Tetra Tech EC, Inc. v. Wisconsin Department of Revenue
This text of 2018 WI 75 (Tetra Tech EC, Inc. v. Wisconsin Department of Revenue) is published on Counsel Stack Legal Research, covering Wisconsin Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinions
DANIEL KELLY, J.
*28*510¶1 The Wisconsin Department of Revenue (the "Department") imposed a tax on the petitioners pursuant to
*511(2007-08) for the "processing" of river sediments into waste sludge, reusable sand, and water. The petitioners say the statutory term "processing" is not expansive enough to cover the separation of river sediment into its component parts, and so they asked us to reject the Department's interpretation of that term.1
¶2 Because resolving this question implicates the authoritativeness of an administrative agency's interpretation and application of a statute, we asked the parties to also address this issue: "Does the practice of deferring to agency interpretations of statutes comport with Article VII, Section 2 of the Wisconsin Constitution, which vests the judicial power in the unified court system?"2
¶3 We conclude that the term "processing" in
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
¶4 On November 13, 2007, the United States Environmental Protection Agency ("EPA") ordered several paper companies to remediate the environmental impact of polychlorinated biphenyls ("PCBs") they had released into the Fox River as part of their manufacturing activities. The paper companies created Lower Fox River Remediation, LLC ("LFR Remediation") to carry out the EPA's order. LFR Remediation hired Tetra Tech EC, Inc. ("Tetra Tech") to perform the actual remediation activities. Tetra Tech subcontracted a portion of the work to Stuyvesant Dredging, Inc. ("Stuyvesant Dredging").5 Stuyvesant Dredging's responsibilities included receiving sediment dredged from the Fox *513River, and then using membrane filter presses to separate it into its component parts: water, sand, and PCB-containing sludge. Part of the purpose of Stuyvesant Dredging's work was to "provide a supply of relatively clean sand that could be sold for off-site use or used beneficially on site."
¶5 In 2010, the Department conducted a field audit of both Tetra Tech and LFR Remediation (collectively, "Taxpayers"). During that same year, the Department issued a Notice of Field Audit Action that assessed a use tax on LFR Remediation's purchase of the portion of Tetra Tech's remediation services that represented Stuyvesant Dredging's work. The Department also issued a Notice of Field Audit Action that assessed a sales tax on the portion of Tetra Tech's sale of remediation services to LFR Remediation (to the extent it reflected Stuyvesant Dredging's work). In both notices, the Department said Stuyvesant Dredging's activities constituted the "repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection and maintenance of tangible personal property," and so were taxable under
¶6 Tetra Tech and LFR Remediation petitioned the Department for redetermination of the assessed taxes. The Department denied the petitions, concluding that Stuyvesant Dredging's "dewatering and desanding of dredged, contaminated sediment that is not returned to the river is a service to tangible personal property" that was taxable under
¶7 Tetra Tech and LFR Remediation timely filed a petition for judicial review, pursuant to
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DANIEL KELLY, J.
*28*510¶1 The Wisconsin Department of Revenue (the "Department") imposed a tax on the petitioners pursuant to
*511(2007-08) for the "processing" of river sediments into waste sludge, reusable sand, and water. The petitioners say the statutory term "processing" is not expansive enough to cover the separation of river sediment into its component parts, and so they asked us to reject the Department's interpretation of that term.1
¶2 Because resolving this question implicates the authoritativeness of an administrative agency's interpretation and application of a statute, we asked the parties to also address this issue: "Does the practice of deferring to agency interpretations of statutes comport with Article VII, Section 2 of the Wisconsin Constitution, which vests the judicial power in the unified court system?"2
¶3 We conclude that the term "processing" in
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
¶4 On November 13, 2007, the United States Environmental Protection Agency ("EPA") ordered several paper companies to remediate the environmental impact of polychlorinated biphenyls ("PCBs") they had released into the Fox River as part of their manufacturing activities. The paper companies created Lower Fox River Remediation, LLC ("LFR Remediation") to carry out the EPA's order. LFR Remediation hired Tetra Tech EC, Inc. ("Tetra Tech") to perform the actual remediation activities. Tetra Tech subcontracted a portion of the work to Stuyvesant Dredging, Inc. ("Stuyvesant Dredging").5 Stuyvesant Dredging's responsibilities included receiving sediment dredged from the Fox *513River, and then using membrane filter presses to separate it into its component parts: water, sand, and PCB-containing sludge. Part of the purpose of Stuyvesant Dredging's work was to "provide a supply of relatively clean sand that could be sold for off-site use or used beneficially on site."
¶5 In 2010, the Department conducted a field audit of both Tetra Tech and LFR Remediation (collectively, "Taxpayers"). During that same year, the Department issued a Notice of Field Audit Action that assessed a use tax on LFR Remediation's purchase of the portion of Tetra Tech's remediation services that represented Stuyvesant Dredging's work. The Department also issued a Notice of Field Audit Action that assessed a sales tax on the portion of Tetra Tech's sale of remediation services to LFR Remediation (to the extent it reflected Stuyvesant Dredging's work). In both notices, the Department said Stuyvesant Dredging's activities constituted the "repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection and maintenance of tangible personal property," and so were taxable under
¶6 Tetra Tech and LFR Remediation petitioned the Department for redetermination of the assessed taxes. The Department denied the petitions, concluding that Stuyvesant Dredging's "dewatering and desanding of dredged, contaminated sediment that is not returned to the river is a service to tangible personal property" that was taxable under
¶7 Tetra Tech and LFR Remediation timely filed a petition for judicial review, pursuant to
*515Tetra Tech EC, Inc. v. DOR,
II. DISCUSSION
¶8 The ultimate question we must answer in this case is whether the petitioners are subject to the tax levied on them by the Department of Revenue pursuant to
¶9 Before we may answer that question, however, there is a predicate matter we must address: When we review an administrative agency's decision, are there circumstances in which we must defer to the agency's interpretation and application of the law? Our current jurisprudence says there are. And ever since Harnischfeger Corp. v. LIRC,
A. Deference to Administrative Agencies
¶10 Our assessment of the deference doctrine begins in the following section with a brief overview of its current contours. To truly understand its function, however, we need to search out its roots, the results of which we discuss in the second section. As preparation for our comparison of the deference doctrine to our constitutional responsibilities, we examine in the third *516section the nature of the judiciary's powers and how they relate to the other governmental branches. In the fourth and fifth sections, we separately assess "great weight" and "due weight" deference in light of the constitutional provisions and principles that govern our work.
