Background
For 40 years, the Chevron Doctrine has been a prominent precedent in administrative law allowing courts to defer to an agency’s interpretation of an ambiguous statute or regulation. The Chevron Doctrine has been overturned by the Supreme Court, with the duty of interpreting ambiguities now falling to the courts.
Chevron was established in 1984, following the court’s decision in Chevron USA, Inc. v. Natural Resources Defense Council, Inc., permitting federal judges to defer to an agency’s reasonable interpretation of ambiguities within statutes and regulations. If there were unclear terms that potentially had multiple interpretations, the Chevron Doctrine permitted agencies to resolve the ambiguities. Subject to a few exceptions, courts were required to adopt those agency interpretations as long as they were reasonable, within their expertise, and did not contradict what Congress intended.
Critics of Chevron perceived the deference as shifting power from the court to agencies to supersede judicial review. Supporters of Chevron argued that the deference allowed agencies to decide what the ambiguities meant using their expertise. Thus, eliminating potential mistakes in judicial decisions by acknowledging judges’ limited expertise in various domains.
In overturning Chevron, the majority opinion of the Court in Loper Bright Enterprises v. Raimondo emphasized that Chevron was “misguided” and only the courts have the jurisdiction to resolve ambiguities, not the agencies. Therefore, courts will be exercising their “independent judgment” on such matters in accordance with the Administrative Procedure Act (APA), which does not warrant deference to agency interpretations and only permits the courts to “interpret statutory provisions.”
What the Reversal Means for You
With the reversal of Chevron, one can expect more debates in court over the complex regulatory environment in the realm of government contracts. Without Chevron, there are more opportunities for judicial review as there is the possibility of courts scrutinizing agency decisions and interpretations more frequently than before. Instead of relying on an agency’s interpretation, the courts will now be looking at the merits of the matter, likely reviewing more closely ambiguous statutes and regulations, and weighing in with traditional judicial review to resolve disputes over these ambiguities.
What WILL Change
Agencies will now face more difficulty in justifying their interpretation of ambiguous statutes, which in turn may lead to more disputes over regulation compliance and requirements, as well as contract terms. Thus, entities involved in government contracts will have more opportunities to challenge and litigate an agency’s interpretation of ambiguities. Disputes over ambiguous Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulations Supplement (DFARS) clauses, plus some contracts clauses citing regulations, will also be ripe for judicial review.
Federal Acquisition Regulation (FAR):
- Under Brownlee v. Dyncorp, the court found that Chevron was permissible in defining the term “contractor” to include the contractor’s employees.
- The court also found that provisions of the FAR should be afforded Chevron deference.
Armed Services Board of Contract Appeals (ASBCA):
- In Southwest Marine, Inc. v. United States, the ASBCA ruled that the FAR Parts 31.204 and 31.205-47(b) do not include legal costs and do not contradict 10 USCS §2324. Upon appeal, the court agreed that §2324 is ambiguous and applied the Chevron deference to the ASBCA’s interpretation.
Military distribution services:
What Will NOT Change
Though the reversal of Chevron does pose uncertainties, one can expect some areas to remain unchanged. Contractors will need to continue to adhere to existing laws and regulations, such as the FAR and the DFARS. In addition, basic components outlined in contracts will remain non-negotiable, despite potential changes in legal interpretations. Agencies with the jurisdiction to resolve contractual disputes such as the Board of Contract Appeals and the Court of Federal Claims will continue overseeing such matters. These aspects will help maintain stability in government contracts amid potential shifts in administrative interpretation.
Many courts had already ceased to follow the Chevron Doctrine for many years, with the Supreme Court not deferring to an agency’s interpretation since 2016. Nonetheless, there were instances where courts found the Chevron deference was unwarranted, therefore one can expect those rulings to remain unchanged.
International Traffic in Arms Regulations (ITAR):
- When statutes are deemed unambiguous Chevron does not apply. In Defense Distributed v. U.S. Dep't of State, in determining whether online downloads by foreign nationals could be deemed an export of technical data, the court found that the term “export” is not ambiguous and should be defined by its most general meaning.
Government Contracts:
- Chevron is not warranted in instances when a law could cause serious constitutional problems. The courts will then interpret the law to avoid such issues. (Defense Distributed v. U.S. Dep't of State)
- In instances where multiple agencies have the responsibility to administer a statute, Chevron is not permissible.
- In Mann v. United States, the United States Court of Appeals for the Federal Circuit found that when a party has a financial interest, Chevron is not permissible.
- In Engineered Demolition, Inc. v. United States, despite the FAR ordinarily being entitled to the Chevron deference, the court held, as overbroad and invalid the last sentence in the definition of “defective certification” within FAR subpart 33.201 where ambiguous language was inconsistent with legislative history (resulting in a contractor to not certify two separate claims each below the $100K threshold), and thus the United States Army Corps of Engineers was not entitled to deference under Chevron.
- In CBY Design Builders v. United States, Chevron deference was not permitted in relation to the Government Accountability Office’s (GAO) opinion as it was deemed “inappropriate” when it concerns an interpretation of a solicitation. The GAO’s opinion was the only one presented to the Court, which overlooked the possibility of multiple interpretations, thus hindering the thoroughness of the judicial review process.
- In Kingdomware Techs., Inc. v. United States, the court denied Kingdomware’s interpretation of the statute 38 U.S.C.S §8127 because it found no ambiguity where Congress clearly spoke to the authority of the Secretary of the Department of Veterans Affairs to set goals for contracts for Veteran Owned Small Businesses.
- In the Appeal of Honeywell Int’l, Inc., Honeywell did not identify a relevant ambiguity in the Energy Savings Performance Contracts statute’s definition of the term “energy savings,” therefore Chevron deference was not permitted.
Actions You Can Take to Navigate the Uncertainties
Stay up to date on statutory provisions and regulations, key interpretations of the same in cases, and seek legal advice to navigate more effectively the uncertainties post-Chevron.
