Opinion ID: 786487
Heading Depth: 3
Heading Rank: 1

Heading: Mandatory Chevron Deference Is Unwarranted in this Case

Text: 39 The first question we must ask in the deference analysis is whether Congress has directly spoken to the precise question at issue. Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Of course, if congressional intent could be discerned from the face of SIPA, our deference inquiry would be over because the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. Id. at 842-43, 104 S.Ct. 2778; see also United States v. Gayle, 342 F.3d 89, 92 (2d Cir.2003) (Statutory construction begins with the plain text and, if that text is unambiguous, it usually ends there as well.). SIPA does not address the precise issue presented in this case. The statute fails to provide any definition of a claim for cash. See 15 U.S.C. § 78 lll. None of the provisions outlines how the Claimants — who were fraudulently misled to invest their money in Goren's bogus securities — should be treated. This is precisely the type of interstitial question anticipated by Chevron and its progeny. See, e.g., Barnhart v. Walton, 535 U.S. 212, 222, 122 S.Ct. 1265, 152 L.Ed.2d 330 (2002). 40 In light of the statute's silence, and because we have an agency interpretation of section 9(a)(1) of SIPA, 15 U.S.C. § 78fff-3(a)(1), the second Chevron step requires that, as opposed to proceeding to construe the statute ourselves (as we usually would), we must determine whether the SEC's interpretation is based on a permissible construction of the statute. Chevron, 467 U.S. at 843, 104 S.Ct. 2778. If the administrator's reading fills a gap or defines a term in a way that is reasonable in light of the legislature's revealed design, we give the administrator's judgment `controlling weight.' NationsBank of North Carolina, N.A. v. Variable Annuity Life Ins. Co., 513 U.S. 251, 257, 115 S.Ct. 810, 130 L.Ed.2d 740 (1995) (quoting Chevron, 467 U.S. at 844, 104 S.Ct. 2778); see also SEC v. Zandford, 535 U.S. 813, 819-20, 122 S.Ct. 1899, 153 L.Ed.2d 1 (2002) (explaining that SEC's interpretation of the ambiguous text of § 10(b) ... is entitled to deference if it is reasonable). 41 There are several reasons that the mandatory deference envisioned by Chevron would be inappropriate here. First, although the SEC has clearly had the power to draft rules to address this ambiguity in SIPA, the interpretation proffered in its brief has never been articulated in any rule or regulation. 16 As the SEC admits, [o]ther than the Series 500 Rules, which the Commission does not interpret to cover fictitious securities, the Commission has not defined by regulation the terms in Section 9(a). Prezioso Letter at 6. In United States v. Mead Corp., 533 U.S. 218, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001), the Supreme Court explained that it ha[s] recognized a very good indicator of delegation meriting Chevron treatment in express congressional authorizations to engage in the process of rulemaking or adjudication that produces regulations or rulings for which deference is claimed.  Id. at 229, 121 S.Ct. 2164 (emphasis added). While the fact that the SEC interpretation has not been expressed in the form of a rule or regulation crafted after notice and comment does not alone determine the applicability of Chevron, see id. at 230-31, 121 S.Ct. 2164; Walton, 535 U.S. at 222, 122 S.Ct. 1265, taken together with the factors discussed infra, it counsels against affording Chevron deference to the SEC's interpretation. 42 Second, it appears that the position taken by the SEC in its brief is one that it has not previously articulated in any form. Cf. Local 705, Int'l Bhd. of Teamsters v. Daniel, 439 U.S. 551, 566 & n. 20, 99 S.Ct. 790, 58 L.Ed.2d 808 (1979) (noting that considerable weight is given to an administrative agency's consistent, longstanding interpretation of the statute under which it operates) (emphasis added). To be clear, while the SEC's articulation of this position is new, the issue certainly is not. The SEC acknowledges that SIPC has long held its position regarding the treatment of non-existent securities. SIPC first articulated this argument — that a claim for fictitious securities is properly treated as a claim for cash — in cases that arose over a decade ago. See Plumbers and Steamfitters Local 490 Severance and Ret. Fund v. Appleton (In re First Ohio Sec. Co.), No. 