1. Current Standard for Reviewing Administrative Agency Decisions
¶11 We generally review administrative agency decisions in accordance *31with chapter 227 of our statutes.8 As relevant here,
¶13 Calibrating this "deference principle" to those "certain situations" resulted in our contextualized, three-tiered treatment of an administrative agency's conclusions regarding the interpretation and application of statutory provisions. When reviewing those conclusions, we give them: (1) great weight deference; (2) due weight deference; or (3) no deference at all. See
¶14 We have said the first of these-great weight deference-is appropriate upon concluding that:
(1) the agency was charged by the legislature with the duty of administering the statute; (2) ... the interpretation of the agency is one of long-standing; (3) ... the *518agency employed its expertise or specialized knowledge in forming the interpretation; and (4) ... the agency's interpretation will provide uniformity and consistency in the application of the statute.
¶15 The second tier of review, "due weight" deference, is appropriate when "the statute is one that the agency was charged with administering,"13 and "the agency has some experience in an area, but has not developed the expertise which necessarily places it in a better position to make judgments regarding the interpretation of the statute than a court."14 Under this standard, "the fact that the agency's interpretation is reasonable does not mean that its interpretation will necessarily be upheld." UFE Inc. v. LIRC,
¶16 When conditions support neither great weight nor due weight deference, we give the administrative agency's statutory interpretation no deference at all. See *33Racine Harley-Davidson, Inc.,
2. History of the Deference Doctrine
¶17 Although we often speak of the deference doctrine in a manner that suggests it started and developed as a cohesive whole, it did not. It is actually a portmanteau, derived from two different sources, the pieces of which developed over two different timelines, until they reached their fullest expression in Harnischfeger. For purposes of clarity and ease of access, we will rehearse their histories separately.
*521i. A Brief History of "Great Weight" Deference
¶18 The road to Harnischfeger's"great weight deference" is a long one (it reaches as far back as Harrington v. Smith,
¶19 In Harrington, we discussed some of the canons of construction we used in discerning the proper meaning of an ambiguous statute. One of those canons says that an agency's understanding of the statute could be probative of its meaning: "Long and uninterrupted practice under a statute, especially by the officers whose duty it was to execute it, is good evidence of its construction, and such practical construction will be adhered to, even though, were it res integra,[15 ] it might be difficult to maintain it." Harrington,
¶20 This is not the language of deference, but of persuasion. In a search for the proper meaning of an ambiguous statute, we said we could properly have recourse to the views of others and treat them as pieces of evidence for use in the process of *34statutory construction in which we ourselves were engaged. In support of our statement about the evidentiary nature of the executive employees' views, we cited Edwards' Lessee v. Darby, 25 U.S. (12 Wheat.) 206, 210,
¶21 Nor was Harrington expressing deference to an administrative agency when it said we would adhere to the executive branch's long-standing interpretation of a statute. Instead, we were acknowledging that a change in an ancient practice could have unacceptably disruptive consequences. For this principle we cited Rogers v. Goodwin, in which the Supreme Judicial Court of Massachusetts said:
*523Were the Court now to decide that this construction is not to be supported, very great mischief would follow. And although, if it were now res integra,[16 ] it might be very difficult to maintain such a construction, yet at this day the argumentum ab inconvenienti [17 ] applies with great weight. We cannot shake a principle which in practice has so long and so extensively prevailed. If the practice originated in error, yet the error is now so common that it must have the force of law.
¶22 Harrington cast a long shadow. The court was content for many years to repeat and apply its formulation without reading deference into its language. See, e.g., State ex rel. Owen v. Donald,
¶23 But then came Pabst v. Wisconsin Department of Taxation,
¶24 Under the analytical approach, "the court decides which part of the agency's determination presents a question of fact and which part a question of law."
¶25 The practical approach treats the agency's decision more like legislation than adjudication. It *525avoids any attempt to distinguish between facts and law, and instead holds that "[t]he judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body." Pabst,
¶26 Pabst observed that the method of review chosen by the court would be outcome-determinative with respect to whose application of the statute would control the case: "[Professor Davis] concludes that the court applies the analytical approach when it does not wish to be bound by the agency's application of a statute to a set of facts, and the practical approach when it believes the agency's application of the law should be deferred to." Pabst,
Davis believes that one of the most-important factors which influences the court's choice of approach in this field is the comparative qualification of court and agency to decide the particular issue. The court often deems agencies and their staffs to be expert within their own specialized fields. In such situations, the practical approach is likely to be employed rather than the analytical in determining the scope of review to be applied.
¶27 We concluded in Pabst that the statutes as they existed at the time bound us to use the analytical approach. "We believe that pars. (b) and (d) of sec. 227.20(1), Stats.,[19 ] require Wisconsin courts to employ *36the analytical approach when reviewing agency decisions." Pabst,
Nevertheless, in fields in which an agency has particular competence or expertise, the courts should not substitute their judgment for the agency's application of a particular statute to the found facts if a rational basis exists in law for the agency's interpretation and it does not conflict with the statute's legislative history, prior decisions of this court, or constitutional prohibitions.
Id. at 323-24,
*527¶28 We used the analytical approach in Pabst, in accordance with statutory requirements,20 but only because we did not "deem the board more competent than this court to decide a question of law involving trust administration." See id. at 324,
While this court has held that ch. 227, Stats. requires that courts employ the "analytical" approach when reviewing agency decisions, this court will give deference to agency determinations, where the agency has particular expertise, rational basis exists in law for the agency's interpretation, and it does not conflict with the statute's legislative history, prior decisions of this court, or constitutional prohibitions.
