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07.03.2024 Legal News

Chevron Overruled – The Widespread Impact Might Just Surprise You

The Supreme Court overruled the 40-year-old Chevron doctrine of judicial deference given to administrative agency actions in an opinion released last week. On June 28, 2024, the court held that federal courts no longer must defer to an administrative agency’s interpretation when a law or statute is silent or ambiguous on an issue. [1]

Under Chevron, federal courts were directed not to disturb agency interpretations of federal statutes unless the agency adopted an unreasonable or impermissible position, or alternatively, violated another statutory obligation, such as the procedure used to adopt the decision or rule.  State courts have also adopted Chevron to varying degrees. Practically, Chevron forestalled many challenges to agency actions and permitted administrative agencies to drastically change policy without Congress changing the underlying statutes.

After years of cases modifying the Chevron doctrine, however, the court finally decided to consider if Chevron should be overruled in Loper Bright

The government argued that Congress intended for agencies to resolve statutory ambiguities because of agencies’ subject matter expertise; because deferring to agencies promotes the uniform construction of federal law; and because resolving statutory ambiguities can involve policymaking best left to political actors, rather than courts. The court, however, found that none of these considerations required the level of deference afforded by Chevron. Particularly, the court found the Chevron doctrine conflicted with Section 706 of the Administrative Procedures Act’s (the “APA”) requirement that reviewing courts “decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action.” 

Writing for the majority, Chief Justice Roberts plainly stated “Chevron is overruled. Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires.”

Chevron – cited in over 18,000 cases – was one of the most important decisions in administrative law. It afforded numerous agencies and presidential administrations the flexibility to interpret laws by agency action and rulemaking. The post-Chevron era has started.

Impact on Environmental Law

Whether it is Chevron’s context as an environmental case or the obvious effect on environmental laws, many expect Loper Bright to represent a major shift in environmental law. Rest assured, Loper Bright certainly will shake up environmental enforcement and rulemaking, but to what extent is yet unclear. One thing it will not do is alter EPA’s existing interpretations that have been approved by courts (likely by way of Chevron). Loper Bright makes explicit the fact that an interpretation of a statute was upheld under Chevron is not a “special justification,” which is necessary to overrule such a holding. Regulated entities should know they are subject to the same environmental laws today as they were pre-Loper Bright.

Entities that deal with environmental regulations are all too familiar with the constant change in policy seen with changing presidential administrations. As an executive agency, EPA is ultimately administered by the president, and EPA policy routinely reflects the current president’s propensities. Chevron facilitated this revolving-door system by forcing courts to abide by any “permissible” interpretation of an environmental statute. Now, under Loper Bright, environmental law may find more constancy with courts empowered to define a “best reading” of a statute using tools of legal interpretation, rather than oft-changing agency interpretation.

Proponents of the new regime envision a return to Congressional accountability. Notwithstanding the modern Congress’ challenges in passing significant statutes, Congress is forced to reckon with Loper Bright’s call for legislation over regulation. But in environmental law, it is unclear whether Congress has the capacity to be accountable in the first place. Congress struggles to pass laws at all, never mind technical, complex environmental laws. For that reason, Congress was happy to let EPA handle the tough decisions of effluent limitations, NAAQS, and other highly specific environmental standards. With no technical expertise and an unwillingness to compromise, it is difficult to see Congress developing and agreeing upon national standards. This makes EPA’s next moves all the more intriguing.

Loper Bright represents a major shift in the way EPA must approach enforcement and rulemaking. Under Loper Bright, there is a “best reading” of every environmental statute. The best reading becomes the law and must guide all EPA actions. Therefore, when EPA offers a new interpretation of an environmental statute, the interpreting regulation or action is ripe for judicial challenge. Wherever a regulated entity believes EPA is acting outside the scope of the express language of a statute, that entity has a valid basis to challenge the interpretation and associated actions.

