At Wednesday's argument in Chase Bank USA v. McCoy (No. 09-329), the Justices considered a rather technical Federal Reserve regulation, which governs whether a credit card issuer must provide advance notice before raising the interest rate on a credit card account in response to a cardholder's default on an obligation to a third party.

Putting the substance of the dispute to the side, the Justices leapt immediately into an extended dialogue about the deference due to the Federal Reserve's brief interpreting its own regulation.   Before Seth Waxman could start the third sentence of his presentation, Justice Kagan interrupted to press the question, and she quickly was joined by Justices Ginsburg and Sotomayor.  Before the Justices allowed Mr. Waxman to begin his substantive argument, four more Justices "“ Scalia, Kennedy, Breyer, and the Chief Justice "“ had joined the discussion as well.  Mr. Waxman held firmly to his view that nothing in the prior cases undercut the propriety of deference to views expressed by an agency in a brief filed in response to a formal request from a court. The Justices, in contrast, without criticizing that point directly, suggested that it was quite difficult to reconcile Mr. Waxman's view on the deference question with Mead.

At last, far more than halfway through Mr. Waxman's time, Justice Alito shifted the discussion back to the facts of the case, pressing Mr. Waxman on how a consumer possibly could know that the interest rate had risen without receiving advance notice.  When he suggested that the disclosure to the customer in the initial contract was adequate, Justice Alito let the matter rest, and Mr. Waxman reserved the rest of his time.

Assistant to the Solicitor General Joseph Palmore appeared next, on behalf of the United States as an amicus in support of Chase.  As he presented a strong argument in favor of deference to the Federal Reserve's interpretation, he shifted from Mr. Waxman's emphasis on a brief that the Federal Reserve had filed in the First Circuit, emphasizing instead the importance of a later rulemaking in which the Federal Reserve revised the regulation, which the Federal Reserve explained at the time as a change in the rule at issue here.  Justice Scalia quickly took Mr. Palmore to task, asking why an agency's later view of its own regulation should matter when Congress's later view of its own statutes would be irrelevant.  After a few questions about application of the regulations, the Justices settled in and allowed Mr. Palmore to spend the rest of his time summarizing the arguments in his brief about how the regulation is properly understood.

The most interesting part of the argument was when Gregory Beck appeared for the respondent, James McCoy.  Justice Ginsburg quickly interrupted Mr. Beck's argument to test his interpretation with a series of hypotheticals about credit card agreements including slightly different notice requirements.  Justices Scalia, Kagan, and the Chief Justice quickly joined the fray, apparently concluding that the distinctions Mr. Beck articulated were so difficult to apply that they deeply undermined the credibility of his interpretation of the regulation.

At that point, Justices Ginsburg and Breyer turned to the topic of agency deference, with Justice Breyer pressing Mr. Beck particularly hard on what he perceived as the oddity of ignoring the Board's explicitly stated and plainly long-standing understanding of the meaning of its own regulation.  As Justice Breyer emphasized: "[W]hat in the law prevents the Board, which is in charge of its own regulations, from telling us what it thinks, if it's in good faith and isn't making up some kind of ex-post rationalization."

At that point, Mr. Beck suggested, in at least a slight shift from the emphasis in his brief, that the core problem with Chase's position is that deference is unwarranted because the meaning of the regulation is not ambiguous.  Justice Scalia challenged that interpretation with force, concluding that "it's at least a horse race, and that brings us back to how much deference you give to the * * * board."

At that point, the Justices allowed Mr. Beck to advance his own interpretation of the regulation in some detail, but ultimately Justice Breyer took the discussion back once again to his view that the court should "defer like double to their own interpretation of their own staff commentary."  Eventually, Justice Sotomayor forced Mr. Beck to concede that the Court would have to defer "to some degree to the brief," and that his case therefore "rises and falls on whether we believe that the statute is clear."

From that point on, given the apparent view of the Justices that the regulation in fact is unclear, the force seemed to have left the argument.  Mr. Beck presented his reading of the regulation for a few more minutes, and on rebuttal Mr. Waxman made a few brief clarifications.

What seems to be left at this point for the Justices is to decide whether McCoy's concession obviates any need for the Justices to debate the propriety of deference either to the agency's brief or to its explanation of the regulation in its rulemaking to amend it.  Not a word of the argument suggests any likelihood of affirmance of the Ninth Circuit.  The principal question, then, is whether the opinions will offer anything interesting in the course of reversal.

Posted in Chase Bank v. McCoy, Merits Cases

Recommended Citation: Ronald Mann, Argument recap: Justices spar over deference to Fed, SCOTUSblog (Dec. 10, 2010, 4:07 PM), http://www.scotusblog.com/2010/12/argument-recap-justices-spar-over-deference-to-fed/