¶29 Where we once treated an agency's interpretation of a statute as evidence of its meaning ( Harrington ), Pabst put us in a posture of deference to administrative agencies. The shift was not a comfortable one, as evidenced by a sporadic, but short-lived, return to a more Harrington-like understanding of "great weight." See Mednis v. Indus. Comm'n,
¶30 When we eventually circled back to Pabst's understanding of "great weight,"
*37we granted administrative agencies even broader deference than they had enjoyed before. See Roggensack, supra ¶ 18, at 558-59. Whereas Pabst called for deference only to an agency's application of a statute to undisputed facts, we extended that deference to the construction of the statute itself in Bucyrus-Erie Co. v. DILHR,
The court will hesitate to substitute its judgment for that of the agency on a question of law if "... a rational basis exists in law for the agency's interpretation and it does not conflict with the statute's legislative *529history, prior decisions of this court, or constitutional prohibitions."
Bucyrus-Erie Co.,
¶31 Only one transformation remains before we reach the current expression of the deference doctrine. Prior to Harnischfeger, we treated deference to administrative agencies as a choice, something the courts could do in the process of interpreting and applying a statute, but were not required to do. Just a few years before we decided Harnischfeger, we said: "The interpretation of a statute presents a question of law, and the 'blackletter' rule is that a court is not bound by an agency's interpretation. Courts, however, frequently refrain from substituting their interpretation of a statute for that of the agency charged with the administration of a law." Lisney v. LIRC,
¶32 Harnischfeger, however, made the deference doctrine a systematic requirement upon satisfaction of its preconditions. See Roggensack, *530supra ¶ 18, at 553. It accomplished this feat by promoting deference from a canon of construction to a standard of review: "Whether or not a court agrees or disagrees with LIRC's methodology, however, is not the issue in this case. Instead, the central question is what standard of review the courts of this state should apply when called upon to evaluate an agency's interpretation of a statute." Harnischfeger,
¶33 Enshrining this doctrine as a standard of review bakes deference into the structure of our analysis as a controlling principle. By the time we reach the *531questions of law we are supposed to review, that structure leaves us with no choice but to defer if the preconditions are met.
ii. A Brief History of "Due Weight" Deference
¶34 "Due weight deference" is of a much younger vintage than "great weight deference." It also has a different source. Whereas the latter developed as a home-grown doctrine within the judiciary, the former has its roots in our statutes. In 1943, our legislature adopted
*532¶35 Our first opportunity to engage with that language came in Ray-O-Vac Co. v. Wisconsin Employment Relations Board,
[O]n a review of the board's findings, the court has no jurisdiction to determine the factual issues anew if there is some evidence before the board reasonably tending to support a finding, and "the court may not weigh the evidence to ascertain whether it preponderates in favor of the finding" ... ; or substitute its judgment for that of the board even though the court might have decided the question differently had it been before the court de novo.
¶36 We agreed with the Board, noting that "[i]n relation to a court review of the *39board's findings and orders it must be noted that there is applicable thereto" the terms of
[I]f th[e] evidence supports the finding of the industrial commission, the finding must stand. The Wisconsin Labor Relations Act in sec. 111.10 (5), Wis. Stats., provides what is lacking in the Workmen's Compensation *533Act, namely, an implied authorization to the courts to review the facts, coupled with the express provision that the findings, "if supported by evidence in the record," shall be conclusive.
¶37 We were not any more specific about how "due weight" consideration affects conclusions of law when we decided Muskego-Norway Consolidated Schools Joint School District No. 9 v. Wisconsin Employment Relations Board,
[I]n this court's judicial review we are not required to agree in every detail with the WERB as to its findings, conclusions and order. ... Sec[tion] 227.20 (2), Stats., requires that upon such review due weight shall be accorded the experience, technical competence, and specialized knowledge of the agency involved. In short, this means the court must make some deference to the expertise of the agency.
Muskego-Norway Consol. Sch. Joint Sch. Dist. No. 9,
¶38 We were a little more direct on this topic in Vivian v. Examining Board of Architects, Professional Engineers, Designers and Land Surveyors, in which we reviewed the Board's determination of whether the defendant's conduct could satisfy a "gross negligence" standard.
The legislative command that due weight is to be given to "the experience, technical competence, and specialized knowledge of the agency involved," in determining what is gross negligence, indicates the determination of the grossness of the negligence is to be made by those knowledgeable as to the particular profession involved.
*40
¶39 A few years later, we stated explicitly that
*535¶40 As we mentioned above, Harnischfeger elevated the deference doctrine from a canon of construction to a standard of review. "Whether or not a court agrees or disagrees with LIRC's methodology, however, is not the issue in this case. Instead, the central question is what standard of review the courts of this state should apply when called upon to evaluate an agency's interpretation of a statute." Harnischfeger,
¶41 Fortified by this history of our deference jurisprudence, we can now determine whether the doctrine is consistent with the judiciary's constitutional responsibility.26
3. The Judiciary's Constitutional Responsibilities
¶42 As the deference doctrine developed, we recognized that its operation allowed the executive branch of government to authoritatively decide questions of law in specific cases brought to our courts for resolution. But nowhere in the journey from Harrington to Harnischfeger did we determine whether this was consistent with the allocation of governmental power amongst the three branches. So, as a matter *536of first impression, we consider whether our deference doctrine is compatible with our constitution's grant of power to the judiciary:
The judicial power of this state shall be vested in a unified court system consisting of one supreme court, a court of appeals, a circuit court, such trial courts of general uniform statewide jurisdiction as the legislature may create by law, and a municipal court if authorized by the legislature under section 14.
