroneous- ly construed the APA in its Paralyzed Veterans doc- trine. As the petition explains (Pet. 20), venue lies in the District of Columbia over APA actions brought against most federal agencies. For that reason, plain- tiffs like MBA are entitled to bring suit in the District of Columbia, where the Paralyzed Veterans doctrine 8 is binding precedent. Those factors render the D.C. Circuit’s precedent particularly significant in this context and, correspondingly, can be expected to im- pede the development of the issue in other courts of appeals. Review therefore is warranted for this Court to correct the D.C. Circuit’s atextual narrowing of the APA and the Act’s express statutory exemption for “interpretative rules.” See Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 525 (1978) (ex- plaining that the Court granted certiorari to review the D.C. Circuit’s judgments “because of our concern that [the D.C. Circuit] had seriously misread or mis- applied [the APA’s] statutory and decisional law cau- tioning reviewing courts against engrafting their own notions of proper procedures upon agencies”). c. Finally, MBA contends (Br. 19-21) that the basic question of administrative law presented here does not warrant review because it is of “limited” practical importance. MBA bases (Br. 19) that view on its con- tention that the D.C. Circuit has itself invalidated agency interpretive rules under its Paralyzed Veter- ans doctrine only occasionally. Those contentions are incorrect. The certiorari petition presents a funda- mental question of administrative law concerning the proper scope of agencies’ notice-and-comment obliga- tions in light of Congress’s decision to exempt “inter- pretative rules” from the APA’s notice-and-comment requirements. The Paralyzed Veterans doctrine has a significant practical adverse impact on federal agen- cies, and it has been repeatedly applied as binding D.C. Circuit precedent to invalidate agency interpre- tative rules issued without notice and comment. The D.C. Circuit’s Paralyzed Veterans doctrine imposes a formidable in terrorem effect on agencies 9 desir? .g to inform the public about the agencies’ cur- rent views that update and correct prior interpreta- tions of agency regulations. Pet. 20-21. The doctrine also creates a significant disincentive to providing authoritative guidance to the public in the first in- stance, lest such agency statements trigger the D.C. Circuit’s requirement of notice-and-comment rule- making to make future revisions. Such deterrence and incentives flow directly from the D.C. Circuit’s governing precedents and contravene Congress’s in- tent in enacting the APA’s express exemption from notice-and-comment rulemaking for interpretive rules. See Pet. 12-14. Although MBA opines (Br. 20) that it “hardly [is] cause for concern” to provide “an incen- tive to agencies to engage in notice ana comment” before altering interpretive rules, the APA’s exemp- tion for interpretative rules itself shows that this, in fact, was a particular cause for concern for Congress. That exemption reflects a seasoned understanding of the very practical burdens on agency resources that notice-and-comment rulemaking can impose (Pet. 21) and Congress’s judgment that limited agency time and resources should not be expended on notice-and- comment procedures simply to inform the public of the agency’s own current interpretation of its regula- tions. The D.C. Circuit’s Paralyzed Veterans doctrine, moreover, has been regularly applied by courts to hold agency interpretive rules invalid for want of notice-and-comment rulemaking. See, e.g., Montefiore Med. Ctr. v. Leavitt, 578 F. Supp. 2d 129, 133-134 (D.D.C. 2008); Cresote Council v. Johnson, 555 F. Supp. 2d 36, 40 (D.D.C. 2008); Ball Mem’ Hosp. v. Leavitt, Civ. No. 04-2254, 2006 WL 2714920, at *11- 10 *12 (D.D.C. 2006); Zyengar v. Barnhart, 233 F. Supp. 2d 5, 14-15 (D.D.C. 2002); Torch Operating Co. v. Babbitt, 172 F. Supp. 2d 113, 124-128 (D.D.C. 2001). And in this case, in addition to again invalidating an interpretive rule under its Paralyzed Veterans doc- trine, the D.C. Circuit has further expanded that doc- trine by holding that the doctrine demands notice- and-comment rulemaking even if no one has ever relied on the agency’s previous interpretation. Pet. 8, 10. The D.C. Circuit’s imposition of its “own notions of proper [rulemaking] procedures upon agencies” and its erroneous departure from the APA’s unambiguous text on this fundamental and recurring issue of admin- istrative law warrants review by the Court. See Ver- mont Yankee, 435 U.S. at 525. > 2. 8 . * For the foregoing reasons and those stated in the petition, the petition for a writ of certiorari should be granted. Respectfully submitted. DONALD B. VERRILLI, JR. Solicitor General MAY 2014 BRIEF 4) RECORD BRIEFS Sep unia Court, U &. FILED MAR 26 2014 NOs. 13-1041, 13-1052 OFFICE OF THE CLERK IN THE Supreme Court of the Anited States THOMAS E. PEREZ, SUED IN HIS OFFICIAL CAPACITY, SECRETARY OF THE DEPARTMENT OF LABOR, ET. AL, PETITIONERS, Vv. MORTGAGE BANKERS ASSOCIATION, ET AL. JEROME NICKOLS, RYAN HENRY AND BEVERLY BUCK PETITIONERS, Vv MORTGAGE BANKERS ASSOCIATION, ET. AL. On Petitions for Writs of Certiorari to the United States Court of Appeals for the District of Columbia Circuit AMICUS CURIAE BRIEF OF ADMINISTRATIVE LAW SCHOLARS IN SUPPORT OF THE PETITIONS Richard J. Pierce, Jr. (Counse) of Record) Alan B. Morrison Robert Glicksman GEORGE WASHINGTON UNIVERSITY SCHOOL OF LAW 2000 H STREET NW Washington, D.C. 20052 (202) 994-1549 rpierce@law.gwu.edu Counsel for Amici Curiae QUESTION PRESENTED Is an agency required to use notice and comment procedures when it changes its interpretation of one of its own rules? ii T [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385015_0961%3A0. Public record. Not legal advice.