Contending that overturning its own 40-year-old Chevron deference standard would reduce political inconsistency and excessive regulation, the majority of Supreme Court justices have created a greater role for the judiciary and the risk of more litigation and judicial uncertainty, industry experts said.
“The demise of Chevron has upended the respective roles of all three branches of government,” James A. Klein, president of the American Benefits Council, said in a July 1 email referring to the June 28 overturning of Chevron deference, which said courts should defer to regulators’ expertise in interpreting laws that are unclear or ambiguous.
The ruling gives courts more power, and that means “the already contentious judicial confirmation process will take on even greater importance as judges are free to rely less on regulators’ subject matter expertise,” Klein said. “Congress will be challenged to pass more detailed legislation rather than deferring to regulators.”
Writing for the majority, Chief Justice John Roberts said the Chevron deference “was a judicial invention that required judges to disregard their statutory duties,” referring to the 1984 Supreme Court ruling in Chevron U.S.A. Inc. et al. vs. Natural Resources Defense Council Inc. et al.
"Justice Roberts' decision is so broad that some might consider it a judicial power grab at the expense of the executive branch of government," said Carol I. Buckmann, founding partner of Cohen & Buckmann PC.
"If a court will not look at whether the agency’s interpretation of ambiguous statutory terms is reasonable, but will substitute its own judgment, any regulation could be challenged without deference to an agency’s expertise," Buckmann said.
That means a regulation "could be overturned by one court in one area of the country in a ruling that has questionable reasoning but a national reach," she added.
Replacing regulators’ expertise in highly technical matters with judges who lack such expertise is "not a recipe for predictability," said Stephen Rosenberg, a partner with The Wagner Law Group.
"From here out, essentially any complex regulatory action or detailed, complicated body of rules is and will be only tentative, subject to whatever any particular judge believes is appropriate, in terms of whether the statutory language allows for the action or regulation," Rosenberg said.
The justices voted 6-2 in Loper Bright Enterprises et al. vs. Gina Raimondo, in her official capacity as secretary of commerce et al. and 6-3 in Relentless Inc. et al vs. The Department of Commerce et al. to overturn the Chevron deference standard.
Each plaintiff lost at the district court and appeals court levels. The ruling sent the cases back to their respective courts "for further proceedings consistent with this opinion."
Justice Ketanji Brown Jackson served on the District of Columbia appeals court while the Loper case was being considered. She didn't participate in that case, but she recused herself from the Supreme Court's discussion of it. Jackson participated in oral arguments for the Relentless case and joined Justices Elena Kagan and Sonia Sotomayor in their dissent.
Chevron deference has been cited by federal courts in “tens of thousands of times in the past 40 years, making it one of the most cited cases in history,” said an October report by the Congressional Research Service, a nonpartisan group that provides information and analysis to members of Congress. “The Supreme Court alone has cited Chevron 238 times and applied Chevron in more than 100 decisions.”
Roberts pointed out that overturning Chevron deference doesn't affect previous cases involving it. "We do not call into question prior cases that relied on the Chevron framework," he wrote.
However, Roberts wrote that the Supreme Court hasn't cited the Chevron deference case since 2016. “At this point,” he wrote, “all that remains of Chevron is a decaying husk with bold pretensions.”
Wide-ranging impact
The Loper Bright and Relentless lawsuits questioned federal rules covering the payment of observers on fishing vessels, but the Supreme Court's ruling will affect all areas of the federal government's role in regulating finance, retirement, healthcare, the environment, pensions and taxation.
Business organizations and conservative legal groups hailed the decision as placing limits on the so-called administrative state, arguing that the Chevron deference standard allowed regulators to act like legislators. They say Chevron deference gives too much power to the executive branch and creates uncertainty for businesses when political administrations change.
“For 40 years, Chevron deference has allowed administrative agencies to enact regulations with little accountability,” Beth Milito, executive director of National Federation of Independent Business' small business legal center, said in a June 28 news release. "NFIB hopes that the Supreme Court’s elimination of Chevron deference will remove significant power from unelected bureaucrats.”
