Chevron Doctrine Debunked—What In-House Counsel Needs to Know

On June 28, 2024, the United States Supreme Court issued a landmark ruling in the case Loper Bright Enterprises v. Raimondo AND Relentless Inc. v. Department of Commerce (collectively referred to as “Loper Light“), knocking over the 40-year-old The Chevron Doctrine established in the case of Chevron USA v. Natural Resources Defense Council Inc. (“Chevron“). The 6-3 majority decision, authored by Chief Justice John Roberts, held that, under Administrative Procedure Act (“APA”) courts must exercise independent judgment in deciding whether an agency acted within its statutory authority. This ruling disrupts the administrative law landscape and, in most cases, eliminates the deference traditionally accorded to various federal regulations.

The new terms are particularly important for in-house lawyers and the companies they represent.

What was Chevron?

In 1984 Chevron decision, the Court established the “Chevron” doctrine, a legal principle that required courts to defer to a federal agency’s interpretation of an ambiguous statute that it administers. The Court created a two-step framework:

First, courts must determine whether Congress’s intent on the matter was clear; if the statute is found to be ambiguous, then

Second, courts should defer to agency interpretations so long as they are reasonable. This doctrine has significantly empowered federal agencies, giving them considerable latitude in interpreting and implementing ambiguous statutory provisions (of which there are many), which has given a big thumbs-up when businesses have gone up against agencies.

What happened?

Last month The court turned 40 years of law upside downrejecting the practice of courts deferring to agency interpretations solely because the statute is ambiguous. The decision emphasizes that courts, not agencies, are responsible for interpreting statutory provisions, because the APA requires a “court of review” to decide all substantive questions of law. The ruling makes clear that statutory ambiguities are not some implicit delegation of interpretive authority to agencies.

According to the Court, agencies have no special authority to resolve statutory ambiguities, which is a judicial function. Instead, courts must now rely on traditional tools statutory construction Down determine for yourself best interpretation of ambiguous statutes. While agency interpretations may still be considered, they are not given the authoritative weight they once had Chevron. Such interpretations may still be “respected” for their cogency, accuracy, and consistency, but such respect is discretionary. All of this tends to restore, according to the Court, the traditional role of the judiciary in interpreting statutes.

What does it mean?

To begin with, the ruling emphasizes the need for clear delegations of authority from Congress to agencies. Courts will honor clear and express delegations, but will no longer infer delegation from statutory silence or ambiguity. This change encourages more precise rulemaking and limits broad grants of interpretive authority to agencies.

Businesses can expect greater judicial scrutiny of agency actions. Courts will now interpret statutes independently, which will lead to more legal challenges to agency regulations because the thumb is off the scale. This will allow businesses to offer their own courts their own interpretations of statutory ambiguities, potentially giving them a winning hand in court proceedings.

Unfortunately, these developments also introduce a great deal of uncertainty about existing regulations and agency interpretations of ambiguous statutes. Businesses must prepare for potential changes in regulatory requirements and enforcement. Agencies, on the other hand, will need to provide clearer justifications for their interpretations and actions, ensuring that they are consistent with statutory provisions. Finally, judicial review of agency actions will almost certainly become more drawn-out and complex, potentially delaying implementation and enforcement actions. All of this leads to a frustrating lack of certainty for businesses and in-house counsel about the “rules of the road” in their regulatory space.

Examples of what a decision can affect

Here are some of the regulatory issues that will be impacted:

Environmental regulations (This decision will impact how environmental protection regulations, particularly under the Clean Air Act, are interpreted and challenged.)

Consumer Financial Protection Bureau (CFPB) (the ruling will have significant implications for Consumer Financial Protection Bureau(given its history of highly aggressive statutory interpretations, the CFPB will face more legal challenges to its rules and an increased likelihood that courts will invalidate or modify rules that push the boundaries of the agency’s statutory authority.)

Labor and employment law (labor and employment law relies heavily on guidance from agencies such as the Department of Labor, OSHA, EEOC, and NLRB and will be significantly influenced Loper Light. Rules on overtime, employee classification, joint employment, pregnancy adjustments, prevailing wage rates and non-compete agreements will be subject to increased judicial scrutiny.)

