Judicial Incentives and Indeterminacy in Substantive Review of Administrative Decisions

Full-text available at SSRN. See link in this record.It was not supposed to be like this. In Chevron and State Farm, the Supreme Court announced what appeared to be controlling standards for substantive review of administrative decisions. Chevron adopted a two-step approach to statutory interpretation under which courts were to overturn agency interpretations that were contrary to the clear intent of Congress, but defer to permissible agency constructions of a statute. State Farm indicated that an agency’s policy judgments should be analyzed according to a specific set of inquiries that focused on the agency’s reasoning process. Administrative law scholars, whether they agreed or disagreed with the Court’s standards, assumed that the two cases were landmark decisions that signaled a turning point in the substantive review of agency decisions. Instead, the Chevron framework has broken down, and State Farm has been all but ignored by agencies and the courts, including the Supreme Court. This article accounts for this breakdown by analyzing the impact of judicial incentives on substantive review in administrative law. Its centerpiece is a model of judicial behavior based on the “craft” and “outcome” components of judicial decisionmaking. Judges engage in the well-reasoned application of doctrine as a matter of craft, and they consider the implications of a result for the parties and society in general as a matter of outcome. When these components pull in opposite directions in a given case, our model suggests how judicial incentives influence the resolution of this tension. Our model of judicial behavior explains why Chevron and State Farm have not been as influential as commonly assumed. Judges have stronger incentives to control outcome and weaker incentives to develop determinate craft norms that limit pursuit of outcome in administrative law than in other areas of law. Because reliance on indeterminate craft norms enables judges to pursue outcome without sacrificing craft, judges have avoided applications of Chevron and State Farm that are determinate. Drawing on this model, we propose a modified approach to substantive judicial review that accounts for the way that judicial incentives influence substantive review doctrine. We recommend that Congress require courts to respond to a series of specific questions that would apply to substantive agency decisions. These questions would make it more difficult for judges to manipulate scope of review standards and would require more explicit reasons for affirming or reversing an agency decision