How Might Agencies and Courts React After Supreme Court Upends 40 Years of Chevron Deference?

On June 28, 2024, the Supreme Court handed down its decision in Loper Bright v. Raimondo.[1] In this long-anticipated ruling, the Court overruled a long-held doctrine of administrative law established in Chevron U.S.A., Inc. v. Nat. Res. Def. Council, 467 U.S. 837 (1984). In doing so, the Court ended four decades of deference by courts to agency interpretations of ambiguities in statutes the agencies are charged with implementing, concluding that courts, not agencies, have the power to interpret such statutes. Decisions relying on Chevron remain good law at least for now, but Chevron's demise will affect ongoing and future challenges to agency rules and could also result in new challenges to existing rules long thought final. Loper Bright will have a broad impact on administrative law and regulatory practice across nearly all industries as most businesses are subject to some federal regulation, and ambiguities in regulatory statutes are common.

Chevron Primer

Chevron established a two-step framework that required courts to defer to a federal agency's interpretation of an ambiguous federal statute in the course of a rulemaking or adjudication. At step one, the court would assess whether Congress has directly spoken to the precise question at issue. If congressional intent was "clear," that would end the inquiry. But if the statute was silent or ambiguous, the court would take Chevron's second step and defer to the agency's interpretation as long as it was a permissible construction of the statute, even if not "the reading the court would have reached if the question initially had arisen in a judicial proceeding."

A third, preliminary step was added in a later case, United States v. Mead Corporation, 533 U.S. 218 (2001). Under Chevron "step zero," Chevron step one or two deference would apply only when the agency's interpretation was promulgated in the exercise of authority delegated by Congress to the agency to make rules carrying the force of law. Notably, Chevron deference would be unwarranted for a procedurally defective regulation, such as when the agency did not follow the correct procedures in issuing it.[2]

Background on Loper Bright and Relentless

Loper Bright and its companion case, Relentless, raised identical challenges to a rule promulgated under the Magnuson-Stevens Fishery Conservation and Management Act (MSA) by the National Marine Fisheries Service (NMFS) that required certain fishing boat operators to pay for third-party, private observers on their vessels to conduct federally mandated compliance checks. In each case, petitioners argued that the rule was inconsistent with the MSA, which does not explicitly require fishing boat operators to pay for monitors.

In Loper Bright, the district court granted summary judgment to the government, holding that the statute authorized the rule while noting that even if the petitioners had identified an ambiguity in the statutory text, deference to the agency's interpretation would be warranted under Chevron. The D.C. Circuit affirmed, concluding that it was not "wholly unambiguous" whether the agency may require the fishermen to pay for observers. Because there was "some question" as to Congress's intent, the court deferred to the agency's interpretation as a "reasonable" construction of the statute. The Relentless petitioners received similar treatment both in the district court, which relied on Chevron in granting summary judgment to the government, and in the First Circuit, which relied on Chevron to uphold the agency's interpretation of the statute. The Supreme Court granted certiorari in both cases only as to whether Chevron should be overruled or clarified—not on any question related to the correct interpretation of the MSA.

A Tombstone for Chevron Deference

In Loper Bright, an opinion by Chief Justice Roberts, the Court disavowed Chevron's deferential interpretive methodology, even as it expressly preserved―at least for now―the specific substantive rulings in past cases that relied on Chevron deference. That is, the Supreme Court has buried the Chevron two-step and placed a "tombstone" on it, as long sought by Justice Gorsuch. But the specific holdings of prior cases that applied Chevron (including Chevron itself) remain in force—at least for now.

Petitioners and amici raised a wide range of arguments against Chevron. In its ruling, the Court relied most heavily on statutory and historical arguments. The majority focused on Chevron's inconsistency with the Administrative Procedures Act (APA), which mandates that "[t]o the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action." The Court cited Morton Salt for the proposition that the APA was "a check upon administrators whose zeal might otherwise have carried them to excesses not contemplated in legislation creating their offices," and interpreted the APA as codifying the framers' vision, expressed in Federalist 78, that interpretation of laws is the duty of the federal courts. In constitutional terms, this vision is embodied in Article III, which vests the judicial power in the courts, as confirmed by Chief Justice Marshall's famous declaration in Marbury v. Madison that "[i]t is emphatically the province and duty of the judicial department to say what the law is." In the words of the Court, "[t]he APA thus codifies for agency cases the unremarkable, yet elemental proposition reflected by judicial practice dating back to Marbury: that courts decide legal questions by applying their own judgment."

