Third Circuit Denies Post-Loper Bright Petition for Rehearing in Case Applying Auer/Kisor Deference (11/6/24)

In United States v. Chandler, 104 F.4th 445 (3rd Cir. 6/11/24), CA3 here and GS here, the Court sustained a sentence based in part on the application of Auer/Kisor deference to the Guidelines Commentary. (See Slip Op. 7, 17-19.) I refer to his panel decision as Chandler I. Chandler I preceded Loper Bright Enters. v. Raimondo, ___ U.S. ___, 144 S. Ct. 2244 (2024), which rejected Chevron deference (as well as, any similar deference that preceded Chevron). But Loper Bright did not address a deference subclass for agency subregulatory interpretations of legislative regulations (such as Guidelines Commentary on Guidelines). See Fourth Circuit Applies Auer/Kisor Deference to Include in Guidelines "Loss" the Commentary Inclusion of "Intended Loss" (Federal Tax Crimes Blog 8/24/24), here; and More on United States v. Boler (Federal Tax Crimes Blog 8/25/24), here.

On petition for rehearing in Chandler, the Court entered a document titled “Sur Petition for Rehearing,” denying the panel rehearing and en banc rehearing but with dissents by Judges Bibas and Matey. United States v. Chandler, 114 F.4th 240 (3rd Cir. 9/22/24), CA3 here and GS here. I refer to this denial of rehearing as Chandler II. Judge Bibas argued that, even if Auer/Kisor deference were otherwise applicable to Guidelines Commentary, deference only applied when the interpretive toolkit was otherwise empty, but that lenity was in the toolkit and applied to preempt ambiguity for Auer/Kisor deference. Judge Bibas said that applying Auer/Kisor deference without first applying lenity, “put us on the wrong side of a circuit split. At least three circuits hold that lenity trumps deference.” (Slip Op. 2-3; note the page numbers are for the pdf because the pages are not numbered.) Judge Matey dissented because he felt that the ordinary meaning of the statutory term was discernible without deference (sort of a Chevron Footnote 9 approach). Neither dissenting Judge reasoned that the Auer/Kisor deference applied in Chandler I (the pre-Loper Bright panel opinion) did not survive Loper Bright.

So, as of now, at least so far as I am aware, we still do not have a definitive ruling on whether Auer/Kisor deference survives Loper Bright, but the courts seem to be deciding cases as if it does survive Loper Bright. Most immediately, that means that the Sentencing Guidelines Commentary interpreting the Guidelines may qualify for deference at least when lenity doesn’t apply. (That sets aside the issue of whether lenity might apply to avoid getting to Auer/Kisor deference for Guidelines Commentary; and conceptually the ambiguity invoking lenity is the same as the ambiguity required for Auer/Kisor deference, lenity might always apply.)

More on United States v. Boler (8/25/24)

Yesterday, I wrote a blog entry on United States v. Boler, 115 F.4th 316 (4th Cir. 2024). Fourth Circuit Applies Auer/Kisor Deference to Include in Guidelines "Loss" the Commentary Inclusion of "Intended Loss" (Federal Tax Crimes Blog 8/24/24), here. (The blog entry was cross-posted on my Federal Tax Procedure Blog, here.) I think there is more that can and should be said about Boler. This post will be more of a “notice” post (like the fabled notice pleading lawyers at least of my generation learned about early in our law school careers).

1. The structure of the Federal Sentencing Guidelines. The 2023 version of the U.S. Sentencing Guidelines is here. The Guidelines (with accompanying Commentary and Policy Statements) are promulgated by the U.S. Sentencing Commission which is “a bipartisan, independent agency located in the judicial branch of government, was created by Congress in 1984 to reduce sentencing disparities and promote transparency and proportionality in sentencing.” See website here. So, we know at the outset that it is a strange creature in our constitutional framework—the only agency located in the judicial branch. 

JAT Side Note: Readers of this blog will surely have some passing acquaintance with the difficulty going back to the 1940s of determining precisely what the Tax Court was, even though the statute said since its earliest days (then the Board of Tax Appeals) that the Tax Court was an independent agency in the Executive Branch. As I have noted, the nature of the Tax Court was an issue was much discussed with more heat than light in the 1940s, including in the consideration of the APA; the Supreme Court in Dobson v. Commissioner, 320 U.S. 489 (1943), reh. den., 321 U.S. 231 (1944), a unanimous opinion authored by Justice Jackson, the most tax procedure savvy Justice ever, held that the Tax Court was an agency rather than a court and applied Chevron-like deference to its statutory interpretations. I cover these issues in John A. Townsend, The Tax Contribution to Deference and APA § 706 (SSRN December 14, 2023), pp. 5-23)   https://ssrn.com/abstract=4665227.

