On June 28, the U.S. Supreme Court overruled the agency deference test established in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The four-decades-old Chevron deference previously set the framework for judges to use in evaluating if a federal agency’s statutory interpretation in rulemaking was consistent with the Administrative Procedures Act (APA). The 6-3 ruling was for the plaintiffs in Loper Bright Enterprises v. Raimondo together with Relentless Inc. v. Department of Commerce. Justice Brown Jackson recused herself from the Loper Bright opinion, as she was on the D.C. Circuit when the case was heard below. Justice Brown Jackson joined with the dissent in Relentless.

Background

As it enacts laws, Congress can rarely anticipate every scenario that agencies enforcing those laws may face. Administrative agencies adopt regulations, policy statements, agency manuals, and enforcement guidelines and undertake administrative hearings to implement and enforce Congress’ laws as those agencies understand the laws. To account for unavoidable disconnects between legislators and boots on the ground, in 1984, the U.S. Supreme Court adopted the Chevron doctrine — or Chevron deference. Since 1984, federal courts have used Chevron deference to evaluate the validity of an agency’s rules and actions based on statutory interpretation. Chevron deference was made up of two primary steps:

Step 1: Determine if Congress was ambiguous in its legislative intent.

1. 1. If Congress’ statutory intent is clear, the agency must abide by that intent.
   2. If unclear, the court must then decide whether the agency’s interpretation of that statute is reasonable.

Step 2: Determine if Congress implicitly or explicitly left the ambiguity or lack of specificity.

1. 1. If Congress explicitly left the ambiguity, meaning it intended for the agency to fill in gaps, then agency regulations are binding unless arbitrary, capricious, or manifestly contrary to the statute.
   2. If Congress implicitly left the ambiguity, then the agency’s interpretation is binding so long as it is reasonable. Of course, what is reasonable is always open to interpretation.

There has been a recent trend of the court narrowing Chevron deference, including, but not limited to, Epic Systems Corp. v. Lewis, 584 U.S. 497 (2018) (an agency gets no deference when construing a statute it does not administer); United States v. Mead Corp., 533 U.S. 218 (2001) and Encino Motorcars, LLC v. Navarro, 579 U.S. 211 (2016) (no deference to an agency that reached its decision without using — or without using properly — its rulemaking or adjudicatory authority); and the “major questions” doctrine where the court will not apply Chevron deference, see, e.g., King v. Burwell, 576 U.S. 473 (2015) and West Virginia v. EPA, 597 U.S. 697 (2022).

The Challenge

Relentless and Loper were brought to the U.S. Supreme Court (SCOTUS) challenging a fisheries management rule requiring commercial fishing vessels to pay for the cost of compliance monitors they were required to allow aboard during fishing trips. The National Marine Fisheries Service (NMFS) required fishing companies to pay for the costs of on-boat regulatory compliance monitors based on its interpretation of the Magnuson-Stevens Fishery Conservation Management Act (MSA), while plaintiffs contended that NMFS lacked statutory authority to require fishermen to pay for the monitors. The plaintiffs argued that the NMFS rule was too broad and exceeded the agency’s authority under the MSA. The lower courts concluded that, even if the plaintiffs’ arguments had raised ambiguities regarding the NMFS’ authority, deference to the agency’s interpretation was afforded under Chevron.

Rather than consider the narrow question of fisheries compliance costs, the high court agreed to hear arguments on whether it should overrule the 1984 Chevron decision. The majority ruled that Chevron deference improperly prioritized executive branch legal interpretations over interpretations by the judicial branch.

In reaching its decision, the majority wrote that Chevron deference “defies the command of the APA that the ‘reviewing court’ – not the agency whose action it reviews – is to ‘decide all relevant questions of law’ and ‘interpret . . . statutory provisions.’” (emphasis original to SCOTUS). It found that Chevron afforded too much deference to agency interpretations and could not be reconciled with the Administrative Procedure Act (APA). The majority explained that when a statutory ambiguity is identified, courts “use every tool at their disposal to determine the best reading of the statute and resolve the ambiguity,” and that should be “no less true when the ambiguity is about the scope of an agency’s own power – perhaps the occasion on which abdication in favor of the agency is least appropriate.” (emphasis original to SCOTUS). Therefore, when presented with a review of an agency’s rulemaking, a court need only ensure that the agency has exercised its discretion within the boundaries of the APA and not grant the agency any additional delegation. As stated by the majority, “[b]y forcing courts to instead pretend that ambiguities are necessarily delegations, Chevron prevents judges from judging.” The Chief Justice concluded that “Chevron’s presumption is misguided because agencies have no special competence in resolving statutory ambiguities. Courts do.”

What Happens Next

Without Chevron, it is unclear what legal doctrine the courts may develop or if Congress will take action with respect to drafting more specific legislation. Agencies may take more time in crafting their rules and regulations to strengthen them against court challenges. In theory, Congress can work with the administration and agencies to craft more robust and specific legislation. One could argue that Congress relied on Chevron in being less specific in its legislative drafting by expecting administrative agencies to fill in the gaps. Over the last 40 years, Congress often chose not to enact legislation to “correct” a regulatory adoption by a federal agency. Perhaps these decisions will be a wake-up call to Congress. Perhaps Congress will grant specific yet broad rulemaking powers with each piece of legislation. Given the complexities of artificial intelligence, health care, pharmaceutical safety, environmental protection, housing, labor safety, and many other fields, it seems unlikely that Congress and the administrative branch will be able to set aside differences to craft legislation that meets the needs of a complex society. Even if the two branches can work together, there are certain to be ambiguities – some intentional, some negotiated, some unforeseen. Further, as the court indicated, it will be left to the courts to deal with the volume of regulations to follow and the litigation to determine the meaning and intent of every law and whether such regulations are validly consistent with the agency’s statutory authority.

A Return to Skidmore Deference?     

Prior to the 1984 Chevron decision, courts applied the guidance developed by the court in Skidmore v. Swift & Co., 323 U.S. 134 (1944). In fact, more recent decisions held that Chevron only applied to agency rules developed by a rulemaking process, whereas Skidmore deference applied to other agency interpretations not developed through the rulemaking process. Skidmore allowed federal courts to adjust the deference they would give to an agency’s statutory interpretation based on the agency’s ability to demonstrate persuasive reasoning. While Loper overturned Chevron, it did not overturn Skidmore.

Unlike Chevron deference, a federal court exercising Skidmore deference is not required to defer to an agency’s statutory interpretation. Rather, the court is to determine the appropriate level of deference on a case-by-case basis based on the agency’s ability to demonstrate that its interpretation is based on sound reasoning. Given the Loper opinion’s references to Skidmore, it seems likely that SCOTUS will nominally revert to Skidmore as to rulemaking as well. Skidmore deference is highly subjective, requiring case-by-case proofs, and allows a court to determine whether it agrees with agency experts.

Conclusion

The U.S. Supreme Court in Chevron held that when a federal statute is ambiguous or silent, courts should defer to an agency’s reasonable interpretation. Some believe Chevron created a stable and predictable regulatory landscape in which Americans and businesses know the “rules of the road.” Loper ended that practice, putting the power over regulations squarely in the hands of appointed judges who are typically not technical subject matter experts. On the other hand, others will welcome the opportunity to educate judges where agencies have improperly sought to legislate results not authorized by Congress. The Loper opinion is one of several significant administrative law opinions issued by the U.S. Supreme Court recently, including Securities and Exchange Commission v. George R. Jarkesy, Jr., et al, 603 U.S. ___ (2024), and Corner Post, Inc. v. Board of Governors of the Federal Reserve System, 603 U.S. ___ (2024).