Overturning the Chevron Deference Could Mean a Regulatory Revolution

https://www.supremecourt.gov/opinions/23pdf/22-451_7m58.pdf

Business groups have long argued that federal agencies have too much power in their rulemaking. The Supreme Court agrees.

The Supreme Court on Friday overturned the legal precedent known as the Chevron deference in a 6-3 decision, which will reshape the way that federal agencies interpret laws and craft rules that regulate a wide range of businesses.

For decades, courts have turned to regulatory agencies to fill in the legal gaps when areas of the law are ambiguous–this is the so-called Chevron deference, which emerged from case law.

The Chevron deference resulted from a 1984 case filed by Chevron, a big oil company, which argued that the Environmental Protection Agency’s interpretation of the Clean Air Act was overly broad. Chevron lost the case after a judge found that federal agencies are considered to be the authority on a statute if it’s ambiguous. That decision brought forth the Chevron doctrine, or the Chevron deference.

The high court revisited Chevron through a pair of companion cases: Relentless v. Department of Commerce and Loper Bright Enterprises v. Raimondo.

It was unclear how far the justices would go in their decision: Some law experts mused that the Supreme Court might rewrite the standard while preserving some elements of Chevron. But on Friday the high court went all in and unraveled 40 years of precedent.

“Chevron is overruled,” the justices wrote in the majority opinion. “Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority,” adding that “careful attention to the judgment of the executive branch may help inform that inquiry.”

Business groups, including the Chamber of Commerce, have kept their fingers crossed for it to be scaled down. Instead, they got a complete victory.

The Chamber–which has vehemently opposed recent rulemaking, such as the Federal Trade Commission’s noncompete ban–argued that Chevron had given federal agencies too much rulemaking leeway.

“There’s been a critique that Chevron has given far too much power to regulatory agencies, and has also given Congress an incentive not to deal with difficult issues — basically to just kick those issues over to agencies, and let agencies decide,” says Jeff Holmstead, a partner at Bracewell LLP.

Stepping away from Chevron now, some legal analysts have argued, could open Pandora’s box: What would such a decision spell out for existing federal rules? The counterpoint is that Chevron itself opened up Pandora’s box, as Holmstead points out. He adds: “Under our constitutional system, the role of federal agencies is simply to implement the decisions made by Congress, not to legislate in their own rights.”

Still, reversing Chevron may be “one of the most significant rulings in decades,” according to Chris Roberts, an attorney at Butsch Roberts & Associates, one that could very well water down existing rules from regulatory agencies. “That can create uncertainty for consumers and businesses alike, because where does that leave the state of law, when for so long, everyone’s been operating under this understanding that what the regulatory agencies rule are, effectively, the rules that we should be following.”

Take the case of the Department of Labor’s recent expansion of the overtime pay rule, which is currently being challenged in court in a separate case. The Labor Department previously argued that Chevron deference allowed it to promulgate the rule, but the agency has since stepped away from that argument, as reported by Bloomberg Law.

Paring back Chevron could also reduce rulemaking from agencies–something many businesses will applaud. Senator Dick Durbin (D-Illinois) here adds that the high court’s “conservative majority just shamelessly gutted longstanding precedent in a move that will embolden judicial activism and undermine important regulations.”

Holmstead, who previously served as the assistant administrator at the Environmental Protection Agency in the George W. Bush administration, believes that the repeal of Chevron will change how federal agencies approach rulemaking.

“No doubt that over time, this will likely constrain agencies and make them more circumspect when they issue regulations,” Holmstead says.