On June 28, 2024, the Supreme Court decided Loper Bright Enterprises v. Raimondo, overturning its own 40-year-old Chevron v. Natural Resources Defense Council decision. In Chevron, the Supreme Court articulated the so-called Chevron doctrine, which provided that if a federal statute is silent or ambiguous on an issue, courts would defer to the reasonable interpretation of the federal agency charged with administering the statute.
In Loper, the Supreme Court reversed course, holding in a 6-3 decision that the Chevron doctrine is incompatible with Section 706 of the Administrative Procedure Act (APA), which specifies that courts will decide “all relevant questions of law” arising on review of agency action. The Loper majority held that, while the APA mandates deferential judicial review of agency policymaking and factfinding, such deference does not extend to questions of statutory interpretation.
Thus, moving forward, Chevron deference is out, and courts will exercise their independent judgment to interpret ambiguous statutes.
What Does This Mean for the Industry?
Prior cases that relied on the Chevron doctrine are not overruled. The Court in Loper expressly stated that it is not overturning previous cases that relied on Chevron. This means that — despite this new decision — parties may not challenge previously decided cases applying Chevron deference based on Loper alone.
A statute that unambiguously addresses an issue remains controlling. While many commentators have characterized Loper as ushering in a sea change, the decision has no impact where the statute in question is unambiguous. The 2012 Supreme Court decision in Freeman v. Quicken Loans is illustrative. In Freeman, the Court granted certiorari to address the meaning of Section 8(b) of the federal Real Estate Settlement Procedures Act (RESPA). The RESPA regulator had long interpreted that law as broadly prohibiting any unearned settlement service fee, and some lower courts had deferred to that view, believing the statute was ambiguous. But the Supreme Court disagreed. In a unanimous opinion authored by Justice Scalia, the Supreme Court held that RESPA unambiguously requires that a charge for settlement services must be divided between two or more people to be actionable under Section 8(b). The Freeman decision did not consider Chevron deference because the statute itself was clear — a result that would be the same today under Loper.
Loper changes how courts will consider agency actions when there is a dispute over an ambiguous statute, but questions persist about the degree of real change we will see. While the Court’s decision to abandon Chevron deference represents a significant doctrinal change, the degree of shift this will cause remains to be seen. The Loper majority stated that the Supreme Court has cited to Chevron very little in the last five years, arguing that thedoctrine has accumulated such a “byzantine set of preconditions and exceptions” that it had become unworkable and obsolete. Yetlower courts have continued to cite to Chevron often, and studies have estimated that the agency has prevailed in most instances where the doctrine has been applied. This leaves questions about the degree of change that will flow from the Loper mandate that courts retain independent judgment to determine the “best reading of a statute,” applying principles like canons of construction and legislative history.
Likewise, questions remain about the extent to which courts will continue to be guided by agency views. Following Loper, courts are permitted — but not required — to use agency interpretations for guidance as provided in the 1944 Supreme Court case Skidmore v. Swift & Co. and may review contemporaneous interpretations of the statue to the statute’s creation, or otherwise consistent or longstanding interpretations of a statute. Moreover, the Loper majority, citing Michigan v. EPA, states that, if congressional intent indicates that an agency should have discretionary power over an issue, then the court must consider whether the agency has engaged in “reasoned decision making.” The Loper dissenting justices argued that this analysis is little different from the first step of Chevron analysis, which required courts to consider whether a statute was ambiguous. A court can move to step two only if a statute contained an ambiguity regarding whether the agency’s interpretation was permissible under the statute.
Additionally, as Justice Kagan noted in her Loper dissent, the Court in 2019 affirmed Auer v. Robins, which requires judicial deference to an agency’s interpretation when it interprets its own regulation. “Auer deference,” which initially required that an agency’s interpretation controls “unless plainly erroneous or inconsistent with the regulation, was upheld and narrowed by the Court in Kisor v. Wilkie. In affirming Auer deference, the Court asserted that a federal court must consider certain factors in determining whether to apply deference. Specifically, courts must consider: (1) the regulation interpreted by the agency is “genuinely ambiguous;” (2) the agency’s interpretation of the regulation must be reasonable; and (3) the agency’s interpretation is entitled to Auer deference based on (a) the interpretation is authoritative and official; (b) the interpretation implicates the agency’s substantive expertise; and (c) the interpretation is fair and would not cause “unfair surprise” with regulated entities. Justice Kagan asserts that the case in Chevron is “at least as strong” as Auer v. Robins, and the overturning of Chevron will cause a “massive shock” to the legal system and settled decisions.
If some courts consider an agency’s interpretation of an ambiguous issue under Skidmore while others disagree with and disregard the agency’s reasoning, we could see inconsistent interpretations of federal statutes. Additionally, judges across the country — many of whom may not have the substantive expertise relevant to certain regulatory schemes, particularly as it relates to highly regulated industries — may hold completely different interpretations for the exact same statutes or regulations. This poses risk and uncertainty for those regulated entities that operate across jurisdictions.
Practical effects must be considered as much as doctrinal debate. In the wake of Loper, we can expect to see more challenges to agency enforcement actions, with parties emboldened to argue that courts are now at liberty to reexamine and overturn prior agency interpretations. This is even more likely in instances where the federal agency has taken novel and aggressive interpretations of law.
We can also expect to see increased challenges to agency rules and regulations, especially in areas not specifically addressed by Congress or the statute. Regulators such as the Consumer Financial Protection Bureau have relied heavily on informal regulatory guidance that is not subject to notice and comment rulemaking or judicial review. Will the Loper decision sway the agency’s enforcement priorities or approach? Agencies may also take the decision into account in their rulemaking process as they work to create regulations that are more likely to withstand challenge.
In addition, the Loper decision may affect legislative drafting, pushing Congress to avoid textual ambiguities that previously would have been resolved by administrative agencies. Drafters can no longer assume that ambiguous statutory language will be conclusively interpreted by agencies in a friendly administration. Congress may also opt to more clearly delegate interpretive authority to implementing agencies to remove textual ambiguities that would fall on the courts to resolve.
In the meantime, on a day-to-day basis, regulated entities are unlikely to depart significantly from existing policies and procedures, many of which have been developed based on agency guidance. For businesses, regulatory certainty and maintaining productive relationships with reasonable regulators are important.
Takeaways
While Loper ushers in a new chapter in administrative law, its overall impact remains to be seen and will require ongoing attention and analysis. In the meantime, industry participants should continue to be mindful of existing agency guidance while also considering opportunities to challenge extreme agency positions, whether because the statute is unambiguously to the contrary or because the agency’s view is not the “best reading of a statute.”
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