Update 793 – Court Scraps 1984 Precedent:
Chevron Gone; Court Term’s Unsettling Finale
The Supreme Court’s 2023-24 term ended this week on an ominous note, with Chief Justice Roberts’ ruling on behalf of a 6-3 majority in Trump v. United States (2024) that the President enjoys absolute immunity from criminal prosecution for actions within his conclusive and preclusive constitutional authority and is entitled to at least presumptive immunity from prosecution for all his official acts — a precedent that unilaterally redefines the authority of the nation’s chief executive.
Last week, Roberts authored another 6-3 opinion, with perhaps lesser constitutional import but greater practical significance on our day-to-day lives, overturning Chevron v. Natural Resources Defense Council (1984). The ruling overturned a precedent that courts should give regulatory agencies deference regarding ambiguous statutory interpretation as long as the agency’s interpretation is reasonable, with Roberts concluding that “agencies have no special competence in resolving statutory ambiguities.”
Today, we examine the issues behind the Chevron doctrine and the ramifications of the end of the doctrine.
Happy Fourth of July, all!
Best,
Dana
For forty years, the Chevron deference was a key component of federal administrative law that circumscribed the role of federal courts in reviewing agency actions to execute the will of Congress. In essence, the Chevron deference held that courts should defer to the expertise of federal agencies in the interpretation of ambiguous statutes from Congress, provided their interpretation was reasonable. It spared the courts from needing to rule on every ambiguity in Congressional statutes, instead deferring to the expertise of federal agencies better suited to the task.
Without the Chevron deference, judges will still have to decide how much “respect” to give well-thought-out agency legal interpretations, but the final say on those questions will lie with federal judges. The ruling may make decisions more unpredictable and more subject to judges’ ideological leanings. And there may be efforts to reopen settled decisions despite the Supreme Court majority’s effort to shield them from reconsideration. The fallout of SCOTUS’ decision will be significant and felt for decades to come.
Summary of the Chevron Deference
The Chevron deference came into being in the 1984 landmark case Chevron USA, Inc. v. Natural Resources Defense Council, Inc. In the 40 years between its inception and its demise last Friday, it was one of the most important guiding principles of administrative law.
The Chevron case came about when the EPA under President Reagan changed its interpretation of the Clean Air Act, allowing polluters more flexibility when meeting the EPA’s air pollution standards, basing its interpretation on the Clean Air Act’s ambiguous definition of a “stationary source.” The Natural Resources Defense Council (NRDC) sued over this change in interpretation, with the lawsuit eventually making its way to the Supreme Court. In a unanimous decision, SCOTUS ruled that the courts should presumptively defer to the EPA’s interpretation of ambiguous language over the definition of “stationary sources” rather than imposing its own definition on the grounds that agencies had been delegated the power to carry out congressional policy by Congress itself. The Court noted that this presumed deference was appropriate given that agencies have greater subject-matter expertise and are more politically accountable than the judiciary.
SCOTUS established a two-step rule that would become known as the Chevron deference:
- A court must first determine whether Congress expressed intent on the statute; if it did, then that would control the decision.
- If, however, Congress’s intent is not clear, then the reviewing judge must defer to the agency’s interpretation, as long as its construction of the statutory language is reasonable.
In other words, if Congress’ intent for a given statute is implicitly ambiguous, a court must defer to the agency’s interpretation of that statute provided that said interpretation is reasonable. The Chevron deference was further modified in the case of US v. Mead Corp, which added “Step Zero:” Before deferring to an agency’s interpretation of a statute, the court must determine whether that agency had the authority to issue binding legal rules; if it did not, then Chevron did not apply.
While it was not seen as a particularly consequential decision at the time, Chevron went on to become one of the linchpins of administrative law. In its 40-year lifespan, Chevron was cited by federal courts more than 18,000 times, with 70 SCOTUS decisions relying on the deference.
On its face, Chevron was a politically neutral ruling. The power to interpret ambiguities in congressional statute rested with federal agencies whose leadership would be decided by whoever sat in the Oval Office. Indeed, in the case in which it was first articulated, the doctrine was used to uphold a deregulatory measure in furtherance of the Reagan administration’s agenda to reduce the government’s role in the marketplace. As such, conservatives were initially favorable toward the Chevron deference, with prominent conservative legal scholars such as the late Justice Antonin Scalia supporting its continuation. With time, this view changed as conservatives’ goals shifted increasingly to curtailing federal regulation. Chevron, they saw, was a roadblock, and spawned years of efforts to get Chevron overturned.
