Tetra Tech v. DOR – Judicial Deference Granted Agencies on Interpretations of Law

The case presented a question of law regarding the proper interpretation of a Wisconsin statute, namely Wis. Stat. § 77.52(2), the “services” sub-section of Wisconsin’s retail sales tax.

In 2007, the Environmental Protection Agency required several paper companies to remediate the environmental impact of harmful chemicals into the Fox River. The collective group of paper companies formed Fox River Remediation, which hired Tetra Tech to perform the remediation. Tetra Tech subsequently hired Stuyvesant Dredging, Inc. (SDI) as a subcontractor.

The Wisconsin Department of Revenue (DOR) audited the entities and found that Tetra Tech owed sales tax on the portion of its sale for services  and that Fox River Remediation owed use tax on the purchase of remediation services from Tetra Tech on SDI’s activities. The entities filed petitions for redetermination with DOR, then with the Tax Appeals Commission. A Wisconsin circuit court and appeals court both upheld the commission’s ruling, giving great weight deference to DOR’s interpretation of tax statutes. The case was appealed to the Wisconsin Supreme Court and the earlier decisions affirmed.

However, the Wisconsin Supreme Court used the case to address the deference levels Wisconsin courts afford regulatory agencies when interpreting statutory provisions. Judicial review of administrative agency actions is the last line of defense against excessive discretionary power in the hands of executive branch regulators. But the courts undermined that protection when deferring to an agency’s interpretation of its governing law.

Under our state and federal constitutions, the core duty of judges is to say what the law is. Deferring to agencies on interpretation of law impermissibly encroaches on this exclusive authority and undermines separation of powers principles that are essential to our liberties.

In addition, GLLF presented a unique perspective in its brief by asserting  that any deference afforded agencies to interpret the law compromises the courts’ duty to be impartial arbiters of the law. Such systematic bias that benefits one party, deprives other parties, such as Wisconsin businesses, of due process. There is no justifiable purpose in providing increasingly powerful administrative agencies such an opportunity to expand their power and reach.

GLLF also testified in support of 2017 SB 745 which sought to limit agency deference by the courts at the Feb. 6, 2018, legislative hearing.