Supreme Court Overturns Chevron Doctrine

The Supreme Court’s much-anticipated decision on Chevron deference has overruled a judicial doctrine in place for over 40 years. Under Chevron, a court was required to give deference to an agency’s reasonable interpretation of ambiguity in a statute administered by the agency. The decision, which applies to two cases, Loper Bright Enterprises v. Raimondo and Relentless v. Department of Commerce, is expected to have significant implications since application of the Chevron doctrine often led courts to rule against regulated entities’ challenges to administrative actions and rules.

“Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the [Administrative Procedure Act] requires.” In doing so, the Court cites the Skidmore doctrine that was established in the court’s 1944 decision Skidmore et al. v. Swift & Co.  and explicitly states that judges are still allowed to take a federal agency’s interpretation of a statute into consideration to determine the meaning of ambiguous text. Courts are just no longer required to automatically defer to those interpretations. “Courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.”

Courts will still need to defer to agencies if they find a statute has a “clear” congressional delegation of authority, but the Court did not define the meaning of “clear.” “Careful attention to the judgment of the executive branch may help inform that inquiry,” and courts must respect when a particular statute delegates authority to an agency consistent with constitutional limits. It’s a matter of whether the agency is acting within its authority, especially when viewed under the major questions doctrine and the non-delegation doctrine.  The major questions doctrine prevents agencies from undertaking regulation with “vast economic and political significance” unless Congress has clearly and expressly delegated that power. The non-delegation doctrine imposes limits and requirements on what legislative powers Congress may delegate to administrative agencies.

Chevron required courts to defer to reasonable agency interpretations when the applicable statute was silent or ambiguous with respect to a certain issue.  “Chevron‘s presumption is misguided, because agencies have no special competence in resolving statutory ambiguities. Courts do.”  Chevron presented a substantial hurdle for lawsuits alleging that an agency had overreached its authority. Where a statute was susceptible of more than one interpretation, and hence was ambiguous, if the agency’s interpretation was a reasonable reading, courts deferred to that interpretation even where a different one was arguably a better interpretation.

Justice Roberts also found that Chevron “wrongly enabled each presidential administration to change regulations affecting every major industry without enduring the legislative process.”

Past court decisions applying Chevron were not overturned. “[W]e do not call into question prior cases that relied on the Chevron framework. The holdings of those cases that specific agency actions are lawful — including the Clean Air Act holding of Chevron itself — are still subject to statutory stare decisis despite our change in interpretive methodology,”

Going forward, when disagreements with agency decisions arise, it will be necessary to determine the statutory basis for the agency’s decision or regulation. If the statute is ambiguous on the issue, then the Loper Bright decision will even the playing field. In this regard, the ruling may impact settlement negotiations with the U.S. EPA. Now that judges are not required to defer to the federal agency’s interpretation of a statute, each party will need to determine what the likelihood is that its statutory interpretation will convince a court to rule in their favor. Where a company can craft a persuasive interpretation of a federal statute, the U.S. EPA will have more of an incentive to resolve the matter rather than risk a successful court challenge by the regulated party.

For entities wishing to challenge agency regulations and obtain judicial review under the APA, the Supreme Court’s recent decision in Corner Post, Inc. v Board of Governors of the Federal Reserve System has extended the deadline for APA suits to accommodate entities that were not initially affected by a regulation because they did not exist at the time a rule went into effect. The decision holds that a claim under the APA does not accrue for purposes of §2401(a)’s 6-year statute of limitations until the plaintiff is injured by final agency action.

The Supreme Court’s decision in Loper Bright binds only the federal courts.  Chevron was not adopted by several states, and some state legislatures (e.g., Florida and Indiana) enacted laws to prohibit Chevron deference by the courts. That said, 25 states (including Illinois and New York) and the District of Columbia have employed Chevron-like deference to state agencies’ interpretations of the statutes they administer.