The Loper Bright and Relentless, Inc. Cases
The ruling on the future of the Chevron deference came down to two nearly identical cases this term concerning two fishing companies. The first was Loper Bright Enterprises v. Raimondo. This case involves a herring fishing company and its conflict with a federal agency, the National Marine Fisheries Service (NMFS). The NMFS promulgated a rule in 2020 that required fishing companies to fund at-sea monitoring programs. The NMFS justified this requirement with its interpretation of the Magnuson-Stevens Act (MSA), which governs how the federal government manages marine fisheries in US waters. The NMFS’ rule would have required Loper Bright to fund at-sea monitoring at a cost of $710 per day. Loper Bright filed a lawsuit against the NFMS with the argument that the MSA does not explicitly delegate the authority to require fishing companies to fund its at-sea monitoring programs. The plaintiffs argued that Congress would not have given the NMFS the power to impose such expenses through a merely implicit delegation of authority.
The US District Court for the District of Columbia ruled against the plaintiffs, holding that, under Chevron, the NMFS had not exceeded its authority because its interpretation of the MSA was “reasonable.” The plaintiffs appealed the case to the US Court of Appeals for the District of Columbia Circuit, which ruled 2-1 to uphold the district court’s ruling. The plaintiffs then appealed to the Supreme Court to consider two questions. They requested the Court to rule outright on the 40-year-old Chevron deference, or at least clarify whether statutory silence about the matter of payment constitutes an ambiguity requiring deference to the agency. On May 1, 2023, SCOTUS granted the petition, limited to the second question presented. The Court also took up the near-identical case of Relentless, Inc. v Department of Commerce so that Justice Jackson, who formerly served in the District of Columbia Circuit, could participate in what was bound to be an important decision.
SCOTUS’ Decision
In a 6-3 divided ruling along ideological lines, SCOTUS struck down the Chevron deference wholesale. In writing for the conservative majority, Chief Justice Roberts stated that the doctrine was “fundamentally misguided” and that the ruling ended “our 40-year misadventure with Chevron deference.” Chief Justice Roberts justified the decision on the grounds that the Chevron deference was inconsistent with the Administrative Procedure Act (APA) of 1946, a federal law that establishes the procedures that federal agencies need to follow and instructions for courts to review agency actions. Roberts argued that the APA made clear that courts are to decide legal questions by “applying their own judgment” and that therefore agency interpretations are not entitled to deference. Roberts concluded that “it thus remains the responsibility of the court to decide whether the law means what the agency says.”
Roberts rejected the argument that federal agencies, with their expertise and experience in the subject matter, were better equipped to interpret ambiguities in congressional statutes than the courts. Instead, Roberts argued that even when ambiguities involve technical or scientific questions, “Congress expects courts to handle technical statutory questions,” and that ambiguities should be resolved using the “expertise” of the courts in resolving statutory interpretation disputes. He argued that courts may receive briefings from the parties and “friends of the court” where expert insight may be provided. Roberts claimed that even if a court did not rule in favor of an agency’s interpretation of a statute, there was still the Skidmore standard of review, which lays out a complicated set of factors for judges to consider when weighing how “persuasive” an agency’s particular interpretation of a statute might be. Whether or not this will mitigate the reach of the ruling regarding court deference to agency expertise is unclear.
Roberts argued that the Chevron deference is not defensible under stare decisis — the principle that courts should make decisions according to the precedents set by prior cases — on the grounds that the doctrine was an “unworkable” precedent, as it is difficult to determine whether a statute is ambiguous. He pointed to the fact that SCOTUS was “constantly tinkering” with the doctrine as evidence of its unworkability, saying that Chevron “allows agencies to change course even when Congress has given them no power to do so.” Roberts concluded that “all that remains of Chevron is a decaying husk with bold pretensions.”
Kagan’s Dissent
In her dissent, Justice Kagan came out forcefully against the majority’s decision. Joined by her fellow liberal justices Sotomayor and Jackson, Kagan derided the shift in the balance of power engendered by the decision to strike down Chevron, stating that “as if it did not have enough on its plate, the majority turns itself into the country’s administrative czar.” Kagan praised the role that the Chevron deference played in creating a reasonable regulatory framework on everything from clean air and water to regulating financial markets. Kagan criticized the majority’s dismissal of the importance of federal agency expertise, stating that “Agencies have expertise in [scientific and technical subject matter]; courts do not,” and that “Agencies know those programs inside-out; again, courts do not.” Kagan denounced the decision as a blatant power grab by SCOTUS’ conservative justices, stating that “a rule of judicial humility gives way to a rule of judicial hubris.”
Kagan also warned of the harm that overruling a 40-year precedent did to stare decisis: “It is impossible to pretend that today’s decision is a one-off, in its treatment of precedent.” Kagan pointed out that after 170 SCOTUS cases affirming Chevron over four decades, some compelling rationale should be offered for a reversal, a rationale that the majority failed to provide. Kagan warned that the decision would invite re-litigation of all cases decided under Chevron. While Roberts tried to assuage this concern by claiming that Chevron’s progeny made before the ruling was safe, the ruling opened up many regulations considered settled to new litigation.
