The US Supreme Court heard arguments on January 17 in Relentless v. Department of Commerce and Loper Bright Enterprises v. Raimondo. In both cases, a commercial herring fishing company challenged a regulatory requirement that the company cover the costs of an observer required to ride along on the fishing boat to confirm compliance with various regulatory requirements.
The statute imposing the requirement did not specify who should pay—the government or the fishing company. The National Marine Fisheries Service (NMFS) directed by regulation that the fishing company must pay for the observer.
Chevron Deference Recap
The doctrine of Chevron deference, named for the 1984 Court decision that established it, provides that a court will defer to the interpretation of the applicable regulatory agency when a statute is “ambiguous.” Once a statute is determined to be ambiguous, a court must decide if the agency’s view is “reasonable.”
The fishing companies argued that it was time to throw Chevron deference overboard (like a bad herring) because it leads to uncertainty and inconsistency and can give federal agencies more authority than separation of powers should allow them to have.
The US Solicitor General, however, in defending Chevron deference and the NMFS, argued that (1) "chaos" would ensue if Chevron were repealed because litigants in past cases that relied on Chevron deference could come back and seek different outcomes and (2) federal agencies have special insights to help inform and guide courts, especially on technical matters.
The Court’s ruling could come anytime but is likely to be in the spring or early summer. The Court could agree to repeal Chevron deference entirely, leaving the federal courts to use other tools in interpreting ambiguous statutes. The Court could also stop short of repealing it and instead give the lower courts more guidance on how to apply it.
What It Might Mean for Regulations Under ERISA
Although Relentless and Loper Bright do not directly implicate the Employee Retirement Income Security Act (ERISA), a repeal of Chevron deference would almost certainly affect how courts treat regulations under ERISA (as well as scores of other federal laws).
Two current ERISA hot topics that come to mind—and there are certainly others as well—are the proposed Retirement Security Rule (the fiduciary rule) and the Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights rule (ESG rule). If the Court abandons or curtails the Chevron deference, ERISA regulations adopted by the US Department of Labor (DOL) may be more heavily scrutinized, modified, or vacated by federal courts.
The Retirement Security Rule
The DOL recently proposed the Retirement Security Rule, which significantly broadens the “investment advice” definition triggering ERISA fiduciary status and forces investment professionals to rely on the more restrictive conditions of PTE 2020-02. The precursor to the Retirement Security Rule, the 2016 fiduciary rule, was vacated by the US Court of Appeals for the Fifth Circuit. We discussed the Retirement Security Rule when it was first released. The status of Chevron deference could come into play if the Retirement Security Rule finds its way to federal court (which many expect).
The ESG Rule
A DOL regulation on fiduciary duties in the selection of plan investments went into effect in January 2023. Often referred to as the ESG rule, it has been challenged in federal district court by the attorneys general of 26 states. In September 2023, the district court for the Northern District of Texas in State of Utah v. Walsh, held that the DOL did not exceed its authority in adopting the ESG rule and declined to vacate the ESG rule. The plaintiffs urged the court to set aside Chevron deference and find that the DOL exceeded its authority.
The district court declined, however, noting in a footnote that Chevron remains a Supreme Court precedent that a district court is not free to disregard unless and until the Court repeals it.
We will certainly report back when Relentless and Loper Bright are decided. In the meantime, please do not hesitate to reach out to the authors or any member of our employee benefits practice with questions.
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