What the ending of Chevron deference means for you

On June 28, 2024, the Supreme Court handed down its ruling in Loper Bright v. Raimondo. This decision ended an era of judicial deference afforded to administrative agencies as established in the 1984 case, Chevron U.S.A., Inc. v. Nat. Res. Def. Council. When presented with ambiguities in statutes, the court in Chevron determined that courts must defer to the interpretation of the agency charged with implementing said statutes.

In overruling Chevron, the court has concluded that the Administrative Procedures Act (APA) prescribes that courts, not agencies, have the authority to interpret statute ambiguities. As most businesses are subject to the administrative agencies’ federal regulations that are often the result of silent or ambiguous statutes, Loper Bright will have far-reaching implications for nearly all industries. 

The Loper Bright ruling will impact many industries. The financial sector — particularly entities regulated by the SEC and Federal Reserve — might be subject to more litigation of regulations governing banking, investments or consumer finance. Labor and Employment law, as regulated by the Department of Labor, may see shifts affecting workplace policies and practices across all industries. 

Chevron was rooted in litigation over environmental regulations. As a result, businesses subject to environmental regulations, such as manufacturing, energy and construction, may see changes related to emissions, waste management or resource extraction.

Chevron history

An environmental group brought suit against the Reagan administration’s effort to relax regulations related to the Clean Air Act. Ultimately, the administration succeeded when the court deferred to the EPA. Justice John Paul Stevens opined, “If Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation.”

Chevron established a two-step process that obliged the courts to defer to a federal agency’s interpretation of an ambiguous statute. At step one, a court was required to determine whether Congress directly addressed the issue before the court. If Congress directly addressed the issue through statutory construction, the analysis was complete and Congress’s intent ruled. However, if the court instead determined that the statute was silent or ambiguous regarding the specific issue, the court then moved to step two. Step two required the courts to defer to an agency’s reasonable interpretation of a statute.  

Loper Bright background

The petitioner in Loper Bright, and its companion case Relentless Inc. v. United States, challenged a rule promulgated under the Magnuson-Stevens Fishery Conservation and Management Act (MSA) by the National Marine Fisheries Service. The rule required certain fishing boat operators to pay for independent third-party monitors to be present on their boats to conduct federally required at-sea monitoring programs.

A group of commercial herring fishing companies argued that the MSA does not specify who bears the costs of the third-party monitors and that the process by which the National Marine Fisheries Service approved the rule was improper.  

Administrative Procedure Act

In 1946, Congress enacted the APA in response to administrative agencies’ expansion of functions and regulations. The APA is a federal act that governs the rulemaking and adjudication procedures for all federal administrative agencies. Specifically, the APA provides that “final agency action for which there is no other adequate remedy in a court is subject to judicial review.”

The APA goes further in stating, “Any person suffering legal wrong because of an agency action, or adversely affected or aggrieved by such action within the meaning of any relevant statute, shall be entitled to judicial review thereof.”

Supreme Court ruling in Loper Bright

The court’s majority opinion held that the APA requires courts to exercise their independent judgment in assessing the intent of a statute and may no longer rely on an agency’s interpretation of ambiguous statutes. The court states, “Chevron cannot be reconciled with the APA … by presuming that statutory ambiguities are implicit delegations to agencies.”

The opinion goes on to say, “Chevron is overruled. Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires.”

The court clarified that it was not calling into question prior cases that relied on Chevron when reaching their conclusions. Those rulings will continue to be valid for now. The court also concluded that lower courts must still defer to agencies’ interpretations if there is a “clear” congressional delegation of authority. The term “clear” is not defined within the ruling and will likely become a focus of future judicial debate.

Further considerations

On July 1, 2024, the court issued another pivotal ruling in Corner Post, Inc. v. Board of Governors of the Federal Reserve System. In Corner Post, the court held that a claim against enforcement of a regulation accrues under the APA when a plaintiff is injured by the final agency action. This means that the statute of limitations for an injured party to bring an action against an agency does not begin tolling until a plaintiff is actually injured by a final agency action. This ruling provides aggrieved parties a longer opportunity to bring an action against agencies.

The Loper Bright ruling will have significant implications, as most businesses are subject to federal regulations issued by administrative agencies. Often, federal regulations issued by administrative agencies are in response to silent or ambiguous statutes. Courts are no longer required to give deference to agencies’ interpretations of ambiguous statutes.

The absence of deference, coupled with an extended time frame to bring actions against agency interpretations under Corner Post, ensures that Loper Bright’s impacts will be far-reaching and affect all areas of administrative law. The impact of Loper Bright could result in a more complex and uncertain regulatory environment for businesses. Businesses will need to take a proactive approach to compliance and legal strategies.

How Wipfli can help

The ramifications of this Supreme Court decision will affect a wide range of businesses and industries, and the impact isn’t yet clear. In uncertain times, it’s essential to have advisors you can trust to help guide your decision-making and help make sense of changing regulations. That’s where Wipfli comes in.

If you have questions about how these decisions may affect your bottom line, contact one of our professionals today. We can help you understand the new regulatory landscape and find some clarity among all the changes.