Having engaged in a historically informed discussion of Article III as background, the Court pivoted to a discussion of how the APA's direction that courts must interpret the law conformed with prior judicial practice, emphasizing the conflict between what the APA expressly requires and the procedures established by Chevron. Notably on this point, while the majority focused on the APA, Justice Thomas's concurrence emphasized that Chevron deference violated the "Constitution's separation of powers," embracing arguments that were central to the petitioners' briefing.

The majority opinion traces cases from Justice Story's tenure in the early 1800s through the 1940s that recognize the judiciary's duty to exercise independent judgment in interpreting federal statutes, emphasizing that the federal judiciary traditionally accords "due respect" for—but not deference to—statutory interpretations made by the executive branch. This tradition, the Court states, is reflected in Skidmore v. Swift & Co., which held that "interpretations and opinions" of an agency, made in pursuance of official duty and "based upon more specialized experience," "constitute a body of experience and informed judgment" that courts can use for guidance even on legal questions. But Skidmore made clear that "[t]he weight of such a judgment in a particular case [would] depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control."

In examining pre-APA cases, the Court acknowledged that New Deal-era adjudications often deferred to agency determinations on questions of fact, but not on questions of law—with some exceptions where the Court found that a statute empowered an agency to decide the breadth of particular terms. The Court contrasted this deferential review of "fact-bound determinations" with the Court's "longstanding judicial approach to questions of law"—such as statutory interpretation.

In its brief to the Court, the government tried to reconcile Chevron with Article III and the APA by relying on the idea, elaborated in cases under Chevron, that statutory silence or ambiguity is an implicit delegation of authority by Congress to a federal agency. It argued that if Article III would not allow courts to disregard an express command of Congress giving an agency the authority to define a term, then Article III should allow for implicit delegation as well, stating that "Article III draws no distinction between an express or implied legislative command." The government also argued that Chevron was consistent with the APA because while the APA requires courts to decide "all relevant questions of law" and "interpret constitutional and statutory provisions," it does not "specify the standard of review a court should use" or foreclose reviewing an "agency's reading for reasonableness." The government further argued that Chevron deference is beneficial because it promotes uniformity in decisions, harnesses the technical expertise of agencies, and keeps the courts out of policy making, and expressed concern that courts lack agencies' subject matter expertise and are ill-suited to assess the policy considerations that often underpin statutory interpretation.

In rejecting these arguments, the Court observed that Chevron "did not even bother to cite" the APA. The Court also noted that members of the Court including Justice Kagan, the author of the dissent in Loper Bright, have recognized that Chevron's presumption that statutory ambiguities amount to congressional delegation is a fiction. Moreover, the Court held that de novo review is the traditional standard for questions of law and that the APA should therefore be understood as codifying that standard, noting that "some things go without saying" even in legislation.

The Court further explained that agency expertise on technical subjects doesn't save Chevron because courts, not agencies, have the relevant expertise—namely, expertise in statutory interpretation. In the Court's words: "Chevron's presumption is misguided because agencies have no special competence in resolving statutory ambiguities. Courts do." Moreover, the Court pointed out that courts routinely interpret highly technical statutes in other contexts and, in effect, noted that courts will still get the benefit of hearing agencies' interpretation of statutes (in their briefing in court) without giving agencies the final word. The Court rejected the idea that statutory interpretation is the equivalent of policymaking. The opinion notes that ambiguities exist in other statutes outside the context of agency regulation, suggesting that the involvement of an agency doesn't transform interpretation into policymaking. In this area, the Chief Justice's opinion harkens back to his confirmation hearing statement that his role is that of an umpire calling the balls and strikes.

One reason courts are reluctant to overrule longstanding precedent is that parties may have relied on the precedent in making investment and other decisions. In this case, petitioners argued that there are no concrete reliance interests favoring Chevron deference, claiming that it is instead "reliance-destroying" because it allows agencies to reinterpret statutes and alter rules with each new administration. The Court agreed, referencing, as a particularly egregious example, the Federal Communications Commission's numerous flip-flops regarding the classification of broadband internet access service under the Communications Act.

