Chenery II Revisited

Ever since the Supreme Court’s 1947 decision in SEC v. Chenery Corporation, known as Chenery II, agencies have enjoyed wide latitude to develop policy through individual adjudications in addition to rulemaking. Chenery II has never been completely uncontroversial, and in recent years, calls to overturn or limit it have been expressed in increasingly fervent tones. Agency policymaking by adjudication has emerged as a new front in the struggle over the administrative state. Against the backdrop of such calls, this Article revisits some of the fundamental questions concerning the Chenery II doctrine. I argue in favor of retaining Chenery II’s core procedural holding. Indeed, except where the organic statute requires rulemaking, courts should never set aside an agency order because that order announces a policy that the court concludes should have been announced through rulemaking. But even if courts lack power to hold that agencies have violated procedural law by failing to use rulemaking in announcing a particular policy, the policy itself remains subject to more substantive limitations: it must have been the product of “reasoned decision-making,” and it must comport with applicable binding law. I argue that courts can adapt these limitations, as applied to particular policies adopted via adjudication, to address the gravest concerns raised by Chenery II’s skeptics. Finally, I evaluate two “soft” constraints on agency policymaking by adjudication, designed to influence agencies’ procedural decisions without purporting to control them. I argue that these soft limits, though plausibly justifiable, may have real costs and reap uncertain benefits. It is at best unclear whether they should be adopted.