Supreme Court Ends Chevron Deference Among String of Decisions Limiting Agency Power

In Loper Bright Enterprises v. Raimondo, the Supreme Court put an end to Chevron deference. Taking its name from the 1984 case of Chevron U.S.A., Inc. v. Natural Resources Defense Council,¹ Chevron deference required federal courts to defer to agencies’ reasonable resolutions of ambiguities in the statutes they administer. It had long been clear that the Supreme Court had lost its faith in Chevron, since the Court had stopped citing the framework when confronted with agency cases concerning statutory meaning. Now, the Court has confirmed that Chevron deference should no longer apply in the lower courts, either. By officially burying Chevron, Loper Bright should have an important impact for litigants by constraining agencies’ regulatory discretion going forward and offering litigants who challenge consequential agency actions additional guidance for pressing successful arguments.

Loper Bright did not stand alone. The decision aligned with other end-of-term decisions that hemmed in administrative agencies. The Court took a broad view of the statute of limitations governing challenges to agency action, and it engaged in searching arbitrariness review of new EPA ozone regulations in an emergency posture. The Court also severely constrained the SEC in relying upon administrative adjudications. When considered together with Loper Bright, these precedents will provide litigants with greater and stronger opportunities to challenge aggressive agency action.

Background

Loper Bright arose as a challenge to a National Marine Fisheries Service (NMFS) regulation that required fishermen to pay for carrying observers aboard their vessels. Although the Magnuson-Stevens Fishery Conservation and Management Act requires fishermen to permit inspectors onboard, the statute does not expressly empower the NMFS to compel fishermen to pay for their own inspectors. Yet in 2020, the NMFS promulgated a final rule imposing such a costly requirement. After fishing businesses challenged the regulation, the D.C. District Court granted summary judgment in NMFS’s favor. In affirming, a divided D.C. Circuit panel relied on Chevron to conclude that the statute was ambiguous with respect to who paid for the observers and deferred to the NMFS’s resolution of that ambiguity as reasonable. In a separate case, Relentless, Inc. v. Department of Commerce,² the First Circuit reached the same conclusion. The Court granted certiorari in both cases but limited that grant to the question of whether Chevron should be overruled.

The Supreme Court’s Decision in Loper Bright

In a majority opinion authored by the Chief Justice, the Supreme Court held that Chevron deference conflicted with Section 706 of the APA. Section 706 requires reviewing courts to “decide all relevant questions of law” and “interpret constitutional and statutory provisions” when assessing challenges to agency action.³  The Court reasoned that this straightforward textual command accorded with the judiciary’s historic role—dating back to Marbury v. Madison—to “say what the law is” in pending cases.⁴  In short: “The text of the APA means what it says.”⁵

The Court acknowledged that, at times, the best reading of a statute is “that the agency is authorized to exercise a degree of discretion.”⁶  For example, some statutes authorize agencies to define certain terms, or they vest agencies with the discretion to make a “reasonable” or “appropriate” regulation on a particular topic. When that is the case, courts must respect Congress’s choice to equip the agency with discretion, “while ensuring that the agency acts within” that statutory framework, as well as constitutional boundaries.⁷  And in doing so, per Skidmore v. Swift & Co., courts may give due respect to agency interpretations that are longstanding and thoroughly consider the statute’s meaning.⁸  However, the Court’s respect for longstanding agency interpretations under Skidmore will not change the fact that the only “permissible” interpretation of a statute is “the one the court, after applying all relevant interpretive tools, concludes is best.”⁹

The Court next rejected the Government’s argument that Chevron can be squared with Section 706 of the APA on the grounds that an ambiguity in a statute constitutes an implicit delegation from Congress to the agency. “Presumptions have their place in statutory interpretation, but only to the extent that they approximate reality.”¹⁰  However, the courts, not agencies, are the experts when it comes to interpreting statutes.¹¹  “By forcing courts to . . . pretend that ambiguities are necessarily delegations, Chevron does not prevent judges from making policy. It prevents them from judging.”¹²

Finally, the Court concluded that the doctrine of stare decisis did not save Chevron, finding that the traditional considerations under this doctrine “all weigh in favor of letting Chevron go.”¹³  Although Loper Bright overruled Chevron, it clarified that cases that relied on Chevron’s interpretive framework to hold that specific agency actions are lawful remain good law, subject to statutory stare decisis. The fact that a prior case relied on Chevron does not alone provide grounds for overturning that decision.¹⁴

Justice Thomas concurred, contending that in addition to running afoul of Section 706, Chevron also violated the constitutional separation of powers. That is, “[Chevron] curbs the judicial power afforded to courts, and simultaneously expands agencies’ executive power beyond constitutional limits.”¹⁵

Justice Gorsuch also concurred to explain why his view of “the proper application of the doctrine of stare decisis” supported the majority’s decision to overturn Chevron.¹⁶

Justice Kagan, joined by Justice Sotomayor and Justice Jackson, dissented. Justice Kagan argued that Chevron “is right,” because it accurately reflects congressional intent that agencies, rather than judges, make policy decisions when statutory meaning runs out.¹⁷

