During the Second World War, the Supreme Court of United States established the rule that a government agency is bound by the explanation it gives for a decision in the record at the time made. This tenet prevents the government from making up reasons or facts later to justify a determination or action that was not contemporaneously articulated. This rule proscribing post hoc rationalization is known as the Chenery principle. Notably, the Chenery principle is intended to preclude the courts from rescuing an administrative agency by supplying a justifiable reason for government action that was not itself relied upon unless the basis for the agency’s action otherwise may be reasonably determined from the administrative record. Although originally applied to regulators’ decisions in contested cases, importantly the Court has extended the principle to rulemaking and even informal policy actions by agencies.
For the Chenery principle to apply, the administrative agency must be interpreting laws that a legislature has delegated to the regulators to administer with the binding force of law, or where there are lapses in factual or policy analyses. The doctrine may be ignored by a reviewing court if there is “harmless error” — that is the agency mistake had no impact on the procedure used or decision reached. The Chenery doctrine similarly is of no avail if the regulatory body’s action is compelled by a statute and the result cannot be different even if the court invalidates the government’s decision. Moreover, the rule does not prevent a reviewing court from considering well reasoned and persuasive agency guidance on a question of law that the court may examine within its de novo review.
There are two central lessons for the business community from the Chenery decision. First, is that the contents of the record, including any written decision or order, created before an administrative agency has real practical implications on the ability to get judicial relief from arbitrary or unlawful action by regulators. This is equally true for rulemaking and policy formulation, as well as adjudicated cases. Second, a company’s representatives need to have detailed pre-hearing strategic conversations about how to influence the content of an agency’s record in a matter impacting the business to optimize the desired outcome. Sometimes a slim record can mean victory, and in other instances a messy and convoluted record is a path to success.
References
SEC v. Chenery, 318 U.S. 80 (1943); Motor Veh. Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983); Bowman Transp., Inc. v. Arkansas-Best Freight, 419 U.S. 281 (1974); Camp v. Pitts, 411 U.S. 138 (1973); K. M. Stack, The Constitutional Foundations of Chenery, 116 Yale L.J. 952 (2007).
ALL THINGS REGULATORY 