Supreme Court Overrules Chevron, Limiting the Regulatory Power of Federal Agencies.

CHEVRON OVERTURNED

Chevron Holding and History

In Chevron, SCOTUS upheld as reasonable an EPA regulation that interpreted the Clean Air Act defining the term “stationary source” to mean whole industrial plants. [1] Chevron established a deferential framework for courts to review agency interpretations of ambiguous statutes. Under Chevron, courts are instructed to perform a two-part analysis:

1. Determine whether Congress has directly spoken to the precise question at issue. Chevron deference is only applicable if Congress has granted the agency authority to act and there is ambiguity in the relevant statute.
2. The agency interpretation receives deference as long as the actions are based on a “permissible construction” of the statute. Chevron, 467 U.S. at 843. [2]

SCOTUS reasoned that agencies had more expertise to implement statutes through regulatory decisions: “Judges are not experts in the field, and are not part of either political branch of government.” Supporters of Chevron, including the Biden administration, argue that agencies have the expertise to address ambiguities in statutes.[3]

SCOTUS hasn’t relied on Chevron since 2016, but lower courts regularly have.[4] Backlash against the “administrative state” has been led by industries and political conservatives. Critics of Chevron argue that judges use it to rubber-stamp agency decisions rather than using their own judgment to interpret the law. Alito, Gorsuch, Kavanaugh, and Thomas have all expressed doubt over Chevron in the past.[5]

Loper Bright and Relentless

A 2020 National Marine Fisheries Service regulation required owners of boats in the Atlantic herring fishery to pay for costly data monitors. Operators in New Jersey and Rhode Island claimed that the NMFS lacked the statutory authority to mandate industry-funded monitoring. The cases also asked the court to overturn Chevron. The D.C. and First Circuits upheld the regulation as a reasonable interpretation of law, citing Chevron.[6] In oral arguments, the Solicitor General argued that there was not a “truly extraordinary justification” to violate stare decisis.[7] On the other hand, Kavanaugh said that Chevron creates a shock to the system with every change in administration.[8]

Holding

The Court issued a 6-3 decision, with Roberts writing for the majority.[9] He wrote that Chevron “defies the command of” the Administrative Procedure Act—which says that courts should interpret statutes. Chevron told courts to “ignore, not follow, ‘the reading the court would have reached’ had it exercised its independent judgment” and “demands that courts mechanically afford binding deference to agency interpretations.” He also noted that courts use Chevron to make these decisions and future courts rely on these cases, leading to decreasing levels of judicial review over time.

" The Administrative Procedure Act requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the law simply because a statute is ambiguous; Chevron is overruled."

In the dissent, Kagan wrote that the decision will “likely cause large-scale disruption.” She wrote that the majority’s decision is based on a “bald assertion of judicial authority. The majority disdains restraint, and grasps for power.”

Implications

Roberts stated that past cases relying on Chevron are not at issue, though opponents believe there will be a flood of litigation.[10] In the dissent, Justice Kagan wrote, “The majority’s decision today will cause a massive shock to the legal system, ‘casting doubt on many settled constructions’ of statutes and threatening the interests of many parties who have relied on them for years.”[11]

Supporters of Chevron believe this decision will make it more difficult for agencies to implement statutes.[12] They may err toward interpreting statutes in a way that can be supported explicitly by statutory text. In anticipation of judicial review, agencies’ general counsels may by more involved in developing regulations.[13]

Congress may have to be more specific in statutes to outline agency authority and to delegate fewer details to agencies. It may be less able to avoid political debate by pushing certain nuances down to the agencies to address.[14] 

Justice Jackson stated in oral arguments that she believes policy decisions, such as defining terms in a statute, will fall to courts now. [15] Judges may feel more pressure to justify their statutory constructions and to avoid the appearance of bias based on their own policy preferences. Dockets may also increase as regulated parties see a greater chance of overturning agency regulations and decisions.[16]

Other Cases Affecting Agency Discretion

On Thursday, SCOTUS announced its 6-3 opinion in Securities and Exchange Commission v. Jarkesy.[17] A hedge fund manager challenged SEC’s authority to seek civil penalties through its “in-house” administrative proceedings under the 2010 Dodd-Frank Act. The Fifth Circuit found that it violated his 7^th Amendment right to trial by jury. SCOTUS agreed, finding that matters concerning “private rights” cannot be removed from Article III courts, and if a proceeding is “in the nature of action at common law, then the matter presumptively concerns private rights, and adjudication by an Article III court is mandatory.” This decision could affect the way other agencies’ conduct in-house enforcement actions, especially when an agency pursues claims stemming from the common law, or when seeking civil penalties designed to deter violations. [18] In her dissent, Justice Sotomayor expressed concern for the agencies that are only legislatively enabled to seek civil penalties through in-house administrative proceedings and not through the courts. These types of proceedings may be determined more slowly as they are shifted to federal courts.[19]