Misunderstanding Chenery and the Problem of Reasons-or-Bases Review

The Supreme Court’s decision in S.E.C. v. Chenery II has been applied overbroadly by appellate courts. By its own terms, the automatic remand rule of the decision applies only to “the domain which Congress has set aside exclusively for the administrative agency.” 332 U.S. 194, 196 (1947) (emphasis added). This exclusive domain encompasses policy determinations and findings of legislative facts. However, ordinary adjudicative facts — those that have no application beyond an individual case — are not the exclusive domain of agencies. Although courts owe deference to agency fact finders, they generally have power to reverse adjudicative factual findings that are clearly erroneous. Therefore, applying Chenery to reflexively remand adjudicative findings for additional analysis instead of reviewing such findings on the merits is an extension that is unmoored from the separation-of-powers theory that animates the opinion. This problem is far more than academic because the refusal of appellate courts to engage with the merits of agency decisions imposes needless costs and delay on both agencies and those contesting agency actions. In one extreme example, decades of data show that the refusal of the Court of Appeals for Veterans Claims to engage with the merits in 80% of the cases it remands to the Board of Veterans’ Appeals has dramatically increased processing times and remands at the agency level without changing the rate at which the Board grants claims. Moreover, such remands do not have a strong correlation to outcome changes in the individual appeals. As a result, there is little connection between the court’s findings of insufficient analysis and actual changes in outcome at either an individual or systemic level. Therefore, the court should abandon its current approach to review in favor of a traditional approach of reviewing agency findings of adjudicative fact for clear error.