On June 28, 2024,^[1] the Supreme Court overruled the Chevron^[2] doctrine that had guided courts’ review of agency actions the past 40 years. The Chevron doctrine required courts to defer to a federal agency’s reasonable interpretation of an ambiguous statute the agency is charged with administering. This deference allowed federal agencies to fill in the gaps, even when a court might have come to a different interpretation.

After Loper Bright Enterprises v. Raimondo,^[3] courts will “decide legal questions by applying their own judgment.” Courts no longer need to defer to an agency’s interpretation of an ambiguous statute.

Three days after it issued Loper Bright, the Supreme Court changed the statute of limitations for challenging final agency decisions. In Corner Post, Inc. v. Board of Governors of the Federal Reserve System,[4] the Court ruled that the six-year statute of limitations for challenging final agency action does not begin until the challenger is injured by final agency action. Before this decision, the rule had been that the six-year statute of limitations began running on the date of the final agency action. After six years had passed, final agency decisions could truly be final and no longer subject to appeal. The Corner Post opinion allows final agency actions to be challenged indefinitely. When a rule affects a person or business for the first time, they may challenge it in court, even if the agency action took place more than six years prior.

Combined, Loper Bright and Corner Post are likely to result in numerous additional challenges to federal rules, even those that have been previously adjudicated and were thought to be settled law.

What does this mean for the real estate and construction industry?

Even though the real estate and construction industry typically operates within the parameters of state and local laws, the Chevron doctrine has shaped the industry. The industry is subject to a number of federal laws, such as federal contracting requirements, Occupational Safety and Health Administration (OSHA) regulations, the Fair Housing Act, and the Equal Credit Opportunity Act. Agency interpretations of these laws have affected the way the businesses within the industry operate.

Where do we expect to see the biggest effects?

• Multifamily Sector: The multifamily sector falls under the Fair Housing Act, which is a broad statute. HUD has traditionally been given substantial discretion and taken great liberties in setting guidance and bringing enforcement actions. The agency will no longer be given such deference. Multifamily property managers may also have obligations to their tenants that arise under a variety of federal laws, such as those that govern privacy, telecommunications, and use of consumer data. The sector might have to change the way it operates interpretations of these laws change.
• Real Estate Financing: Real estate financing falls under federal fair-lending requirements and the Equal Credit Opportunity Act. Changes in the interpretation of these laws and regulations could result in alterations to the terms under which financing may be offered.
• Government Contracting: After Chevron, there might be more successful legal challenges to agency directives, wherein contractors assert that an agency has not properly interpreted or applied Congressional intent, particularly in the application of Davis-Bacon and other similar statutory requirements with broad requirements are implemented via regulation. Courts may be more likely to strike down or limit an agency’s ability to implement those broad statutes in ways that Congress might not have originally intended or considered.

• Land Use and Zoning Challenges: Less obviously, zoning and land use law also could be affected by Loper Bright. Many jurisdictions have extended Chevron deference to local officials in interpreting their codes. If zoning or land use ordinances are challenged or ambiguous, local agencies might lose deferential review of their decisions after Loper Bright. Land use and zoning decisions could undergo greater scrutiny if challenged. Our Schwabe lawyers have already seen Loper Bright’s effect on arguments that can be made in court to defend a local jurisdiction’s land use or zoning decision. Developers could see more successful challenges to their local entitlements.

What other effects should the industry be aware of?

• Potential for More Developer-Friendly Rulings: With reduced agency deference, courts could interpret federal regulations in a manner that diverges from agency analyses. Certain courts might be inclined to interpret federal regulations in a more business-friendly manner.
• Higher Costs: Companies might have to invest in augmented legal and regulatory expertise to navigate the complex and uncertain regulatory environment.
• Variable Regulatory Standards: The absence of a consistent interpretive framework might result in more variable standards across different jurisdictions, which would create new challenges for companies that operate in multiple regions.
• Uncertainty: As with any change in regulatory regime, Loper Bright has the potential to generate greater uncertainty for businesses. As courts and federal regulators work through suitable application of Loper Bright to future cases and fact patterns, there could be significant volatility until we see further decisions that rely on Loper Bright. Some regard this uncertainty as a long-term problem and fear it will subject federal agency decision-making to endless judicial fiat. Others believe that the decision will increase certainty by reining in arbitrary and ever-shifting federal agency activities. Only time will tell. For the time being, we can expect a bumpy ride.

What should business leaders in real estate and construction do?

Loper Bright and Corner Post offer an opportunity for businesses to examine their own circumstances and attempt to determine whether a specific rule has negative impacts that might warrant a court challenge.

• Examine business operations and standard contract provisions. Consider any decisions based on an interpretation of federal regulations or a final agency action. Are there standard contract provisions that are regularly included in contracts based on such interpretations? Businesses should consider conducting a review to determine which aspects of their operation are governed by federal agency interpretations, so as to identify risks and opportunities to challenge federal regulations that might have a substantial effect on their functions.
• Look for approvals based on final federal agency actions. Did any developments, projects, or contracts require the approval of a federal agency? Before Corner Post, challenges to final agency actions that occurred more than six years ago could not be litigated. Now, however, final agency actions might no longer be final. Businesses should consider assessing the litigation risk and determine whether they ought to take steps to mitigate or prepare for potential risks.
• Keep an eye out for changes to interpretations of federal regulations. Schwabe can help with this. Over the next few weeks, we will send out regular updates that discuss how agencies and courts apply Loper Bright and Corner Post.

[1] Loper Bright Enterprises v. Raimondo, 603 U.S. ___, No. 22–451 (U.S. Jun. 28, 2024), slip op. at 19; https://www.supremecourt.gov/opinions/23pdf/22-451_7m58.pdf.
[2] Chevron , U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984); https://www.law.cornell.edu/supremecourt/text/467/837.
[3] Loper Bright, slip op. at 7–18
[4] 603 U.S. ____, No. 22-1008 (U.S. Jul. 1, 2024); https://www.supremecourt.gov/opinions/23pdf/22-1008new_8n5a.pdf.