The Impact of Overturning Chevron
SCOTUS’ overturning of Chevron caps a series of decisions made by SCOTUS this term curtailing the power of the federal regulatory apparatus, though this ruling will potentially have the greatest impact. By eliminating the Chevron framework, SCOTUS has significantly shifted power away from federal agencies and toward the courts. This shift will likely impede the functioning of the federal government, as policy questions will now be at the mercy of unelected judges who may decide to rule based on their own ideological preferences instead of listening to experts. Federal agencies will likely become more skittish in pursuing their congressionally-delegated duties, while also having to divert more resources to defend statutes that are already in place. It is unclear what regulatory rules are at risk due to SCOTUS’ decision, but one can expect major rules such as the CFPB’s recent late fees rule may be targets of litigation.
Leaving decisions that were formerly decided via Chevron to individual judges with conflicting ideologies increases the likelihood that conflicting rulings will occur, resulting in an increased caseload for higher courts as they seek to resolve numerous competing interpretations of statutes. Adding to this problem, despite Chief Justice Roberts’ reassurance to the contrary, overturning Chevron likely opens the door to lawsuits challenging old decisions that relied on the doctrine, further eroding stare decisis. The end result of all of this upheaval and uncertainty in the court system will be even greater upheaval and uncertainty in the federal regulatory system.
Equally concerning, the ruling will also lead to greater difficulty in the lawmaking process. Up until now, Congress has been fairly comfortable with leaving ambiguities in legislation with the confidence that federal agencies would have the ability to interpret them as they saw fit. Now if Congress wants to delegate policymaking authority to an agency, it has to grant an agency that power explicitly, a process for which SCOTUS provided no guidelines. Additionally, if Congress wants to avoid the courts interpreting its laws, it will now need to write legislation in great detail to avoid ambiguities. The bigger issue is that even experienced lawmakers cannot foresee all of a law’s possible ramifications and court challenges, as laws are intended to remain on the books for decades. Chevron will require lawmakers to include more technical expertise on their staff to fine-tune bills, and even that likely will not be enough to resolve all ambiguity. Up until now, Congress intentionally left ambiguities in legislation to make it easier for lawmakers to come to agreements on complicated and contentious issues. Requiring lawmakers to fill gaps in minute details may make compromise and deal-making on legislation more difficult.
Policy Implications of Overturning Chevron
The overturning of Chevron has big ramifications for federal policy on everything from environmental regulation to healthcare. The ruling could critically undermine many actions taken by the Biden Administration in the absence of Congressional action. Biden’s “Plan B” for student debt relief – the plan he adopted after SCOTUS shot down his original plan – relies on the Department of Education’s novel interpretation of the Higher Education Act, one that might not hold up to judicial scrutiny anymore. Additionally, Biden’s efforts to lay the groundwork for AI regulation where Congress has been slow to act relies on the authority and flexibility of agencies such as the Commerce Department, both of which might be undermined by the ruling.
- Financial Regulation: One major area where the overturning of Chevron may be keenly felt is in banking regulations. While banking agencies have explicit powers granted to them by Congress to supervise and enforce rules regarding unsafe and unsound banking practices, their authority to write and enforce new rules may be constrained. As financial firms have become bold in bringing their regulators to court over new rules, it is safe to assume that the overturning of Chevron will invite even more challenges. Banking trade groups have campaigned and lobbied against the new set of proposed capital rules known as Basel III endgame; without Chevron, opponents of Basel III endgame are likely to push even harder to kill it once a version of the proposal is finalized.
- Tax Policy: Taxes are a complicated area of law that often invites significant debate from lawmakers, so Congress often leaves it to the Treasury and the IRS to fill in statutory gaps. Additionally, Congress has left it up to these two agencies to interpret tax law as most lawmakers are not experts on the tax code; delegating interpretive power to the Treasury and the IRS meant that experts could iron out issues and errors in laws passed by Congress. Overturning Chevron brings considerable uncertainty to the tax code at a time when the authority of the IRS is already under attack from conservatives in the courts.
SCOTUS’ decision to curtail federal policy-making power comes at a time when countless issues — from the environment to healthcare to emerging issues such as AI — need attention from federal regulators. It makes federal action without explicit congressional approval far more difficult. It also puts added burdens on Congress when it comes to lawmaking, requiring much greater scrutiny in statutory drafting. With the federal government becoming less effective in addressing the problems facing everyday Americans, its public support will further erode. If Congress wants to prevent the upending of America’s federal regulatory system, it needs to step up and codify the Chevron deference into law. At least one bill, the Stop Corporate Capture Act, already contains such a provision. Without decisive action, the federal government will be hamstrung in addressing pressing issues affecting the lives of all Americans.