2. Guidelines treated as Legislative Rules; Commentary Treated as Interpretive Rules. As an agency, albeit a Judicial Branch agency, the issue underlying Boler was the authority of the Guidelines and the Policy Statements and Commentary. In Stinson v. United States, 408 U.S., 36 (1993), GS here, the Court treated the Guidelines as analogous to legislative rules which make law pursuant to Congress’ delegation and treated Commentary as an interpretive rule interpreting the law (the law being the Guidelines). The Court said (p. 44-45, cleaned up to omit most case citations):

Although the analogy is not precise because Congress has a role in promulgating the guidelines, we think the Government is correct in suggesting that the commentary be treated as an agency's interpretation of its own legislative rule. The Sentencing Commission promulgates the guidelines by virtue of an express congressional delegation of authority for rulemaking, and through the informal rulemaking procedures in 5 U. S. C. § 553, see 28 U. S. C. § 994(x). Thus, the guidelines are the equivalent of legislative rules adopted by federal agencies. The functional purpose of commentary (of the kind at issue here) is to assist in the interpretation and application of those rules, which are within the Commission's particular area of concern and expertise and which the Commission itself has the first responsibility to formulate and announce. In these respects this type of commentary is akin to an agency's interpretation of its own legislative rules. As we have often stated, provided an agency's interpretation of its own regulations does not violate the Constitution or a federal statute, it must be given "controlling weight unless it is plainly erroneous or inconsistent with the regulation." Bowles v. Seminole Rock & Sand Co., 325 U. S. 410, 414 (1945). 

Bowles v. Seminole Rock is the predicate for Auer deference which I now call Auer/Kisor deference because of the authoritative treatment of Auer deference in Kisor v. Wilkie, 588 U.S. 558 (2019). As I discussed in yesterday’s blog on Boler, the issue was the application of Auer deference to Guidelines’ Commentary (Application Note) defining the Guidelines term “loss” to include “intended loss.”

3. Did Auer/Kisor Deference Survive the Demise of Chevron. One of the issues I presented in yesterday’s blog was whether Auer/Kisor deference survived the demise of Chevron deference. I just want to make a few bullet points about that issue.

Sentencing Guidelines under the Loper Bright Non-Deference Regime (8/7/24; 10/15/24)

Three leading authorities on federal sentencing have co-authored an article that might be of interest to those interested in the confluence of federal sentencing and the demise of deference in Loper Bright Enterprises v. Raimondo, 603 U. S. ____, 144 S. Ct. 2244 (2024), SC Slip Op. here & GS here. The article is Mark Allenbaugh, Doug Passon, and Alan Ellis, Post-Chevron, Good Riddance To The Sentencing Guidelines (Law 360 7/15/24), here. I learned from the article and made appropriate changes to the federal crimes section of the 2025 working draft of my Federal Tax Procedure book.

The authors engage Loper Bright over the Sentencing Guidelines. The authors note that there are two key categories within the Guidelines.

• The Guidelines which “are the equivalent of legislative rules adopted by federal agencies,” quoting Stinson v. United States, 508 U.S. 36. 41, 45 (1993). The Guidelines are thus like, in the Treasury context, the consolidated return regulations under § 1502 which contain many rules (including interpretations of the rules). They are the law if within the legislative rulemaking authority conferred by Congress.
• What I call Sub-Guideline Rules which are Policy Statements and Commentary (including Application notes). Sub-Guidelines rules are not legislative rule-equivalents but more like interpretations of the regulations-equivalent Guidelines. Since they are not law but interpretations, they can be tested for validity of the interpretation.

As I said, legislative rules are the law if within the scope of the authority delegated and thus are not tested as to whether “reasonable” (under Chevron) or “best” (under Loper Bright). They are the law if within the scope of the legislative rulemaking authority granted. While an unreasonable definition in a legislative rule would likely be rejected as arbitrary and capricious (which could overlap but was never the same as the reasonableness test under Chevron), so long as the interpretation in a legislative rule is reasonable, it should be the law, just as interpretations and definitions in the consolidated return regulations under § 1502 are the law. (I know, this sounds like smuggling in Chevron deference, but I am just applying the traditional distinction between legislative rules and interpretive rules which Loper Bright did not reject.)

Third Circuit Holds That Tax Loss for Tax Crimes Sentencing Calculations is the Intended Loss Rather than Actual Loss (5/10/23)

In United States v. Upshur, 67 F.4th 178 (3rd Cir. 5/8/23), CA3 here and GS here, the Court held that the loss driving the Tax Table at U.S.S.G. § 2T4.1, here, is the intended loss rather than the actual loss to the Treasury.  The holding is driven by the language in the Guideline itself: “the tax loss is the total amount of loss that was the object of the offense (i.e., the loss that would have resulted had the offense been successfully completed).” § 2T1.1(c), here

That only became an issue because the Third Circuit held in United States v. Banks, 55 F.4th 246 (3d Cir. 2022) that, for larceny and related financial crimes in U.S.S.G. § 2B1.1, the “loss” (meaning actual loss) is the measure. Both results were driven by the plain meaning of the respective terms in the Guidelines.

 The case highlights a possible disconnect between the sentencing for the two types of financial crimes. It is not apparent from the Guidelines why there is a difference, but as the plain text of both Guidelines provisions establishes, there is a difference.

The Court also said (Slip Op. 6 n.1):

   n1 Because we conclude that the text of § 2T1.1(c)(1) is unambiguous, we need not go further and examine its “structure, history, and purpose” or determine if the relevant Guidelines Commentary merits Auer deference. See Kisor, 139 S. Ct. at 2415.

Auer deference in the Guidelines context would be Commentary interpretation of the Guidelines (which for deference is treated like a notice and comment regulations).