The Court’s Holdings in Corner Post, Ohio v. EPA, & SEC v. Jarkesy

A few days later, the Court decided Corner Post, Inc. v. Board of Governors of the Federal Reserve System, which held that the limitations period to challenge an agency action does not begin until the action injures the plaintiff. As a general rule, challenges to agency action are governed by the APA’s six-year statute of limitations period, unless an agency-specific statute provides a different limitations period.¹⁸ (For example, a person aggrieved by the SEC’s issuance of a rule under the 1934 Exchange Act must file a challenge within sixty days after the issuance of a rule.¹⁹) But when does the APA’s statute of limitations begin to run? In an opinion authored by Justice Barrett, the Court held that APA claims do not accrue for purposes of the six-year statute of limitations period until the plaintiff sustains an injury from final agency action. The Court rejected the government’s contrary view that the six-year statute of limitations period begins to run once the agency action is finalized—which in many cases would have functionally prevented injured parties from challenging the validity of longstanding regulations.

A day before Loper Bright, the Court decided Ohio v. EPA. There, petitioners successfully challenged EPA’s promulgation of a federal implementation plan (FIP) for ozone regulations under the Clean Air Act as arbitrary and capricious. The Court invalidated the regulation because EPA had failed adequately to respond to commenters’ concerns that its proposed rule did not address important aspects of the problem at hand: in particular, many of the states originally conceived as being part of the FIP would in fact be excluded, and EPA did not account for this consequential shift.  Importantly, the Court took the case and scrutinized the EPA rule in an emergency posture. Some knowledgeable Court watchers have surmised that the Court’s increasing willingness to consider challenges to agency action in an emergency posture—like in Ohio v. EPA—is driven by an interest in preventing industries from having to comply up front with costly agency regulations that turn out to be unlawful.²⁰

In another significant administrative law decision, the Court also held in SEC v. Jarkesy that the Seventh Amendment jury trial right applies to an action by the SEC to seek civil penalties for violations of the antifraud provisions of the federal securities laws. It thereby compelled the SEC to bring contested enforcement cases alleging securities fraud in federal court.

The Broader Impact of the Court’s Administrative Law Decisions

The combined force of these rulings is that the Court has expanded the grounds for challenging agency regulations and other actions and increased the likelihood of success for mounting those challenges. These decisions are consistent with a longer-term trend in which the Supreme Court has cut back on the power of administrative agencies to legislate through regulation and has checked the power of agencies by subjecting their rulemaking and enforcement activities to greater judicial review.

With Chevron overruled, courts “may not defer to an agency interpretation of the law simply because a statute is ambiguous.”²¹ This new rule will significantly influence litigants’ challenges to agency action going forward. Arguments attuned to a statute’s meaning will likely grow more prevalent, since courts may not defer to the agency’s interpretation of the statute. Loper Bright will thus constrain agencies from adopting novel, untested theories of older laws and arguing that such agency policymaking warrants deference.

When combined with the Court’s recent decisions in other cases, Loper Bright offers litigants who challenge consequential agency actions additional guidance for pressing successful arguments. First, relying on the Supreme Court’s previous decision in West Virginia v. EPA,²² litigants may argue that an agency is attempting to resolve a “major question” without the benefit of clear statutory authorization. Second, the litigant may argue that even if the court disagrees that a major question is at issue, the agency’s regulation does not constitute the best interpretation of the statute. In other words, without having to address Chevron deference, litigants may be able to consistently attack agency regulations on both major-question grounds and straightforward statutory interpretation grounds. In addition, Ohio v. EPA reminds plaintiffs that procedural challenges to arbitrary and capricious rules remain alive and well. Also, as Dechert recapped in its recent OnPoint on SEC v. Jarkesy, those on the other side of the “v.” opposite an agency may turn to constitutional challenges.

Thanks to Corner Post, litigants also will have more time to mount their challenges to agency action. Absent a specific statutory command to the contrary, a plaintiff that has sustained their injury from a final agency action within the past six years will have their day in court to make their on-the-merits statutory interpretation arguments under the Loper Bright standard. On the other side, should a plaintiff want to challenge an agency rule early on and not comply with its dictates throughout the long course of litigation, Ohio v. EPA indicates that the Court might be willing to hear such a plaintiff out on the front end.

Finally, Loper Bright’s overturning of Chevron deference puts renewed pressure on Congress to be precise in its legislative language. As a result, more citizens and industry groups may choose to lobby for policy changes from Congress, rather than seek relief from the Executive Branch. Without the flexibility afforded by Chevron deference, Executive Branch agencies will have less leeway to achieve their policy preferences through creative statutory interpretation. Thus, if existing statutes do not adequately serve the policy needs of a particular industry or the White House, these groups may be more apt to ask Congress directly to change the law in accordance with their policy goals.

Should Congress draft more precise language, the Court will apply it as written and not permit the Government to read it too expansively in subsequent litigation. These cases are therefore consistent with the Court’s strong embrace of textualism, which it applied in other end-of-term cases involving the criminal law. In Fischer v. United States and Snyder v. United States, for instance, the Court looked to statutory text, structure, and linguistic canons in rejecting the Government’s overbroad reading of vague criminal statutes.

In sum, Loper Bright’s overturning of Chevron was part of, and in many ways the culmination of, a broader and deeper trend: the end of October Term 2023 offers regulated firms and persons a slew of helpful precedents to contest unfavorable and overreaching administrative agency action.