Wis. Const. art. VII, § 2. It is, perhaps, tautological to say that the judicial power should reside in the judiciary. But the constitution does not define what that term comprises, nor does it explicitly describe how that power relates to the other branches of government.27
*41¶43 Allowing an administrative agency to authoritatively interpret the law raises the possibility that our deference doctrine has allowed some part of the state's judicial power to take up residence in the executive branch of government. To discover whether it did, we must first get our bearings on the nature and extent of judicial power. We had occasion to dwell on this subject at some length just last term. See generally Gabler v. Crime Victims Rights Bd.,
¶44 The "separation of powers" doctrine informs our understanding of how the constitution allocates *537governmental power amongst its constituent branches.28 This fundamental principle of American constitutional government was "established at the founding of our nation and enshrined in the structure of the United States Constitution," and "inform[s] our understanding of the separation of powers under the Wisconsin Constitution." Gabler,
¶45 We must be assiduous in patrolling the borders between the branches. This is not just a practical matter of efficient and effective government. We maintain this separation because it provides structural protection against depredations on our liberties. The Framers of the United States Constitution understood *538that "[t]he accumulation of all powers legislative, executive and judiciary in the same hands, whether of one, a few or many, ... may justly be pronounced the very definition of tyranny." The Federalist No. 47, at 324 (James Madison) (Jacob Cooke ed., 1961). Consequently, "[a]s Madison explained when advocating for the Constitution's adoption, neither the legislature nor the executive nor the judiciary 'ought to possess, directly or indirectly, an overruling influence over the others in the administration of their respective powers.' " Gabler,
¶47 Core powers, however, are not for sharing. "Each branch has exclusive core constitutional powers, into which the other branches may not intrude." Flynn,
*540Gabler,
¶48 The separation of powers prevents us from abdicating core power just as much as it protects the judiciary from encroachment by other branches. "It is ... fundamental and undeniable that no one of the three branches of government can effectively delegate any of the powers which peculiarly and intrinsically belong to that branch." Rules of Court Case,
¶50 From the earliest days of our country, we have understood that the judiciary's first and irreducible responsibility is to proclaim the law: "It is emphatically the province and duty of the judicial department to say what the law is." Marbury, 5 U.S. at 177. The process of interpreting the law in a specific case is part of that central duty: "Those who apply the rule to particular cases, must of necessity expound and interpret that rule." Id. We agreed with Marbury just a few years ago when we described our judicial power as "the ultimate adjudicative authority of courts to finally decide rights and responsibilities as between individuals." State v. Williams,
¶51 It is fair to say that exercising judgment in the interpretation and application of the law in a particular case is the very thing that distinguishes the judiciary from the other branches:
The judiciary ... has no influence over either the sword or the purse, no direction either of the strength or of the wealth of the society, and can take no active resolution whatever. It may truly be said to have neither Force nor Will, but merely judgment; and must ultimately depend upon the aid of the executive arm even for the efficacy of its judgments.
The Federalist No. 78, at 523 (Alexander Hamilton)
*542(Jacob Cooke ed., 1961). We, too, have said as much: "By vesting the judicial power in a unified court system, the Wisconsin Constitution entrusts the judiciary with the duty of interpreting and applying laws made and enforced by coordinate branches of state government." Gabler,
¶52 Some would argue that the judiciary's law-declaring and law-applying power lies not at the core of what it means to be a court, but somewhere out on the periphery of our powers where we share it with the executive branch. Some of our older cases have spoken in terms that lend this proposition at least some superficial plausibility. For example, in State ex rel. Wisconsin Inspection Bureau v. Whitman we said:
Every executive officer in the execution of the law must of necessity interpret it *44in order to find out what it is he is required to do. While his interpretation is not final, yet in the vast majority of cases it is the only interpretation placed upon it, and as long as it is acquiesced in it becomes the official interpretation which the courts heed and in which they oftentimes acquiesce as a practical construction.
We do not consider the Industrial Commission a court, nor do we construe the act as vesting in the Commission *543judicial powers within the meaning of the constitution. It is an administrative body or arm of the government which in the course of its administration of a law is empowered to ascertain some questions of fact and apply the existing law thereto, and in so doing acts quasi-judicially, but it is not thereby vested with judicial power in the constitutional sense.
Borgnis v. Falk Co.,
¶53 But these cases cannot bear the weight their proponents assign them. The executive must certainly interpret and apply the law; it would be impossible to perform his duties if he did not. After all, he must determine for himself what the law requires (interpretation) so that he may carry it into effect (application). Our constitution not only does not forbid this, it requires it. Wis. Const. art. V, § 1 ("The executive power shall be vested in a governor, ...."); Perez v. Mortg. Bankers Ass'n, --- U.S. ----,
4. "Great Weight" Deference Considered
¶55 We see our core judicial powers lying at the heart of "great weight" deference. When the doctrine's preconditions are satisfied, that is, when an administrative agency meets the four Harnischfeger criteria, we cede to the agency the power to authoritatively interpret the law ("an agency's interpretation must then merely be reasonable for it to be sustained," Harnischfeger,
¶56 We provide guardrails for an administrative agency's exercise of our power, to be sure, but they are minimal. Under great weight deference, we simply require that the agency's judgment on the law not overrule our precedents, violate the constitution, contradict legislative history, or be unreasonable.31 Within those expansive *46boundaries, however, the agency is the master of statutory construction and application, and it occupies the field to the exclusion of the judiciary.32 We reserve a sufficient quantum of judicial power to set the guardrails, but that gives no good answer to the charge that this doctrine cedes something that belongs *547exclusively to the judiciary. We are concerned here with categories of power, not quantity. Regardless of the circumscriptions we put in place, when we defer we are allowing the agency to exercise what is unmistakably core judicial power.
¶57 Chief Justice Roggensack has been particularly incisive in describing the practical problems this deference causes. She has observed that "[w]hat decision-avoidance doctrines accomplish is to relieve the court of the real work of judicial review, what has been described as the 'burden of reasoned decisionmaking.' " Roggensack, supra ¶ 18, at 546 (quoted source omitted). And it privileges unelected executive-branch employees over those the people of Wisconsin elected to resolve questions of law.