Federal Trade Commission (FTC) (must now convince courts that its interpretations are not only permissible but the “best” under the statute. This includes an expanded interpretation of “unfair methods of competition” under Section 5 of the FTC Act and its efforts to enforce the new non-compete rule).

Department of Labor ESG principle (a rule that allows benefit plan fiduciaries to consider ESG factors when considering investment options that will be affected by a decision).

Other (Given the broad scope of the ruling, other agency regulations affected would include tax regulations, OFAC regulations, banking regulations, USPTO regulations, healthcare regulations, FDA, USDA, FCC regulations, antitrust regulations, local regulations, and others.) Virtually every agency regulation is now subject to challenge to the extent the court cited Chevron respect in maintaining the same.

Industry self-regulation (The ruling could create an opportunity for industry self-regulation as the agency’s regulatory powers will be curtailed.)

What should lawyers employed by the firm expect?

This Loper Light decision will lead to an increase in litigation challenging agency regulations, both directly under the APA and in private lawsuits in which defendants invoke agency regulations as a defense. The decision, combined with the Court’s recent ruling in Corner Post vs. Federal ReserveExtending the statute of limitations for challenging agency actions would lead to an increase in lawsuits challenging federal regulations.

The lack of uniform deference to agency interpretations will, over time, lead to inconsistent rulings across jurisdictions, creating compliance challenges for businesses operating in multiple states. Similarly, employers and businesses involved in litigation based on agency interpretations will have additional legal arguments to challenge those interpretations. Courts now have greater discretion to reject agency interpretations that do not reflect the “best interpretation” of the statute. This means that the judge’s choice will be important in increasing the chances of a favorable outcome.

More importantly, although the decision was overturned Chevron the Court itself argued, not to invalidate the last 40 years of court decisions issued using Chevron respect, i.e. the change in the interpretative methodology did not “undermine” these decisions, because the principle of statutory old decisions still applies. This is a difficult concept for many, including judges, to grasp and will likely present new challenges for a wide range of existing agency interpretations, as parties attempt to force courts to interpret statutes differently from the agencies. In addition, agencies may interrupt current and ongoing rulemaking and shift focus by providing guidance such as FAQs and notices. This can lead to more frequent (but potentially less helpful) guidance from the regulator to the affected regulated industry.

What should I do now?

The following steps are important for in-house counsel:

Don’t panic. Nothing changes immediately and there’s no need to believe the sky is falling.
Consult with outside counsel who specializes in your specific legal provision and develop a strategy for dealing with anticipated changes or uncertainty, and more importantly, determine whether there is a legal provision you wish to challenge.
Monitoring the development of the judiciary and stay up to date with court decisions interpreting the laws relevant to your industry.
Expand or improve your company’s government and advocacy functions. You’ll have more opportunities to influence legislation that affects your company.
Work with your trade union to share knowledge and strengthen your company’s voice.
If an agency’s interpretation is problematic for a company, this is the best time to challenge it.

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This Loper Light The decision is a sea change in administrative law, emphasizing judicial independence and reducing agency authority to interpret statutes. While the full impact of the decision will unfold over the next few years, in-house counsel (and their firms) need to adapt to this new legal environment now. Navigating any changes (real or potential) will require a greater understanding Administrative law and proactive approach to legal and compliance strategy. If you have access to Practical Law and other Thomson Reuters Resourcesyou will receive comprehensive tools to help you understand the changes.

STERLING MILLER, HILGERS GRABEN PLLC

Sterling Miller is a three-time General Counsel who has spent nearly 25 years with the firm. He has published six books, his most recent being “Productive In-House Counsel: Tips, Tricks, and the Art of Getting Things Doneand writes an award-winning legal blog, Ten things you need to know as a corporate attorney. Sterling is a frequent contributor to Thomson Reuters and a sought-after speaker. He regularly consults with legal departments and trains in-house counsel. Sterling earned a J.D. from Washington University in St. Louis.