Supreme Court Overturns Chevron Doctrine

In a monumental shift in administrative law, the U.S. Supreme Court has overruled the Chevron doctrine in its decision in Loper Bright Enterprises v. Raimondo. This landmark ruling redefines the balance of power between federal agencies and the judiciary, fundamentally altering how courts review agency actions.

Background and Significance of the Chevron Doctrine

The Chevron doctrine, established by the Supreme Court in 1984 in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc 467 U.S. 837 (1984), mandated that courts defer to an agency’s interpretation of ambiguous statutes, provided the interpretation was reasonable. This doctrine granted agencies significant leeway to define their statutory authority, often making it difficult for businesses and individuals to challenge agency actions. Critics of Chevron argued that it eroded the separation of powers by allowing agencies to effectively legislate, bypassing the judicial branch’s role in interpreting the law.

The Case: Loper Bright Enterprises v. Raimondo

In Loper, New Jersey herring fishers contested the National Marine Fisheries Service’s (NMFS) authority to require them to fund federal observers on their vessels under the Magnuson-Stevens Act. The Act did not explicitly address this requirement, and the lower court, applying the Chevron deference, ruled in favor of the NMFS. The Supreme Court’s decision to overrule Chevron means that courts will no longer defer to agency interpretations of ambiguous statutes. Instead, they will exercise independent judgment to determine the best interpretation of the law.

The Court’s Rationale

Chief Justice Roberts, writing for the majority in a 6-3 decision, emphasized the judiciary’s role to “say what the law is,” citing Marbury v. Madison. The opinion highlighted that the historical practice of respecting agency interpretations was based on their thoroughness and consistency, but Chevron’s broad deference diverged from this tradition. The Court found that Chevron‘s deference was incompatible with the APA’s mandate for courts to “decide all relevant questions of law.”

Concurring and Dissenting Opinions

Justice Gorsuch concurred, stressing the judiciary’s role in interpreting laws independently of executive agencies. He argued that Chevron deviated from traditional judicial responsibilities and expanded executive power beyond constitutional limits. Justice Thomas also concurred, criticizing Chevron for compelling judges to abdicate their Article III powers and disrupt the constitutional balance.

In contrast, Justice Kagan, joined by Justice Sotomayor in dissent, defended Chevron as an effective allocation of interpretive responsibility between courts and agencies. She argued that agencies possess the expertise and accountability necessary to resolve statutory ambiguities. Justice Kagan warned that overturning Chevron would cause significant disruption and uncertainty in administrative law.

Implications of the Decision

The Loper decision is expected to increase the likelihood of successful challenges to agency actions. Courts will now independently interpret statutes, making it more challenging for agencies to issue far-reaching rules without clear statutory authority. This shift is likely to make agencies more cautious in their rulemaking, particularly when modifying interpretations issued by previous administrations.

The Loper decision also marks a significant reconfiguration of the relationship between the judiciary and administrative agencies. By eliminating Chevron deference, the Court has reinforced the judiciary’s role in interpreting the law and curtailed the scope of agency authority, potentially leading to more rigorous judicial scrutiny of administrative actions.

Without Chevron deference, courts will independently interpret ambiguous statutes, potentially leading to more rigorous scrutiny of agency rules. This may result in regulatory agencies, such as the EPA, FDA, SEC, and CFPB, exercising greater caution in rulemaking to ensure clear statutory support for their regulations. Consequently, regulated entities could see increased legal challenges to agency actions, affecting the stability and predictability of regulatory environments. It is expected that the Court’s decision will affect, for example, how medications are approved, and what pollutants can be regulated. From a banking and finance perspective, this could include restrictive activities like the recent guidance around Buy Now Pay Later products, the ill-fated Abusive guidance issued last year or more permissive rules such as model notices provided by regulation.

The Loper decision marks a significant change in how federal agencies’ regulations are scrutinized by the courts. However, the court indicated that this decision does not impact prior decisions that have relied on Chevron deference. Only time will tell. Stay tuned for continuing updates on the impact of the Loper decision.

If you should have any questions on the impact of the Loper decision on your business, contact your Clark Hill attorney.

For more details, you can read the full Supreme Court opinion here.

This publication is intended for general informational purposes only and does not constitute legal advice or a solicitation to provide legal services. The information in this publication is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this information without seeking professional legal counsel. The views and opinions expressed herein represent those of the individual author only and are not necessarily the views of Clark Hill PLC. Although we attempt to ensure that postings on our website are complete, accurate, and up to date, we assume no responsibility for their completeness, accuracy, or timeliness.