When the court employs judicially created doctrines that limit the scope of its review instead of applying the collective knowledge that the seven justices were elected to exercise, it avoids the real work of appellate decision making: explaining to the public why the application of the law to the facts of the case resulted in the court's decision and why that result is fair under the law.
Roggensack, supra ¶ 18, at 560.
¶58 The abdication of core judicial power to the executive is a concern not just of our court, but of the federal judiciary as well. Wisconsin's separation of powers is a reflection of that found in the United States Constitution, which provides (in relevant part) that "[t]he judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain *548and establish." U.S. Const. art. III, § 1.33 Whereas our decision in Harnischfeger made us structurally deferential to administrative agencies, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. accomplished something very similar for the federal courts.
[T]he court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute.
¶59 Jurists in federal courts have expressed the same concern with Chevron deference as we have with Harnischfeger deference. Justice Clarence Thomas directly questioned the constitutionality of deferring to an administrative agency's interpretation of the law in *549Michigan v. Environmental Protection Agency, --- U.S. ----,
¶60 Justice Antonin Scalia was equally concerned with the possible abandonment of judicial power to the executive branch. Although he supported Chevron's imprimatur on the executive's authority to adopt policy-making regulations to fill up interstitial statutory silences, his approval did not extend to an agency's authority to make binding pronouncements on the law:
*550I suppose it is harmless enough to speak about "giving deference to the views of the Executive" concerning the meaning of a statute, just as we speak of "giving deference to the views of the Congress" concerning the constitutionality of particular legislation-the mealy-mouthed word "deference" not necessarily meaning anything more than considering those views with attentiveness and profound respect, before we reject them. But to say that those views, if at least reasonable, will ever be binding-that is, seemingly, a striking abdication of judicial responsibility.
The Honorable Antonin Scalia, Judicial Deference to Administrative Interpretations of Law,
*48I would therefore restore the balance originally struck by the APA with respect to an agency's interpretation of its own regulations, not by rewriting the Act in order to make up for Auer, but by abandoning Auer and applying the Act as written. The agency is free to interpret its own regulations with or without notice and comment; but courts will decide-with no deference to the agency-whether that interpretation is correct.
Perez,
*551¶61 Justice Neil Gorsuch, when he was on the Tenth Circuit Court of Appeals, elegantly summarized how deference to administrative agencies hollows out a court's judicial power:
Yet, rather than completing the task expressly assigned to us, rather than "interpret[ing] ... statutory provisions," [5 U.S.C. § 706 ] declaring what the law is, and overturning inconsistent agency action, Chevron step two tells us we must allow an executive agency to resolve the meaning of any ambiguous statutory provision. In this way, Chevron seems no less than a judge-made doctrine for the abdication of the judicial duty. Of course, some role remains for judges even under Chevron. At Chevron step one, judges decide whether the statute is "ambiguous," and at step two they decide whether the agency's view is "reasonable."
Gutierrez-Brizuela v. Lynch,
*552¶62 Indeed, it has. And that presents a related, and equally serious problem.
*
¶63 Ceding judicial power to an administrative agency is, from a separation of powers perspective, unacceptably problematic; it is problematic along a different axis when that agency appears in our courts as a party. The non-agency party may reasonably ask whether our deference doctrine will deprive him of an impartial decisionmaker's exercise of independent judgment, and, thereby, the due process of law.36
*49¶64 The United States Supreme Court says that a "fair trial in a fair tribunal is a basic requirement of due process." In re Murchison,
*553Guthrie v. WERC,
¶65 We have already concluded that our deference doctrine cedes to administrative agencies some of our exclusive judicial powers. It necessarily follows that when that agency comes to us as a party in a case, it-not the court-controls some part of the litigation. When questions of law arise, the court serves as a gatekeeper to adjudge compliance with the Harnischfeger prerequisites. But once the court completes that task, it receives instruction from the governmental party on how to interpret and apply the rule of decision.
¶66 When a court defers to the governmental party, simply because it is the government, the opposing party is unlikely to be mollified with assurances that the court bears him no personal animus as it does *554so.38 The injury arises not from the reason the court favors one party over another, but from the fact that the court has a favorite at all.39 As Professor Phillip Hamburger observed, "when judges defer to the executive's view of the law, they display systematic bias toward one of the parties." Philip Hamburger, Chevron Bias,
¶68 The situation appears no better when considered from the agency's perspective. When an administrative agency interprets and applies the law in a case to which it is a party, it is to that extent acting as judge of its own cause. By the time the Framers condemned such an arrangement, the rationale had already been a part of our wisdom literature for centuries:
No man is allowed to be a judge in his own cause; because his interest would certainly bias his judgment, and, not improbably, corrupt his integrity. With equal, nay with greater reason, a body of men, are unfit to be both judges and parties, at the same time; ....
The Federalist No. 10, at 59 (James Madison) (Jacob Cooke ed., 1961).40 Echoing Madison, the United States Supreme Court said that "no man can be a judge in his own case[,] and no man is permitted to try cases where he has an interest in the outcome." In re Murchison,
*556¶69 An administrative agency has an obvious interest in the outcome of a case to which it is a party. Yet, our deference doctrine commits the rule of decision to its hands anyway. It is entirely unrealistic to expect the agency to function as a "fair and impartial decisionmaker" as it authoritatively tells the court how to interpret and apply the law that will decide its case. Because it cannot do so, deference threatens the most elemental aspect of a fair trial.41 Guthrie,
*51¶70 As a postscript to this issue, it is worth recalling that great weight deference is a creature of our own making-that is, nothing in our statutes called it into being. If anything, the relevant provision under which we normally review agency decisions militates against it. Subsection 227.57(5) says:
The court shall set aside or modify the agency action if it finds that the agency has erroneously interpreted a provision of law and a correct interpretation compels a particular action, or it shall remand the case to the agency for further action under a correct interpretation of the provision of law.
