How much of an impact this decision will have will likely be discussed for years to come.

On June 28, 2024, the Supreme Court of the United States jettisoned the Chevron doctrine, overruling a 40-year-old case that had long served as the foundation for American administrative law. In the consolidated opinion in Loper Bright Enterprises, Inc. v. Raimondo and Relentless, Inc. v. Department of Commerce, the Supreme Court declared that, instead of deferring to agency interpretations of ambiguous statutes, courts now must exercise their “independent judgment” to determine whether an agency acted within its statutory authority.

Although the Court held that Loper Bright Enterprises does “not call into question prior cases that relied on the Chevron framework,” it will still likely create waves for every federally regulated industry in the United States. How much of an impact this decision will have will likely be discussed for years to come. In the meantime, companies are encouraged to review any recently issued regulations to determine if the agency acted within its statutory authority under this post-Chevron, nondeferential analysis.

The Chevron Doctrine

In 1984, the Supreme Court decided Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. In that case, the Court held that where a “statute is silent or ambiguous with respect to the specific issue” before an agency, courts “may not substitute [their] own construction of a statutory provision for a reasonable interpretation made by” the agency. In so holding, the principle of “Chevron deference” was born. Chevron deference required courts to analyze an agency’s construction of a statute using a two-step test. In step one, courts determined whether the statutory language at issue was “clear” or “ambiguous.” If it was clear, that language controlled, and an agency could not deviate from it. But if it was ambiguous, in step two, courts were to defer to the agency’s interpretation of the statutory scheme that Congress “entrusted [it] to administer,” as long as that interpretation was “permissible.” Chevron deference gave federal agencies significant discretion to pass rules based on their reasonable interpretations of arguably ambiguous federal statutes.

The Regulation Involved in Loper and Relentless

Both Loper and Relentless challenged a regulation promulgated by the National Marine Fisheries Service (NMFS) under the Magnuson-Stevens Fishery Conservation and Management Act (MSA). That statute gives the Secretary of Commerce and the NMFS the authority to require commercial fishing vessels to “carry” federal observers on the vessel to ensure that the vessel is complying with federally approved fishery management plans.

Using its regulatory power, NMFS issued a regulation that requires herring fishermen to carry federal observers on approximately 50 percent of their fishing trips. The regulation also provided that, while the federal government would cover the daily salary of some observers, the vessel owners would be required to pay the salaries of the other, nonfunded observers.

Herring fishermen challenged the regulation, arguing that the NMFS lacked authority to require the vessel owners to pay the salaries of the mandated observers. In the two cases in which the Supreme Court granted certiorari, the U.S. Courts of Appeals for the First Circuit and for the District of Columbia disagreed. In Relentless, the First Circuit held that the MSA authorized the NMFS’s regulation without deciding whether the statute was ambiguous, implicating Chevron step two. In Loper Bright Enterprises, the D.C. Circuit held that the statute was ambiguous, meaning the NMFS’s regulation was lawful because it was reasonable.

The Supreme Court Overruled Chevron for Future Regulatory Challenges

In Loper Bright Enterprises, the Supreme Court held that Chevron deference is inconsistent with the judiciary’s constitutional authority to say what the law is. Deference is also inconsistent with the Administrative Procedure Act’s (APA) requirement that courts “exercise their independent judgment” to decide if an agency has acted pursuant to its statutory authority. The Court leaned on the APA’s provision that “courts, not agencies will decide ‘all relevant questions of law’” touching on agency action. Neither the Constitution nor the APA allows courts to abdicate that role just because a statute is ambiguous.

To reach this conclusion, the Court analyzed decades of precedent before and after Chevron, both to demonstrate that Chevron was an aberration at the time it was issued and to show its subsequent unworkability.

The Court held that the fatal flaw in the Chevron principle was the assumption that statutory ambiguity is a delegation of authority to the agency. It rejected that assumption. The Court also explained that an agency’s subject matter expertise does not make it more qualified than the federal judiciary to interpret a statute.

Although the Court has left Chevron behind, it expressly held that regulations previously upheld under the Chevron framework are subject to stare decisis.

The Court also recognized that Congress may still confer discretionary authority on agencies to prescribe rules. In such circumstances, the role of a reviewing court is to ensure that the agency has acted within the boundaries of that delegated authority and has engaged in the reasoned decision-making required by the APA.

Finally, although courts will no longer automatically defer to an agency’s interpretation, courts can still treat the agency’s interpretation as persuasive, particularly if it is thorough, well-reasoned and consistent with other agency pronouncements.

Implications

The Court’s decision to overrule Chevron is a momentous change in how American courts approach issues relating to administrative law. Given the large number of regulated industries in the United States, the Court’s decision has the potential to affect every federally regulated industry, including education, healthcare, tax, automotive, environmental, farming and securities, to name a few. The decision will have a major impact on administrative agencies’ ability or appetite to regulate in areas that are not obviously within their statutory authority and may embolden businesses who are interested in challenging agency actions affecting their respective industries.

For More Information

If you have any questions about this Alert, please contact Stephen H. Sutro, Robert M. Palumbos, John M. Simpson, Drew T. Dorner, Leah Mintz, any of the attorneys in our Trial Practice Group or the attorney in the firm with whom you are regularly in contact.

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