June 28, 2018Client Alert

Down with Deference: Wisconsin Courts Will No Longer Defer to State Agency Conclusions of Law

On June 26, 2018, the Wisconsin Supreme Court released its decision in Tetra Tech EC, Inc. v. Wisconsin Department of Revenue, 2018 WI 75. In the case, a five-justice majority announced it would “end [courts’] practice of deferring to administrative agencies’ conclusions of law.”

By altering the standard by which state agencies’ legal conclusions are reviewed by state courts, the case has potential impacts for any client with business before Wisconsin state agencies.

Under the Court’s existing precedent, an agency’s reasonable interpretation of law was entitled to “great weight” deference when four conditions were satisfied: (1) “the agency was charged by the legislature with the duty of administering the statute”; (2) the agency’s interpretation is long-standing; (3) the agency “employed its expertise or specialized knowledge in forming the interpretation”; and (4) adopting the interpretation supports “uniformity and consistency in the application of the statute.” Giving an agency’s interpretation “great weight,” the Court explained, means adopting the agency’s interpretation of the law “so long as it is reasonable.”

Tetra Tech does away with “great weight” deference in Wisconsin, a result that commands courts to take a more active role in interpreting state statutes when reviewing agency action. No longer will great weight deference be a “controlling principle” “baked into the structure” of a court’s analytical process. For better or worse, as the case may be, courts will no longer be required to adopt an agency’s interpretation of state statute when the great weight deference preconditions are met.

What’s Left After Tetra Tech?

The Court’s opinion in Tetra Tech also appears to fundamentally alter the nature of so-called “due weight” deference.

In addition to great weight deference, Wisconsin’s jurisprudence has also recognized a second, lower tier of deference referred to as due weight deference. Prior cases establish that due weight deference was “appropriate when ‘the statute is one that the agency was charged with administering,’ and ‘the agency has some experience in an area, but has not developed the expertise which necessarily places it in a better position to make judgments regarding the interpretation of the statute than a court.’” The Court noted that commentators often call this form of deference “tie goes to the agency” deference, because it requires deference to an agency interpretation unless the court finds an interpretation it believes is more reasonable than that of the agency.

Unlike great weight deference, which developed through the Supreme Court’s case law, due weight deference finds a basis in state statute. Wisconsin Stat. § 227.57(10) provides that courts must accord “due weight” to the “experience, technical competence, and specialized knowledge of the agency involved[.]”

The Court’s holding—that it would no longer defer to agencies’ conclusions of law—seems to suggest that the court would also repudiate the “tie goes to the agency” approach to due weight deference. Instead, hewing more closely to the text of chapter 227, courts will now give appropriate persuasive value (i.e., “due weight”) to an agency’s view of what a statute means, without requiring the court to reflexively adopt the agency’s interpretation when certain conditions are met.

Wisconsin Bell, Inc. v. LIRC, 2018 WI 76, released the same day as Tetra Tech, supports this conclusion. There, the majority stated that it will give “due weight” to an administrative agency's experience, technical competence, and specialized knowledge as we consider its arguments.”

The Court continued by explaining:

The factors informing how much weight is due include the considerations we previously used in deciding whether we would defer to an administrative agency's conclusions of law, such as: (1) whether the legislature made the agency responsible for administering the statute in question; (2) the length of time the administrative agency's interpretation has stood; (3) the extent to which the agency used its expertise or specialized knowledge in developing its position; and (4) whether the agency's perspective would enhance uniformity and consistency of the law.

Wisconsin Bell at ¶ 42 (emphasis added).

This passage seems to confirm that, after Tetra Tech, “due weight” means something different from “tie goes to the agency.” Instead, courts should scrutinize agency claims of deference using the factors listed above and accord persuasive value (if any) to agency interpretations of state law as appropriate; it does not seem that a court is required to reflexively adopt an agency interpretation simply because it is equally reasonable, in the eyes of the court, as another competing interpretation.

Court Disagrees on Grounds

While the a majority decided that courts will no longer defer to state agencies’ legal conclusions, a majority did not agree on the grounds, or rationale, for that conclusion. Justices Daniel Kelly (author of the lead opinion) and Rebecca Bradley would have decided the case on constitutional grounds, concluding that separation of powers and due process considerations mandate an end to deference in Wisconsin. Specifically, Justice Kelly wrote that deference fails to comport with separation of powers principles because it transfers a core judicial power (to say what the law is) to unelected executive branch employees. He also reasoned that deference runs afoul of due process requirements because, in essence, it allows agencies an outsize role in interpreting the law governing a dispute to which they are a party—thus depriving private parties of an impartial decision maker.

The three other justices who comprise the majority would have avoided justifying their result on constitutional grounds. Instead, these three justices view the court’s deference jurisprudence as judicially created, and thus subject to judicial revision.

Standard of Review for Factual Findings Not Impacted

It is important to note that the Tetra Tech case does not alter the standard of review applicable to an agency’s factual findings, but only to its conclusions of law. Often, adjudication of disputes at the agency level often implicate both factual questions (i.e., what happened or what are the underlying circumstances of a dispute) and legal questions (i.e., what does the law mean and how should that law be applied to the facts). Tetra Tech’s holding applies to conclusions of law. It does not disturb the standard of review that applies to factual findings, which requires a court to conclude that a finding is “not supported by substantial evidence in the record” before it may set aside an agency’s decision or remand a case for further proceedings.

For more information on this development, contact your Michael Best attorney.

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