5. "Due Weight" Deference Considered
¶71 "Due weight," as a principle, entered our jurisprudence through a statute, but over time our cases grafted it into the administrative deference doctrine. The original statutory foundation, however, is still there, and is just as viable as it was before. Today, we restore the principle of "due weight" to its original form by removing the patina of "deference" with which our cases have covered it.
¶72 It is true that due weight deference presents a threat to our core powers that is less extensive than that presented by great weight deference. It has been said that "in most situations, applying due weight deference will lead to the same result as would applying no deference at all." MercyCare Ins. Co. v. Wis. Comm'r of Ins.,
¶73 The threat presented by due weight deference is less, however, only in the sense that the preconditions that justify the agency's exercise of our exclusive power are fulfilled more rarely. When the *558"due weight" preconditions are satisfied,42 we must defer to the agency when our respective views of the law, while different, are equally reasonable.43 When there is equipoise, the court cedes its core judicial power just as surely as if great weight deference had applied. Infrequency does not make the cession appropriate.
¶74 Nor does cession become acceptable because the agency has less latitude in exercising our power under due weight deference than it does under great weight deference. In *52Racine Harley-Davidson,Inc.,
¶75 On the other hand, "due weight"-in its statutory form-presents no such concerns. There are five provisions in
(3) The court shall separately treat disputed issues of agency procedure, interpretations of law, determinations of fact or policy within the agency's exercise of delegated discretion.
....
(5) The court shall set aside or modify the agency action if it finds that the agency has erroneously interpreted a provision of law and a correct interpretation compels a particular action, or it shall remand the case to the agency for further action under a correct interpretation of the provision of law.
....
(8) The court shall reverse or remand the case to the agency if it finds that the agency's exercise of discretion is ... in violation of a constitutional or statutory provision; ....
....
(10) Subject to sub. (11), upon such review due weight shall be accorded the experience, technical competence, and specialized knowledge of the agency involved, as well as discretionary authority conferred upon it.
(11) Upon review of an agency action or decision affecting a property owner's use of the property owner's *560property, the court shall accord no deference to the agency's interpretation of law if the agency action or decision restricts the property owner's free use of the property owner's property.
¶76 None of these provisions direct us to defer to an agency's interpretation or application of the law. To the contrary, subsection (3) tells us to treat questions of law separately from all other matters in the case (reminiscent of the analytical approach mentioned in Pabst ); subsection (5) recognizes the court, not the agency, as the law-declaring body; and subsection (8) calls for us to test an agency's exercise of discretion against relevant constitutional and statutory provisions (without any suggestion that the agency is to decide what those provisions mean).
¶77 We find the legislature's commendation of administrative agencies in subsection (10). There, we learn we are to give "due weight" (subject to subsection (11)-more about that later) to the "experience, technical competence, and specialized knowledge of the agency involved." From our earliest days we have recognized that the state's agencies develop a valuable perspective, unique to them, as they administer the laws within their portfolios. See Harrington,
¶78 Recognizing that administrative agencies can sometimes bring unique insights to the matters for which they are responsible, however, does not mean we should defer to them. And there is nothing in
¶79 But "due weight" is not a talisman that automatically grants its bearer additional rhetorical power. If an agency brings to court nothing but a rote recitation of its background with the subject matter, it should not expect the statutory directive to give its argument extra heft. The agency should be prepared to explain how its experience, technical competence, and specialized knowledge give its view of the law a significance or perspective unique amongst the parties, and why that background should make the agency's view of the law more persuasive than others. As we assess the persuasiveness of the agency's perspective, we will consider the same types of factors that formerly informed our deference doctrine, to wit: (1) whether the legislature made the agency responsible for administering *562the statute in question; (2) the length of time the administrative agency's interpretation has stood; (3) the extent to which the agency used its expertise or specialized knowledge in developing its position; and (4) whether the agency's perspective would enhance uniformity and consistency of the law.
¶80 Before concluding our "due weight" analysis, we must still account for the effect of
[D]e novo judicial review of the law's meaning would limit the ability of any agency to alter and amend existing law. It would avoid the due process and equal protection problems of the kind documented in our decisions. It would promote reliance interests by allowing citizens to organize their affairs with some assurance that the rug will not be pulled from under them tomorrow, the next day, or after the next election.
Gutierrez-Brizuela,
6. Standard of Review
¶82 We are mindful that our decision today represents a significant break with the way we have reviewed agency decisions since at least Harnischfeger, and in some respects, since Pabst. The principle of stare decisis counsels that we depart from our precedents only when circumstances unavoidably superannuate our commitment to them. Typically, that occurs when:
(1) [c]hanges or developments in the law have undermined the rationale behind a decision; (2) there is a need to make a decision correspond to newly ascertained facts; (3) there is a showing that the precedent has become detrimental to coherence and consistency *564in the law; (4) the prior decision is "unsound in principle;" or (5) the prior decision is "unworkable in practice."
Bartholomew v. Wis. Patients Comp. Fund,
¶83 We are leaving our deference doctrine behind because it is unsound in principle. It does not respect the separation of powers, gives insufficient consideration to the parties' due process interest in a neutral and independent judiciary, and "risks perpetuating erroneous declarations of the law." Operton,
¶84 Today, the core judicial power ceded by our deference doctrine returns to its constitutionally-assigned residence. Henceforth, we will review an administrative agency's conclusions of law under the same standard we apply to a circuit court's conclusions of law-de novo. See Mitchell Bank v. Schanke,
7. Discontinuing Deference for Administrative Reasons
¶85 We created our deference doctrine ex nihilo, and so it is within our power to end it simply by declaring it at an end. Some members of the court prefer that option-discard the doctrine not because the constitutional problems require its abandonment, but merely because we have chosen to drop it. However, just because we can do this does not make it wise. Indeed, stare decisis exists as a principle for the sole purpose of counseling against that option.