In the enforcement context, EPA must ensure the statute being enforced explicitly authorizes the enforcement at issue, both procedurally and substantively. If not, EPA risks that a court reads the statute differently and holds EPA’s actions to be unauthorized by Congress. In that instance, EPA’s enforcement would fail, alleged violators would not be penalized, and EPA expressly would be without authority to penalize similar parties. Where EPA seeks to enforce a statute without clear authority to penalize the actions at hand, EPA now must do more than show its enforcement is “permissible” under the statute; it must convince the court its enforcement is explicitly provided for in best reading of the statute. EPA may embrace this challenge and rely on its squadron of litigators, or it may limit enforcement to proceedings where it is sure of statutory support. Courts are free to read the statute as they see fit, and may, but are not required to, rely on EPA’s interpretation, “body of experience and informed judgment,” or any other information EPA can submit to the court. Either way, whether an enforcement action is justified under the best reading of the statute is set to become a key defense to EPA enforcement actions.

Loper Bright also has major implications for EPA rulemaking. Most EPA regulations either directly interpret a statute (e.g. creating a definition for a term left undefined in the statute) or act upon some interpretation of authority granted by the statute (e.g. promulgating regulations to develop a permit program where the statute directs EPA to take “all necessary actions”). EPA can still promulgate these interpretive regulations, but now must do so with more careful reference to the statute itself. For its interpretations to withstand judicial challenge, EPA must be able to show its interpretations are correct under the best reading of the statute. EPA may engage in a greater evaluation of comments than that of the Chevron era, using any consensus it may identify in comments to bolster its interpretation as the best reading. Similarly, courts and contestants to regulations are now armed with a swath of comments suggesting competing interpretations, which they may use to sow doubt as to the best reading of the statute or inform the ultimate best reading.

The Supreme Court’s endorsement of Skidmore may bear special relevance in the highly technical field of environmental law. In essence, Skidmore says courts may consider an agency’s “power to persuade” in the court’s interpretation of statutes. Some judges will eschew any persuasive power of EPA, instead deciding a best reading through the canons of statutory interpretation and the statutory text itself. But courts embracing Skidmore will hear out an agency’s interpretation and evaluate the weight to be given to the interpretation based on four factors: (1) the thoroughness evident in the agency’s consideration, (2) the validity of its reasoning, (3) its consistency with earlier and later pronouncements, and (4) “all those factors which give it power to persuade.” One can imagine a judge with little technical environmental experience hearing an environmental case. If the judge feels there is some legitimate ambiguity in the statute at issue, they may wish to consider the agency’s interpretation as they filter down to the “best reading.” In that instance, the judge may justify the adoption of the agency’s interpretation through the evaluation of Skidmore factors, along with the canons of statutory interpretation necessary under Loper Bright. Thus, while Loper Bright certainly limits agency deference, it does not necessarily end the idea of deference to agencies.

Impact Far Beyond EPA

The Chevron doctrine has been used by state and federal courts for nearly four decades to justify substantial deference to agency interpretation of law. Now that Chevron has been overruled, we predict a surge of regulatory challenges that may once have seemed almost insurmountable. Petitioners no longer have to scale the Everest of Chevron deference. Regulated entities may be eager to file suit to test the new limits of agency deference and hope to develop new precedents.

Although many think of Chevron as an environmental case granting deference to the EPA, the Chevron doctrine applied to any federal agency action. The list of federal agencies that now have to muddle through this post-Chevron world is an alphabet soup of big players – the FDA, DEA, FTC, DOJ, ATF, TTB, FDIC, SEC, FBI, and Homeland Security -- just to name a few. In fact, there are 439 agencies currently listed in the Federal Register.

While the list of federal agencies is quite long, the list of regulated entities is far greater. If you have any questions regarding how your business may be impacted by the Loper Bright ruling, please let us know.

[1] Loper Bright Enterprises, et al. v. Raimondo, et al., 603 U.S. ___ (2024) (overruling Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)).