The court's ruling puts regulation under the microscope of 94 federal district courts and 13 federal courts of appeals. Critics say the judges lack the expertise of regulators, and they worry that a single judge in a single judicial district could topple federal rules covering the whole country.
“To best safeguard consumers, protections need to be based on research and data, not on the whims of judges who have no expertise on these products and services," Susan Weinstock, president and CEO of the Consumer Federation of America, said in a June 28 news release. "We will all pay the price of today’s terrible decision with our dollars, our health, and our lives."
More litigation
The lawyers and organizations who represent clients in the vast array of regulatory matters predict future challenges — but they aren't sure how fast and how significant.
"While the full implications will take time to emerge, it’s almost certainly going to produce more litigation, and in the process less certainty for advisers, plan sponsors and record keepers trying to operate within those boundaries," said Nevin Adams, a spokesman for the American Retirement Association.
"A decision by one court affirming an agency interpretation under Chevron may well be discounted by courts in other jurisdictions addressing the same issue without deference," said Jaime Santos, co-chair of Goodwin Procter's appellate and supreme court litigation practice.
As a result of the Supreme Court ruling, "I think it could lead to more litigation and also change the nature of existing litigation," Santos said. "These decisions could very much encourage companies to challenge more agency interpretations."
With Chevron deference in force, "some agency interpretations were not worth challenging," she said. "But now, with courts less likely to defer to agency interpretations, there is a greater incentive for companies to challenge agency interpretations of statutory terms."
The overturning of Chevron deference "might also embolden plaintiffs to sue using more aggressive interpretations of a statute than interpretations that have been adopted by the Department of Labor," Santos said.
The Chevron deference decision "could have a very significant impact on each of the agencies’ regulatory agendas," said David N. Levine, principal at Groom Law Group. "With the DOL’s fiduciary rule already being challenged in a number of cases, this decision could make it even more challenging for the DOL fiduciary rule to survive the litigation process."
The Securities and Exchange Commission "could face additional challenges on future rules in addition to the loss in the Jarkesy case," said Levine, referring to the Supreme Court's 6-3 ruling on June 27 declaring unconstitutional the SEC's use of in-house administrative judges.
Recent trends in rule-writing convinced some lawyers that Chevron deference had to go.
When P&I interviewed attorney Kent Mason in January just before the Supreme Court held oral arguments on the Chevron deference cases, the partner at Davis & Harman said: "I would be nervous with a wholesale revocation."
At the time, Mason took a middle ground. “I would preserve Chevron deference where agencies are using their technical expertise, but I would not apply it regarding rules that are driven by a political or policy agenda,” he said. “It’s not an easy line to draw.”
Chevron deference "produces some stability" in his firm's dealing with the DOL, IRS and PBGC, he added. "In many cases, we like the stability even though I don’t agree with some of it.”
After the Chevron ruling, however, Mason said overturning the standard was a logical response to what he viewed as regulators exceeding their responsibilities.
"I think that this decision will help address some of the regulatory overreach that is going now, such as at DOL and the SEC," he said. "Some rules, such as the DOL fiduciary rule, are so clearly invalid that this won’t have much effect, but other overreaching rules could be invalidated by reason of this decision."
Although some regulators base their work on interpreting the law's intent, "other agencies have used the regulatory process to advance policy goals unrelated to congressional intent," Mason said. "As this latter trend proliferated, it became clearer that Chevron deference was inappropriate. So, the only solution was to eliminate Chevron deference."
Petitioners cannot seek to overturn a law or regulation by simply noting that Chevron deference was overturned, Roberts wrote. "And when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it," he added.
Roberts also quoted an earlier Supreme Court ruling in noting that regulators have a role, albeit an advisory one, in offering courts their “body of experience and informed judgment.” Such information has "the power to persuade, if lacking power to control," said the 1944 ruling in Skidmore vs. Swift & Co. It is still on the books.
