Legal expert says Loper Bright and Corner Post aren’t the winners the companies think they are

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Given the importance of predictability in corporate governance, companies will likely rue the day when the U.S. Supreme Court stripped agencies of their rulemaking authority in Loper Bright and struck down the statute of limitations provision in Corner Post, Todd Baker of Columbia Law School says: on the Blue Sky school blog.

On the surface, the decisions to replace court opinions with agency expertise and extend the window in which companies can sue over rules they don’t like are good for business. But the end result will be prolonged uncertainty about what the rules are—what Baker calls a business killer in a rapidly changing world.

“In many cases, knowledge of the rules is more important for effective business planning than the content of the specific rules,” says Baker, a senior fellow at the Richard Paul Richman Center for Business, Law and Public Policy at Columbia Business School and Columbia Law School. Baker also served as director of corporate strategy and development for three large banks.

“Businesses need to think ahead and make decisions based on credible assessments of the likely future legal and regulatory environment in which they will compete,” he says. “Strategic and operational plans need to be implemented, with financial support and management incentives designed to support the desired outcomes. Businesses rely on and benefit from predictability.”

As a result of the court’s decision in the Loper Bright case, which dispelled Chevron Respect When it comes to administrative interpretation of the law, no significant regulatory rule becomes final without years of federal court litigation and court decisions at multiple levels, likely including a trip to the Supreme Court.

And because of the Corner Post decision, which Baker calls the more significant of the two decisions, individuals and companies can challenge any final rule, no matter how many years or decades it has been in effect, for six years after they allegedly suffered harm from it. That means the rule could, in practice, never be finalized.

“In this new world of administrative law,” he says, “it can take five years or more for a regulatory action to work its way through an overburdened court system before it becomes technically final and binding. If interested parties find or create a new plaintiff in the years that follow, the ‘final’ rule can still be challenged under Corner Post on a variety of grounds. No matter what the subject matter—environmental law, securities law, Internet regulation, labor law, consumer protection, banking law—it is conceivable that some administrative rules will never have the force of settled law.”

The growing polarization of the courts contributes to uncertainty.

“For reasons that are hard to understand, lobbyists and other opponents of the so-called ‘administrative state’ and regulatory overgrowth don’t seem concerned about what the new rulemaking model will mean for them when the political worm turns and agencies start issuing regulations that companies actually like,” he says. “They seem to forget that competitors and public interest groups will have the same power to delay litigation and prevent any ‘good for me’ regulations from becoming reliably final.”

It’s worth remembering that the decision that led to Chevron’s concessions some 40 years ago was a lawsuit filed by environmentalists over an air-quality standard set by the business-friendly EPA. A lower court had struck down the EPA standard and replaced it with something more stringent. Chevron appealed and won when the Supreme Court found that the lower court had erred in substituting its ruling for the EPA’s because the agency’s interpretation of the law was reasonable.

“At some point, companies will recognize that throwing sand in the wheels of regulatory writing will end up hurting as much as helping,” he says. “Here’s a prediction: Within a decade, corporate America will be begging for the respectability of Chevron or something like it. It won’t be long before CEOs realize that five or more years of uncertainty about the validity of anything the SEC, FTC, FCC, CFPB, OCC, EPA, NLRB, HHS or any other agency does makes strategic and investment decisions for corporations incredibly difficult.”