What Businesses Need to Know About the Fate of the Chevron Doctrine

What Businesses Need to Know About the Fate of the Chevron Doctrine

The Chevron doctrine is a bedrock of administrative law and affords government agencies significant leeway when interpreting federal regulations. Its fate is now in the hands of the U.S. Supreme Court, which recently heard oral arguments in two cases asking the justices to reconsider the long-standing precedent.

Under the Supreme Court’s 1984 decision in Chevron v. Natural Resources Defense Council, federal judges must defer to agencies’ “reasonable” legal interpretations of ambiguous laws in litigation over rulemaking. The rationale behind Chevron deference is that Congress can’t possibly address every possible legal situation when drafting statutes, and that the federal agencies tasked with implementing them are best positioned to address gaps and ambiguities.

As explained by Justice John Paul Stevens, the so-called Chevron analysis involves a two-step process:

First, always, is the question of whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its construction on the statute … Rather, if the statute is silent or ambiguous concerning the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.

Since it was decided in 1984, Chevron has been used to uphold countless regulatory interpretations by agencies such as the Securities and Exchange Commission, Environmental Protection Agency, and Federal Communications Commission. However, in recent years, it has come under fire from legal scholars, lawmakers, and even members of the Supreme Court. Critics contend that Chevron’s deference gives federal agencies too much power and, in doing so erodes the roles of both the judiciary and Congress.

Challenges to Chevron have now reached the U.S. Supreme Court. In Relentless, Inc. v. Department of Commerce, the First Circuit Court of Appeals upheld the Magnuson-Stevens Fishery Conservation and Management Act’s requirement that vessel owners procure and pay for certain monitors by contracting with private entities. According to the First Circuit, the rule is a permissible exercise of the Department of Commerce’s authority. In Loper Bright Enterprises v. Raimondo, the D.C. Circuit Court of Appeals also deferred to the Department of Commerce’s interpretation of the Magnuson-Stevens Act.

In granting certiorari in both cases, the Supreme Court agreed to address the following question: “Whether the court should overrule Chevron v. Natural Resources Defense Council, or at least clarify that statutory silence concerning controversial powers expressly but narrowly granted elsewhere in the statute does not constitute an ambiguity requiring deference to the agency.”

The Supreme Court heard oral arguments in the two cases on January 17, 2024. In arguing that Chevron should be abandoned, attorneys for the challengers asserted that the Chevron doctrine runs afoul of the court’s duty to say what the law is and creates instability. “Chevron is a reliance-destroying doctrine,” attorney Roman Martinez argued on behalf of the fishing companies. “If you’re a person or regulated entity and you’re trying to figure out what the law is, you should be able to rely on the best interpretation of the law and not have to check” for updates every few years.

Justice Brett Kavanaugh agreed. “Chevron itself ushers in shocks to the system every four or eight years when a new administration comes in, whether it’s communications law or securities law or competition law or environmental law,” he said. “It’s just a massive change that is at war with reliance.”

Much of the discussion centered on what the legal landscape would look like without Chevron. While Chief Justice John Roberts suggested the impact would be minimal, other justices questioned whether the lower courts would get bogged down with lawsuits challenging regulatory interpretations. Rather than defer to an agency’s reasonable interpretation, courts would need to resolve all statutory ambiguities, which could also lead to conflicting decisions on the same issues. Justice Amy Coney Barrett also raised concerns that the end of Chevron deference could result in attempts to relitigate decisions based on the long-standing precedent.

The Court’s liberal justices raised concerns overturning Chevron deference would force federal judges to make policy determinations on issues that they know little about. “There’s this old saying that when you’re a hammer, everything looks like a nail,” Justice Ketanji Jackson said. “I’m concerned that judges are going to look at all of the questions related to a statute and call them legal if we don’t have something like Chevron that requires judges to be thinking about their proper role relative to this issue.”

To limit the chaos that many on the Court seemed to acknowledge could follow a decision to overrule Chevron, the justices could decide to limit Chevron so that deference is only due in certain circumstances, such as when Congress has delegated an ambiguity to the agency to resolve. However, as with any Supreme Court case, it is impossible to predict which path the Court will take. A decision is expected before the end of the term in June.

The Supreme Court will issue its decision before the expiration of its current term in June.  The Supreme Court’s decision could have a significant impact on the regulated community. Allowing courts, rather than federal agencies, to resolve statutory ambiguities could make it easier to challenge federal regulations in some cases. The end of Chevron deference could also force Congress to be more explicit when drafting regulations because federal agencies would no longer be able to fill in the blanks. At the same time, businesses could also face new legal instability should courts across the country make diverging interpretations of the same statutes.