¶86 Justice Gableman provided a thoughtful account of why he would end the deference doctrine on non-constitutional grounds. Ultimately, however, his rationale still depends on the separation of powers-sotto voce, to be sure, but undeniably. Thus, for example, he says our deference doctrine is unsound in principle because "deference (especially great weight deference), if correctly and honestly applied, leads to the perverse outcome of courts often affirming inferior interpretations of statutes." Justice Gableman's concurrence, *566¶ 166. That is indubitably true. But it is true only if one already subscribes to the proposition that our interpretation enjoys pride of place over that of the administrative agency. We should not be surprised to learn, however, that an administrative agency might believe its own interpretation is superior to ours. Indeed, we should expect no less from an agency engaged in a good faith effort to do its job. From the agency's perspective, therefore, our deference doctrine creates no perversity at all; instead, it gives the statute the best possible interpretation: Its own. So when Justice Gableman says that "[i]n our role as court of last resort, we should ensure that erroneous-but-reasonable legal conclusions are corrected,"44 he is making a separation of powers assertion-to wit, the court is the authoritative arbiter of the law in the case before us, and our opinion must prevail over that of the other branches. Without that constitutional impetus, there is no fuel for his "unsound in principle" analysis.
¶87 Justice Gableman also says newly-ascertained facts provide a non-constitutional basis for ending deference.45 Specifically, he notes that part of the justification for the doctrine was the assumed subject-matter expertise of the agency decision-makers. He questions whether they really do have such expertise, and then concludes: "We may say that it is only a matter of speculation that agency decision-makers possess less expertise than courts when it comes to interpreting various statutes. Importantly, it is equally a matter of speculation that they possess more."46 So as Justice Gableman acknowledges, these are not newly-ascertained facts, they are newly-ascertained *567speculations. Our deference doctrine has defined the relationship between administrative agencies and the *56judiciary for over two decades now. Speculation about a hearing examiner's expertise seems an especially diaphanous justification for upending this settled history.47
¶88 The members of the court who would end our deference doctrine for administrative reasons do so out of a desire to avoid a constitutional analysis. But as Justice Gableman's concurrence demonstrates, it is impossible to describe a substantive reason for ending the doctrine without at least an unspoken appeal to constitutional principles. We do no good service by avoiding an analysis that so obviously demands our attention.
¶89 Justice Ziegler would also prefer dispensing with our deference doctrine for administrative reasons because she is concerned about how our decision will affect the finality of past cases. The source of her concern is not entirely clear-this decision is incapable of reopening cases that have already been decided.48 If they were final upon release of this opinion, their finality will go on undisturbed by our decision today. Relief from the judgment of a case is *568governed by
¶90 Justice Ziegler's concern cannot be realized here for the same reason it has never been realized when we overrule one of our prior decisions. That has never occurred because overruling a case does not expose to collateral attack any of the intervening decisions that were based on the overruled case. "To the contrary," Justice Ziegler says, "overruling one of our prior decisions[ ] can quite obviously have significant impact on other cases."
¶93 Justice Ann Walsh Bradley and Justice Ziegler are also concerned about whether our decision will adversely affect the precedential authority of cases decided pursuant to our now-discarded deference doctrine. To the extent a court favored an agency's conclusion of law over its own, that conclusion is now part of the judgment of the case and an inextricable part of the opinion. Consequently, its precedential and controlling effect will be the same as if the court had based the decision on its own interpretation. The only future effect of our decision is that courts, rather than administrative agencies, will decide questions of law. If that prospect is sufficient to raise an alarm against impending "tumult" (see Justice Ann Walsh Bradley's concurrence, ¶ 120), then we have more to worry about than a deference doctrine.
B. "Processing" River Sediments
¶94 Now that we have identified the proper standard of review, we can address the petitioners' argument that they are not subject to the tax imposed by
For the privilege of selling, performing or furnishing the services described under par. (a) at retail in this state to consumers or users, a tax is imposed upon all persons selling, performing or furnishing the services at the rate of 5% of the gross receipts from the sale, performance or furnishing of the services.
§ 77.52(2). The services to which this provision refers include the following:
*571The producing, fabricating, processing, printing or imprinting of tangible personal property for a consideration for consumers who furnish directly or indirectly the materials used in the producing, fabricating, processing, printing or imprinting. This subdivision does not apply to the printing or imprinting of tangible personal property that results in printed material, catalogs, or envelopes that are exempt under s. 77.54(25) or (25m).
§ 77.52(2)(a)11.
¶95 The parties agree that, in this case, the petitioners are liable for the tax imposed by the Department only if Stuyvesant Dredging received compensation for *58"processing" tangible personal property it received (directly or indirectly) from the petitioners. The parties also agree that the river sediment comprised tangible personal property, that Stuyvesant Dredging received compensation for the work it performed on the river sediment, and that the river sediment was furnished by the petitioners.50 Therefore, the only question is whether Stuyvesant Dredging's work constituted "processing."
¶96 Because this case turns on the meaning of the term "processing" in
*572State ex rel. Kalal v. Circuit Court for Dane Cty.,
¶97 Our statutes do not define the term "processing." Consequently, the Commission turned to a dictionary to assist its analysis, stating "[t]he dictionary definition of 'processing' is 'to put through the steps of a prescribed procedure; or, to prepare, treat, or convert by subjecting to a special process.' " The petitioners reject this definition, arguing that it is so broad it transforms a narrow and selective tax statute into a general tax on all services related to tangible personal property. They would instead have us find the term's meaning in the Administrative Code. Specifically, they propose Wis. Admin. Code § Tax 11.38(2) (June 1993), which provides:
Fabricating and processing services, where materials are furnished directly or indirectly by the customer, that are subject to Wisconsin sales or use tax include, except as provided in sub. (1)(a) through (c):
*573(a) Application of coating to pipe.
(b) Assembling kits to produce a completed product.
(c) Bending glass tubing into neon signs.
(d) Bookbinding.
(e) Caterer's preparation of food for consumption on or off the caterer's premises.
(f) Cleaning used oil.
(g) Cutting lumber to specifications and producing cabinets, counter tops or other items from lumber for customers, often called "millending."
