The U.S. Supreme Court’s recent decision to overrule its 1984 Chevron opinion means that when reviewing agency interpretation of a statute, courts now must exercise their independent judgment as to whether an agency acted within its statutory authority.
While courts need to respect statutory delegation to agencies, they still must ensure that the agency acts within those limits. Courts may not defer to an agency interpretation of a statute simply because it is ambiguous.
Businesses and individuals subject to federal regulations should expect years of uncertainty as the scope and enforceability of those regulations are challenged in courts across the country. Clients should consider whether to raise their own challenges or appeals to those regulations as well. Regardless, it will be critical to follow those various court interpretations closely, as they may have a confusing effect on business going forward.
The decision came in the landmark cases of Loper Bright Enterprises, et al. v. Raimondo, et al. and Relentless, Inc., et al. v. Department of Commerce, et al. It was handed down on Friday, June 28, 2024, overruling Chevron U.S.A. Inc. v. National Resources Defense Council, Inc., 467 U.S. 837 (1984).
However, the Court declined to retroactively impose its ruling in Loper Bright, explaining that cases decided previously by the Court relying on Chevron remain good law despite the Court now changing the interpretative methodology.
What Sunk Chevron: I’m Not Paying for These Observers on My Boat
Chevron’s demise begins at sea. For fifty years, the United States has been reclaiming coastal waters from overfishing by international vessels, bolstering our nation’s “exclusive economic zone.” These efforts are governed by the Magnuson-Stevens Fishery Conservation and Management Act, which is administered by a federal agency known as the National Marine Fisheries Service. Managing fish populations relies on data collected by observers stationed on private fishing boats. The statute allows the costs of those observers to be charged back to private fishing operations, but Atlantic herring fishermen are not expressly listed as one of them. Nevertheless, the agency promulgated a rule requiring Atlantic herring fisheries to pay for observers as well.
The Loper Bright and Relentless appeals concern whether Atlantic herring fishermen are required to bear these costs of observers, which as you might expect, is expensive. The petitioners argued that the statute did not authorize the agency to force them to pay for these observers. The agency pushed back, insisting that the rule represented a permissible interpretation of the statute. Applying Chevron, the circuit courts below sided with the agency. The end result of both circuit decisions was affirmation of the agency’s interpretation of the statute, requiring these fishermen in the Atlantic herring fishery to pay for the costs of observers.
Where We Were: Agency Deference
As explained by Chief Justice Roberts, who wrote the majority opinion, Chevron deference required courts to use a two-part analysis when interpreting statutes administered by a federal agency. A court determined, first, whether Congress had spoken on the issue — and whether congressional intent was “clear.” If the answer to that question was yes, then the inquiry proceeded no further. If the statute was silent or ambiguous on the issue, however, then the court moved to the second step and deferred to the agency’s interpretation — if that was based on permissible statutory construction.
The Court noted that Chevron had been significantly refined through the years, resulting in a “byzantine set of preconditions and exceptions.” For instance, Chevron deference was only due if the agency engaged in notice-and-comment rulemaking or formal adjudication. There were also other instances where Chevron did not apply, such as in matters of certain economic and political significance, agency interpretations of judicial review provisions, or statutory schemes not administered by the agency seeking deference.
The Reasoning: Leave Legal Interpretation to Judges
The Court began with the plain text of the Administrative Procedure Act, which requires that the judicial branch — not administrative agencies — decide legal questions. Further, the Court noted, Section 706 of the APA “prescribes no deferential standard for courts to employ in answering [ ] legal questions,” though it does establish deference to other agency decisions like policymaking and factfinding. But agencies only derive their rule-making power from express delegation by Congress. The Court found no reason to read a statutory ambiguity as Congress implicitly delegating interpretive responsibility to an agency, relieving courts of their obligation to independently interpret the statute.
Turning then to the legislative history of the APA, the Court cited to House and Senate Reports on the APA, which both provided that courts — not agencies — are the ones to decide questions of law. It bolstered this view through references to legislators and the position of the Department of Justice at the time. Finally, the majority concluded this analysis with references to several scholars, also of the time of the APA’s enactment, all of whom echoed positions in support of this proposition that only courts are to answer questions of law.
In rounding out its analysis, the Court concluded that “the role of the reviewing court under the APA is, as always, to independently interpret the statute and effectuate the will of Congress subject to constitutional limits.” By “fixing the boundaries of the delegated authority […] and ensuring the agency has engaged in reasoned decisionmaking within those boundaries […] a court upholds the traditional conception of the judicial function that the APA adopts.” After all, “agencies have no special competence in resolving statutory ambiguities. Courts do.”
Addressing points by the government and the dissent, the majority acknowledged that agencies often have helpful technical expertise in the subject matter covered by the statute. And going forward, courts may very well find agencies’ explanations persuasive. But Chevron reached too far, requiring courts to defer to agencies even when their interpretation of statutes went well beyond their area of expertise.
Finally, making quick work of any lingering question about stare decisis, the majority described Chevron as undermining the rule of law values fundamental to precedent. It noted the absence of any prior reasoning that aligned Chevron deference with the APA. Emphasizing what it considered the unworkable nature of Chevron, the Court highlighted that the understanding and definition of “ambiguous” varies and invites different results in different cases. Moreover, as the Court pointed out, statutory interpretation does not change because an agency is involved — the best meaning can, and should, be decided by a court using traditional canons of statutory interpretation.
Chevron, the Court concluded, has “become an impediment, rather than an aid, to accomplishing the basic judicial task of saying what the law is.” In the Court’s view, Loper Bright removes that obstacle by eliminating deference to agency interpretation and returning the job of answering questions of law to the courts.
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