Executive Summary; On June 28, 2024, in an anticipated but significant decision, the Supreme Court of the United States overruled Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), which required courts to defer to an administrative agency’s reasonable interpretation of an ambiguous statute. The Supreme Court has now made clear that courts must exercise their independent judgment in determining the meaning of statutory provisions, rather than deferring to an administrative agency’s interpretation.
In the short term, today’s decision in Loper Bright Enterprises v. Raimando creates uncertainty for regulated entities in both the public and private sectors. The Court’s decision will lead to immediate litigation challenging prior agency actions or regulations; it also casts doubt on underlying agency positions that derive from the agency’s interpretation of a statute. Freed from the constraints of Chevron deferral, practitioners can now take more assertive positions on litigation challenging agency regulations and statutory interpretation.
In the long term, the Court’s decision will help to eliminate the adjustment of priorities that occurs when a new presidential administration appoints new agency leadership. By requiring courts to interpret statutes, rather than deferring to administrative agencies’ interpretation, the Court’s decision should lead to more consistent agency policy and guidance over time. As Chief Justice Roberts reflected, “[t]he only way to ensure that the law will not merely change erratically, but will develop in a principles and intelligible fashion, is for the Court to leave Chevron behind.”
Chevron Deference and the Administrative Procedure Act
The Administrative Procedure Act (“APA”) governs administrative agencies and sets forth specific processes for how agencies can make rules or engage in administrative adjudications. Congress often delegates to agencies the authority to interpret the agency’s governing regulations (for example, Congress delegates to the National Labor Relations Board and Equal Employment Opportunity Commission the authority to implement regulations on certain issues). Nearly forty years ago, the Supreme Court announced, “Chevron deference,” a two-step legal test to determine the level of deference that a court must afford an agency’s interpretation. First, courts must determine whether “the intent of Congress is clear” i.e., whether a statute is ambiguous. This requires courts to determine whether Congress has spoken on the issue. If a statute is not ambiguous, legislative intent controls, and a court does not proceed to step two. If a statute is ambiguous, the Court must proceed to step two and defer to the agency’s interpretation. At step two, rather than imposing its own interpretation of the statute, the court must defer to the agency’s interpretation so long as that interpretation was reasonable.
Chevron was one of the most significant and far-reaching decisions in administrative law. For decades, courts have deferred to an agency’s reasonable interpretation of the statutes they are tasked with enforcing. In recent years, however, Supreme Court justices have signaled their opposition to Chevron and the Court has not deferred to an agency interpretation under Chevron since 2016; the Court noted that the purpose of the judicial branch is to interpret law, and the deference afforded under Chevron abdicated the courts’ role in resolving disputes.
Background on Loper Bright Enterprises
The Supreme Court’s decision today involved the National Marine Fisheries Service (“NMFS”) a federal agency under the U.S. Department of Commerce. The Magnuson-Stevens Act gave the Secretary of Commerce and the NMFS the authority to implement fishery management programs, and the Act contained certain requirements for such programs. The NMFS promulgated a regulation to implement one of these requirements for the fishery management programs. Two fishing companies challenged the regulation. Relevant here, both the federal district court and Circuit Court of Appeals applied Chevron and upheld the NMFS regulation as a reasonable interpretation of federal law. The fishing companies appealed to the Supreme Court and asked the justices to overrule Chevron. At oral argument, most justices appeared to agree that Chevron undermined the role of the judicial branch in interpreting the law. A minority of justices signaled that deference was appropriate because administrative agencies have the scientific and technical expertise to promulgate regulations based on their interpretations of the law.
The Court’s Holding
Today, in a 6-3 decision, the Supreme Court expressly overturned Chevron. It held that the APA 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. The decision is significant because of the profound effect it could have on litigation moving forward – it effectively permits a court to interpret a federal statute on its own, rather than the well-established procedure requiring deference to an agency’s interpretation.
Moving forward, courts have far more latitude to interpret federal statutes. The agency’s interpretation of a statute can be one source of potential interpretation, under a 1944 Supreme Court decision Skidmore v. Swift & Co., but courts may also utilize any method of statutory interpretation now. It is difficult to predict how today’s decision will ultimately impact the legal landscape, but it is clear that deference is no longer required.