93-3313, 39 F.3d 1181 (table), 1994 WL 599433, at  (6th Cir. Nov.1, 1994) (unpublished decision) (finding that the only legal conclusion possible where claimants sought SIPC advances for securities that never even existed was that the claims were for cash and not for securities), cert. denied, 514 U.S. 1018, 115 S.Ct. 1362, 131 L.Ed.2d 219 (1995); Appleton v. Hardy (In re First Ohio Sec. Co.), No. 590-0072 (Bankr.N.D.Ohio Dec. 1, 1992) (unpublished order affirming trustee's determination that a claim for non-existent securities is a claim for cash). SIPC also apprised the SEC of its position on this issue in its 1993 and 1994 Annual Reports. Harbeck Letter at 9. 43 Third, the SEC concedes that its new interpretation of SIPA has been expressed for the first time ... in an amicus brief filed at the request of this Court and that, under those circumstances, its interpretation may not be entitled to Chevron deference. Prezioso Letter at 6. As we observed in Callaway v. Commissioner, 231 F.3d 106 (2d Cir.2000), the Supreme Court has accorded deference, even to agency interpretations appearing for the first time in an amicus brief, where there `is simply no reason to suspect that the interpretation does not reflect the agency's fair and considered judgment on the matter in question.' A new, and therefore inconsistent position, may yet be `fair and considered.'  Id. at 132 (citations omitted); see also Cedar Rapids Cmty. Sch. Dist. v. Garret F. ex rel. Charlene F., 526 U.S. 66, 74-75 n. 6, 119 S.Ct. 992, 143 L.Ed.2d 154 (1999); Auer v. Robbins, 519 U.S. 452, 462, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997). But cf. Christensen v. Harris County, 529 U.S. 576, 587, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000) (Interpretations such as those in opinion letters — like interpretations contained in policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law — do not warrant Chevron-style deference.). The SEC's opinion is certainly not the sort of `post hoc rationalization'... to defend past agency action against attack about which the Supreme Court has registered concern. Auer, 519 U.S. at 461-62, 117 S.Ct. 905 (citation omitted). We have no reason to doubt that the SEC's interpretation was the product of careful consideration. And the SEC's familiarity with this case from its inception lends credence to its view. Nevertheless, the SEC submitted its brief only after being invited to do so (and only once this dispute reached appeal). 17 Indeed, in some cases, we have declined to consider arguments raised for the first time in an appellate amicus brief. See, e.g., Concourse Rehab. & Nursing Ctr., Inc. v. DeBuono, 179 F.3d 38, 47 (2d Cir.1999). This, then, is another consideration that weighs against Chevron deference. 44 Finally, the SEC's historical relationship with SIPC and SIPC's arguably greater familiarity with the provisions of SIPA are yet additional reasons to decline to apply Chevron deference to the SEC's interpretation of SIPA. Chevron deference is predicated, in part, on the perceived superior expertise of the agency in question. See Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 651-52, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990) ([P]ractical agency expertise is one of the principal justifications behind Chevron deference.). With respect to SIPA and the determinations made by the Trustee and SIPC during liquidation proceedings, the SEC's role involves more removed oversight. Indeed, if the conduct of this litigation is any indication, it appears that the SEC generally adopts a hands-off approach with respect to SIPC liquidations (and litigation). As a result, the SEC's expertise in this context is arguably less compelling than it would be with respect to those portions of the Securities Exchange Act as to which it takes a more proactive day-to-day role. Cf. Bowen v. Am. Hosp. Ass'n, 476 U.S. 610, 643 n. 30, 106 S.Ct. 2101, 90 L.Ed.2d 584 (1986) (noting that where the Department of Health and Human Services was one of twenty-seven agencies responsible for promulgating regulations forbidding discrimination, there is ... not the same basis for deference predicated on expertise as we found [in Chevron ]). 45 For these reasons, we find that the informal opinion proffered by the SEC in its amicus brief lacks the force of law and thus does not warrant Chevron deference. Chao, 291 F.3d at 227.