Chevron ruling aims to boost business for corporate litigation lawyers

The Supreme Court’s decision to overturn decades of precedent on agency authority is a major boost for corporate litigators, motivating companies and industry trade groups to challenge government regulations and galvanizing the interests of the companies that represent them.

Decision of 28 June to annul Chevron The doctrine, which gives regulators the ability to interpret ambiguous rules, also shows how a single high court case can have wide-ranging repercussions across the legal sector.

“In the short term, there will be more chaos, a lot of uncertainty and a lot more litigation,” said Gordon Todd, leader of the regulatory litigation group at Sidley Austin LLP, which was formed last year to capitalize on the growing number of challenges to government regulations.

Sidley is among the large corporate law firms specializing in appellate and regulatory law that companies have long enlisted to help them in Washington. Many of the firms rely on familiar names, such as Noel Francisco of Jones Day, the U.S. attorney general under Trump; Jeff Wall of Sullivan & Cromwell LLP, Francisco’s former deputy; and Eugene Scalia of Gibson Dunn & Crutcher, President Trump’s labor secretary.

The work can be lucrative. “It’s very high stakes and high execution because there’s a lot at stake in these cases,” said Bruce MacEwen, a legal industry consultant at Adam Smith Esq.

The activity of challenging government regulations, even if Chevron intact, has increased in recent years. The number of challenges under the Administrative Procedure Act, which dictates how federal agencies can make rules, has tripled in the past decade, according to a Bloomberg Law analysis.

Some lawyers questioned whether the decision might prompt agencies to voluntarily limit attempts at regulation, and thus reduce the number of opportunities for challenges. But most saw it as a significant change.

“We regularly consult with clients about their options, and part of that calculus is the decision to file a lawsuit,” said James Tysse, a partner at appellate law firm Akin Gump. Chevron “cases in which we decide to file a lawsuit are more likely to end in court proceedings.”

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“A Lot of Legal Challenges”

The precedent set in Chevron USA, Inc. v. Natural Resources Defense Council, Inc.. required judges to defer to the agency’s interpretation of ambiguous rules when writing regulations, provided the rules are reasonable.

The Supreme Court, in its 6-3 majority ruling, rejected this 40-year-old legal framework. Chevron was a “judicial intervention” that required judges to shirk their statutory duties, Chief Justice John Roberts wrote for the majority. “And the only way to ‘ensure that the law does not simply change haphazardly but evolves in a fundamental and understandable way’ is to leave Chevron behind.”

The change “will give greater force to the many legal challenges we’re already seeing,” said Lisa Heinzerling, a professor at Georgetown University Law Center and a former climate policy adviser at the Environmental Protection Agency, while introducing much greater unpredictability.

“When there is such uncertainty, people who have a lot of money to lose are encouraged to take up the challenge,” she added.

Two New England fisheries, one backed by a conservative group that receives funding from sources including billionaires Charles Kochled to the overturning of matters ChevronThey hired Paul Clement, an attorney general under President George W. Bush, and Roman Martinez, a partner at Latham & Watkins LLP who clerked for Justices Roberts and Brett Kavanaugh.

During oral arguments in January, lawyers told the justices that Chevron undermined the courts’ duty while unfairly giving federal agencies an advantage. “There’s no justification for giving the government a bind,” said Clement, a former Kirkland & Ellis LLP partner who now runs a boutique firm.

The court proceedings are already “active”

Overthrow Chevron The decision follows years of hostility toward the administrative state, especially as the Biden administration, seeking to bypass a divided Congress, uses regulatory bodies to implement sweeping regulations covering areas such as Wall Street and the environment.

The Supreme Court did not refer to Chevron test since 2016, and in 2022 it said regulators must get explicit authorization from Congress before introducing regulations with significant economic significance.

The documented skepticism of the administrative state has already influenced the tactics of litigation lawyers, said Ron Levin, a law professor at Washington University in St. Louis.

The U.S. Chamber of Commerce, for example, is involved in cases against 13 federal agencies, an “unprecedented” number for the business lobby, said general counsel Daryl Joseffer.

In April, the Chamber hired Sullivan & Cromwell’s Wall to sue the Federal Trade Commission for allegedly overstepping its authority with a noncompete order for employees. A Texas judge is expected to rule on a request from the Chamber and other groups for a preliminary injunction this week.

Changes in Chevron The estimate will have the greatest impact on “agency and client general counsels,” Levin said. “Because they are in the business of assessing the risks of different courses of action.”

Agencies taking fewer risks in rulemaking due to lack of deference may actually result in fewer challenges. At the same time, the rewards of challenging agency rules in court will be higher.

ChevronThe fall eliminates a “tie-breaker effect” that had tilted regulators’ favor, said Covington & Burling appellate partner Kevin King. “The net result is that agencies will be less likely to prevail in disputes about the meaning of federal statutes.”

Increase in purchases on the forum

Many litigants have already developed strategies for conducting their cases in judicial districts that are more susceptible to administrative law challenges. Chevron “more precisely” defines what judges across the U.S. think about the agency’s regulatory authority, said Erin Webb, a litigation analyst at Bloomberg Law.

“It could add interest to the forum,” Webb said.

At the same time, administrative law experts say the main source of policy challenges will continue to be a long-standing legal test: whether an agency has the statutory authority to implement the regulations it issues.

Gibson Dunn’s Scalia used that framework to successfully fight a new Securities and Exchange Commission rule that requires hedge funds and private equity firms to detail quarterly fees and expenses for investors. The Fifth Circuit on June 5 blocked the rule because it “overstepped” the agency’s statutory authority, striking a blow to the Wall Street regulator’s agenda.

This Chevron This decision appears to strengthen these arguments.

“It will be some time before we see the effects of this decision in the rulemaking process,” said K&L Gates partner Varu Chilakamarri. “But in the future, the agency’s actions will be even more rigorous, and there will likely be more opportunities for the regulated community to challenge agency rules and rulings.”

The case is Loper Bright Enterprises v. Raimondo, U.S., No. 22-451, opinion dated June 28, 2024.