The U.S. Supreme Court on June 28 significantly weakened regulatory agencies ability to interpret federal laws by overturning the Chevron deference, a standard set by the Supreme Court in 1984 that said judges should defer to regulators when laws are ambiguous and unclear.
“Chevron is overruled,” Chief Justice John Roberts wrote in two cases involving challenges to fishing regulations but whose impact will affect all regulatory agencies, including the Securities and Exchange Commission, Internal Revenue Service, Department of Labor, Pension Benefit Guaranty Corp. and Environmental Protection Agency.
“Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority,” he wrote.
When laws delegate authority to an agency “consistent with constitutional limits, courts must respect that delegation,” he wrote. “But courts need not and under the APA (Administrative Procedures Act) may not defer to an agency interpretation of the law simply because a statute is ambiguous.”
The Supreme Court acted on two cases involving payment of government observers on fishing boats under federal law: Loper Bright Enterprises et al. vs. Gina Raimondo, in her official capacity as Secretary of Commerce et al. and Relentless Inc. et al. vs. U.S. Department of Commerce et al. Plaintiffs in both cases lost at the federal district court and appeals court levels.
Justice Ketanji Brown Jackson served on the District of Columbia appeals court while the Loper case was being considered. Although she didn't participate in that case, she recused herself from the Supreme Court's discussion of it. She participated in the oral arguments for the Relentless case.
The Loper vote was 6-2, and the Relentless vote was 6-3. The Supreme Court remanded the rulings of both appeals courts “for further proceedings consistent with this opinion,” Roberts wrote.
The full impact of the decision won’t be felt for months until plaintiffs begin challenging regulations in federal district courts and courts of appeals.
"Chevron was a judicial invention that required judges to disregard their statutory duties,” Roberts wrote, referring to the 1984 Supreme Court ruling in Chevron U.S.A. Inc. et al. vs. Natural Resources Defense Council Inc. et al.
The court’s decision represents a victory for businesses, conservative politicians and conservative legal groups that contend regulators have, in effect, become legislators because they craft rules that go beyond the language and intent of federal laws. They say Chevron deference gives too much power to the executive branch and creates uncertainty for businesses when political administrations change.
“Today’s decision is an important course correction that will help create a more predictable and stable regulatory environment,” Suzanne P. Clark, president and CEO of the U.S. Chamber of Commerce, said in a June 28 statement.
“The Supreme Court’s previous deference rule allowed each new presidential administration to advance their political agendas through flip-flopping regulations and not provide consistent rules of the road for businesses to navigate, plan and invest in the future,” she said.
The decision is a blow to Chevron-deference supporters, most notably the federal government, who have said judges lack the technical expertise to interpret complex yet ambiguous laws. They have warned that a weakening or cancelling of Chevron deference allows a single judge to negate public policy. Regulatory expertise is necessary, they add, because Congress often creates laws whose fine print — or lack of it — is subject to multiple interpretations.
“The ability of federal agencies to issue regulations in the public interest is foundational to our democracy, by ensuring that there are sensible guardrails in place that prioritize the public interest and minimize corporate overreach,” Josh Zinner, CEO of the Interfaith Center on Corporate Responsibility said in a June 28 news release. “Without reasonable regulations, corporations can profit from practices that externalize costs onto the public, to the detriment of society.”
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 2023 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.”
Legal fights over allegations of regulatory overreach could be affected by the Supreme Court’s ruling, potentially impacting the public company climate rule, the private fund adviser rule and the proxy-voting rule from the Securities and Exchange Commission as well as Department of Labor’s fiduciary rule and ESG rule.
Dissenting justices warned that overruling Chevron distorts the balance of power between regulators and judges.
“A rule of judicial humility gives way to a rule of judicial hubris,” Justice Elena Kagan wrote. “In recent years, this court has too often taken for itself decision-making authority Congress assigned to agencies.”
Her 33-page dissent was almost as long as Roberts’ 35-page opinion of the majority.
“This Court has long understood Chevron deference to reflect what Congress would want, and so to be rooted in a presumption of legislative intent,” Kagan wrote.
“Congress knows that it does not — in fact cannot — write perfectly complete regulatory statutes,” she added. “It knows that those statutes will inevitably contain ambiguities that some other actor will have to resolve, and gaps that some other actor will have to fill. And it would usually prefer that actor to be the responsible agency, not a court.”
Justice Clarence Thomas, a long-time critic of Chevron deference, applauded the majority’s opinion in a separate concurrence, saying Chevron deference violated the Constitution’s separation of powers.
“It improperly strips courts of judicial power by simultaneously increasing the power of executive agencies,” he wrote. “Under Chevron, a judge must accept an agency’s interpretation of an ambiguous law, even if he thinks another interpretation is correct.”
The fundamental guideline for Chevron deference has been a two-step process. If Congress delegates authority to a regulatory agency to decide an issue and the court determines the law is clear with respect to this issue, then a court must implement congressional intent. However, if a court determines a law is silent or ambiguous on an issue before the court, then the court should defer to the agency if the court decides the interpretation of the law is reasonable.
“Because Chevron in its original, two-step form was so in determinate and sweeping, we have instead been forced to clarify the doctrine again and again,” Roberts wrote. “Our attempts to do so have only added to Chevron’s unworkability, transforming the original two-step into a dizzying breakdance.”