Petitioners also argued that ordinary stare decisis considerations did not counsel against overruling Chevron's "interpretative methodology." The Court again agreed, finding that such considerations actually favored overruling Chevron.

Immediate Impacts in the Regulatory and Appellate Context

With Chevron gone, what remains is Skidmore deference. Under Skidmore, an agency's interpretation of an ambiguous statute has only the "power to persuade," not the "power to control." "Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires. Careful attention to the judgment of the Executive Branch may help inform that inquiry. 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."

This means that federal agencies left with only the "power to persuade" must convince reviewing courts not that their interpretation of a statute is reasonable but that it is right. The Court specifically said that the job of the courts is to determine the "best" interpretation of an ambiguous statute. Agencies will need to earn the courts' agreement based on the factors noted in Skidmore, such as the thoroughness evident in the agency's consideration, the validity of its reasoning, and the interpretation's consistency with earlier and later pronouncements. By overturning Chevron in favor of Skidmore, Loper Bright will have several lasting impacts on agencies and appellant litigators alike.

Although this outcome was likely anticipated by federal agencies, they may now need to exercise more caution than in the past in issuing new rules that rely on interpretating statutes (or taking other actions that rely on doing so) to ensure that their reasoning will survive judicial review. This is likely to have several effects:

• The overturning of Chevron will likely significantly slow down agencies' rulemaking and administrative processes as they work to ensure that their orders are as persuasive as possible.
• Agencies may become reluctant to alter their interpretation of a statute when the language of the statute itself has not changed as consistency is one of the key factors enumerated in Skidmore. Chevron, by contrast, had allowed agencies to "change course even when Congress has given them no power to do so."
• Agencies may take the hint proffered by Justice Gorsuch in his concurrence regarding the importance of aligning statutory interpretation with congressional intent by providing analysis that is more focused on the statutory text, its linguistic context, various canons of statutory construction, and other evidence of intent.
• Agencies will also need to take an additional step in the limited circumstances where Congress has expressly authorized a degree of discretion to an agency. In such cases, Loper Bright requires the agency to demonstrate that it is acting within that delegated discretion. This is most relevant with respect to statutes that expressly delegate authority to interpret a given statutory term to the agency, statutes that empower an agency to prescribe rules to "fill up the details" of a statutory scheme or engage in regulatory oversight subject to statutory language that "leaves agencies with flexibility."
  
  

Considering all of this, litigators can expect to see statutory interpretation by agencies that aligns more with standard judicial practices and standards.

As to past rules and actions that have survived judicial review by virtue of Chevron, the Court in Loper Bright expressly states that those decisions remain good law. Many administrative lawyers—including us—are far less sure that this will be true in all instances, however. It is possible, for example, that courts will review new challenges to old rules in litigation arising from enforcement actions by agencies whose interpretations previously survived judicial review under Chevron. And on July 1, the Supreme Court separately held in Corner Post v. Board of Governors, No. 22-1008 (July 1, 2024), that the statute of limitations to bring APA challenges to certain agency actions can be tolled indefinitely with respect to entities that were not previously affected by the agency action. This may allow for new challenges—in different circuits—to rules that had previously been upheld based on Chevron deference.[3]

Takeaways

Post-Chevron, courts and agencies will have to create new precedent that provides granular, industry-tailored insights into the nature of an agency's statutory authority as applied to particular cases. In turn, the contours of a range of agency-established compliance obligations will become sharper as agencies digest Loper Bright. Successfully navigating this new regulatory landscape will be crucially dependent on parties and their counsel having a deep, sophisticated understanding of how a regulated industry works in practical terms and what Congress said about how each industry should be regulated. Counsel and the businesses they support are also well advised to monitor ongoing agency enforcement activity to identify situations where current regulatory practices may not survive under Loper Bright. Burdensome and expensive regulations that would have been (or may already have been) upheld under Chevron may now be invalid—which means that the businesses subject to them may find litigation to avoid expensive compliance activities to be warranted.

Our team at Davis Wright Tremaine has expert and experienced counsel in the regulatory regimes affecting a wide range of industries. Please feel free to reach out to discuss the impact of Loper Bright on any aspect of your regulatory compliance issues.