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Client Alert: The End of Chevron Bias: A Tombstone No Federally Regulated Company Should Miss

Interpreting the Law Without Systemic Bias in the Government’s Favor

For companies whose operations are subject to strict federal regulations – and particularly those that are facing or may be facing enforcement actions – take note. The U.S. Supreme Court may have just leveled the playing field. On Friday, June 28, 2024, the Supreme Court overturned a long-standing legal precedent that instructed courts to defer to federal agencies’ interpretations of ambiguous laws they administer. Instead, federal laws will be interpreted by the courts.  Federal agencies will need to prove their cases, including enforcement actions where an arguably ambiguous statute is at issue. This is good news for businesses in the U.S.
 
In a 6-3 decision,[1] splitting along ideological lines, the majority sided with two New England fishing companies that challenged a rule requiring them to pay for federal monitors on their boats. The Court held that the rule, issued by the National Marine Fisheries Service, exceeded the agency's authority under the Magnuson-Stevens Fishery Conservation and Management Act.[2] This statute regulates fishing in U.S. waters.
 
The Court expressly overruled the decision in Chevron U. S. A. Inc. v. Natural Resources Defense Council and the eponymous “Chevron” doctrine it birthed. In Chevron, the Court upheld the U.S. Environmental Protection Agency's interpretation of the Clean Air Act. The Chevron doctrine taught that courts must defer to an agency's reasonable interpretation of a statute if the statute was silent or ambiguous on the question of agency authority challenged. The Chevron Court reasoned that deference was based on a presumption that Congress intended to delegate interpretive authority to the agency, which has more area expertise and accountability for policy judgments than the judiciary.
 
Incompatibility with the APA, excessive power, and infringement on separation of powers
 
The Court's majority opinion, written by Chief Justice John Roberts, rejected the Chevron doctrine, holding its presumption incompatible with the federal Administrative Procedure Act (also known as the “APA”). The APA governs review of agency actions and directs the federal courts to interpret federal laws. The Court’s majority held that the Chevron doctrine gave excessive power to the executive branch, compromised legal predictability, and infringed on the Constitution’s separation of powers. 
 
The decision makes it clear that courts must exercise their independent judgment when determining if an agency has acted within its statutory authority and should only defer to the agency if Congress has delegated interpretive power.
   
Thus, even in cases where an agency takes an interpretative position and even where the alleged “ambiguity is about the scope of an agency’s own power,” the court must “use every tool at their disposal to determine the best reading of the statute and resolve the ambiguity.”
 
A Jolt to the Legal System
 
The Court's dissenters, led by Justice Elena Kagan[3], accused the majority of overturning a well-established and widely accepted precedent that reflected Congress's intent and respected the agency's expertise and policy choices. The dissenters warned that the majority's decision would create uncertainty and disruption in the law, invite judicial activism and inconsistency, and undermine necessary public interest regulations.
   
Whatever the benefits of regulatory expertise, the Court, more concerned about potential regulatory overreach and the judicial role, roundly rejected this concern. As Justice Neil Gorsuch wrote in a concurring opinion: “[t]oday, the Court places a tombstone on Chevron no one can miss. In doing so, the Court returns judges to interpretative rules that have guided federal courts since the Nation’s founding.”
 
Before and After: Impacts on the EPA, FDA, and financial markets
 
The Court's decision to overturn the Chevron doctrine will significantly impact how federal agencies enforce regulations and how businesses challenge them. Here are some bullet points summarizing the state of the law before and after the decision:
 

• Before the decision, courts would defer to federal agencies' interpretations of ambiguous laws that they administer unless the interpretations were unreasonable or contrary to Congress's intent.
• After the decision, courts will not defer to federal agencies' interpretations of ambiguous laws unless Congress has delegated interpretive authority to the agency. Courts will decide whether an agency has acted within its statutory authority, looking to traditional principles of interpretation, and will consider the agency's judgment as one factor among others in deciding what power has been given to the agency. 
• Before the decision, federal agencies had more leeway and flexibility in issuing regulations, bringing enforcement actions, and otherwise implementing policies based on ambiguous provisions within their empowering acts, without explicit direction from Congress to address an issue or use certain enforcement tools.
• After the decision, federal agencies may face more scrutiny from courts and challenges from litigants, both in issuing regulations and directly enforcing the statutes they administer. They may have less power and discretion to regulate industries and address new or complex problems without clear or explicit direction from Congress.

 
Business owners and executives face a tough choice when caught in an administrative action. They need a trusted advisor who can help navigate the complex and often uncertain legal landscape. Whether you are dealing with environmental, health, safety, financial, or other regulations, the Business and Corporate Law Section of Whiteford can advise you on compliance, represent you in enforcement actions, and advocate for your interests before government agencies and courts.
 
Contact Dale G. Mullen and the Business and Corporate Law Section of Whiteford today to schedule a consultation and learn how we can help you protect and advance your business interests in the post-Chevron era.