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That is not URL encoding, that is HTML entity encoding.

By default, the API returns "safe" values; see the filters doc:

Any string returned as a result of an API call with a safe filter will be inline-able into HTML without script-injection concerns. That is to say, no additional sanitizing (encoding, HTML tag stripping, etc.) will be necessary on returned strings.

That means that special characters (<>'"&, etc.) will be HTML entity encoded by default.

If you run the same query with an "unsafe" filter (See the doc), you can often get the raw values:

{
  "items": [
    {
      ...
      "user_id": 562459,
      ...
      "display_name": "Mike Sherrill 'Cat Recall'",
      ...