(h) Cutting or crushing stones, gravel or other construction materials.
(i) Drying, planing or ripping lumber.
(j) Dyeing or fireproofing fabric.
(k) Fabricating steel which may involve cutting the steel to length and size, bending and drilling holes in the steel to *59specifications of a particular construction job.
(L) Firing of ceramics or china.
(m) Heat treating or plating.
(n) Laminating identification cards.
(o) Making a fur coat from pelts, gloves or a jacket from a hide.
(p) Making curtains, drapes, slip covers or other household furnishings.
(q) Production of a sound recording or motion picture.
*574(r) Retreading tires.
(s) Tailoring a suit.
(t) Threading pipe or welding pipe.
Wis. Admin. Code § Tax 11.38(2)(a)-(t).
¶98 Although we conclude that Stuyvesant Dredging "processed" the river sediment into its constituent parts, we do not believe either party provided a satisfactory definition of the term. The petitioners rely on Wis. Admin. Code § Tax 11.38(2) as an exhaustive recitation of "processing" services subject to Wisconsin's sales and use tax. Because the separation of river sediment does not appear in this list, they conclude that the principle expressio unius est exclusio alterius excludes Stuyvesant Dredging's services from the statute's reach. This canon of statutory construction would be helpful if the list of services were meant to be exhaustive, rather than illustrative. But this is a tool of elucidation only-it has no power to contradict the code's text. And by its own terms, § Tax 11.38(2) contains an illustrative list, not a comprehensive one. The operative language says: "Fabricating and processing services, ... that are subject to Wisconsin sales or use tax include, ...."
¶99 As an illustrative list, Wis. Admin. Code § Tax 11.38(2) is similarly unhelpful to the petitioners' cause. The petitioners say they purchased services that involved nothing more than "separating" tangible personal property into its components. But this could be said of cleaning used oil, too, which presumably involves separating contaminants from the oil. See § Tax 11.38(2)(f). The petitioners also say that Stuyvesant Dredging's work cannot be understood as "processing" because it neither added nor subtracted anything from the personal property on which it performed its services. This could be said with equal accuracy of those who crush stones, and yet that service is part of the Department's illustrative list. See § Tax 11.38(2)(h). So § Tax 11.38(2) does not advance the petitioners' argument because it is not an exclusive list of "processing" activities, and because, as an illustrative list, it describes activity analogous to Stuyvesant Dredging's work.
¶100 But the petitioners have a legitimate concern about the breadth of the Commission's definition of "processing." That term stands cheek by jowl with "producing," "fabricating," "printing," and "imprinting" in
¶101 Therefore, we must understand "processing" to bear a meaning that does not displace all of the *577other descriptors in
¶102 Based on the definitions above, we see that "fabricating" is distinct from its associates in that it requires skill in the construction or manufacture of a final product. "Producing" contemplates the creation of a final product from the combination of components or raw materials, a characteristic that is not necessarily encompassed by "fabricating," which could describe the manufacture of a product out *61of a single resource. *578"Printing" differs from the other categories in that it involves "the transfer of characters or designs" onto a medium. And finally, "imprinting" is unique even from "printing" in that characters or designs are impressed on a medium through pressure (as, for example, metal stamping in which the medium is deformed to depict the character or design).51 *579¶103 Turning now to the proper meaning of "processing," we know it must contain at least one attribute that is distinct from those described above if it is not to displace its neighbors. The Oxford English Dictionary says "processing" means, in pertinent part, "[t]o subject to or treat by a special process; to operate on mechanically or chemically." Processing, The Oxford English Dictionary (2d ed. 1989) (definition 3.a.). It is poor form to use the defined word in its own definition, mostly because such a construct provides little to no information. Here, this infraction means the first clause tells us nothing but that processing is "special," which is entirely unhelpful. The second clause, however, is instructive. Applying that material to the term "processing" as it appears in
¶104 Understood in this fashion, "processing" encompasses Stuyvesant Dredging's separation of river sediment into its component parts. The Commission's Ruling and Order described how this was accomplished. After going through scalping screens, slurry holding tanks, and slurry thickener tanks, the sediment enters the coarse and fine sand separation operations. The coarse separation operation physically separates, washes, and dewaters sand particles larger than 150 microns from the sludge. The fine sand separation operation does the same for sand particles between 63 and 150 microns. The petitioners confirm *581that everything Stuyvesant Dredging receives from them is returned. The only difference is that the property is separated into its components. No new product has been created; no chemical transformation has occurred; and the property is still just as contaminated as when Stuyvesant Dredging received it. The work described by the Commission reflects the performance of a mechanical operation on the river sediments. Therefore, petitioners are subject to the sales and use tax of
¶105 It is unlikely that our definition of "processing" will upset the petitioners' reasonable expectations. The Commission said that Tetra Tech's vice-president of project engineering testified that Stuyvesant Dredging "processed" the river sediment. Similarly, an operations manager who oversaw LFR Remediation's work on the Fox River testified that Stuyvesant Dredging "processed" the river sediment. And the Commission observed that, "[a]t various points in the affidavits and depositions of Petitioner's general manager and experts, they refer to what SDI [Stuyvesant Dredging] does as a 'process' or as 'processing.' That language is also used in many of the contracts between Tetra Tech and SDI." Although we do not derive the meaning of a statutory term from a party's subjective understanding, we recount this history as confirmation that our analysis has not ventured outside the realm of what those subject to the statute might reasonably anticipate.
¶106 As is apparent from this analysis, we gave little weight to the Commission's understanding of the term "processing." We recognize the legislature *582charged the Commission with the duty to decide contested cases involving the application of
III. Conclusion
¶107 The petitioners paid Stuyvesant Dredging to process river sediment within the meaning of
¶108 We have also decided to end our practice of deferring to administrative agencies' conclusions of law. However, pursuant to
By the Court. -The decision of the court of appeals is affirmed.
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Cite This Page — Counsel Stack
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