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A SCOTUS Case With Big Implications For Federal Regulations

How an upcoming Supreme Court decision on marine monitoring could reimagine regulators’ legal authorities.

While members of Congress were negotiating tax and spending packages and challengers for the White House, Senate, and U.S. House were fighting it out on the campaign trail, last week the members of the Supreme Court of the United States (SCOTUS) were hearing arguments in a case that could significantly alter the federal regulatory landscape.

 

What is the judicial principle at issue in this case, and what are the potential repercussions of SCOTUS’ forthcoming ruling? Politically, how has this legal tenet gone from one that Republican lawyer Kenneth Starr praised as the “Magna Carta for use in federal administrative agency deregulation” to one that conservatives now detest? And, finally, how are the justices likely to rule in this case?

 

Those are our questions for this week.

 

What Is The Chevron Deference Principle? 

In a 6-0 decision issued in June 1984, SCOTUS established a test for determining when and whether federal courts should defer to a federal executive branch agency when it comes interpreting Congress’s legislative intent for their rulemakings. This test is now known as the Chevron deference principle.

 

As the law firm Holland & Knight explains, the principle says that when a court reviews an agency regulation, there are two possible paths:

  • If the court determines that Congress spoke directly to the precise question at issue — in other words, if the intent of Congress is crystal clear — the court, as well as the federal agency, absolutely must follow Congress’ intent.

  • If the court determines that Congress’s language is silent on a question or ambiguous, then the court must defer to the federal agency’s reading of the statute if the agency’s interpretation of the law seems reasonable.

 

This judicial standard replaced an earlier one from 1944 that had considered how consistent a federal agency had been in interpreting a law that it is responsible for administering. Under that standard, the court could use an agency’s consistency (or lack of it) to decide whether to uphold an agency regulation.

 

The matter at issue in the 1984 case, Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., will be familiar to today’s readers: air pollution and how far the U.S. Environmental Protection Agency (EPA) can go to regulate activities that may pollute the air we breathe.

 

As the legal resource Oyez explains, the Clean Air Act required states that had not yet achieved national air quality standards to establish a permit program regulating new or modified major stationary sources of air pollution like manufacturing plants. In the early 1980s, the EPA interpreted that provision to mean that it had the authority to enact a regulation that allowed states to treat all pollution-emitting devices in the same industrial grouping as though they were a single “bubble.” That interpretation meant manufacturing plants could “install or modify one piece of equipment without needing a permit if the alteration does not increase the total emissions of the plant.”

 

Several environmental groups, including the Natural Resources Defense Council (NRDC), challenged the EPA’s interpretation of the Clean Air Act in the rulemaking. A lower court agreed with that challenge.

 

SCOTUS did not. Led by Justice John Paul Stevens, the court ruled against the NRDC and in favor of Chevron, which had been affected by the EPA’s regulation.

 

But time – and politics – have a tendency to complicate matters. Ironically, it is now environmental groups like the NRDC who argue the Chevron deference principle should be upheld while corporations, business trade associations, and right-leaning policymakers who are skeptical of federal regulation are arguing the principle should be abandoned. That’s because those entities believe that, in practice, the Chevron deference principle has led to an increase in the power of the federal government. (The Obama administration, for example, cited Chevron in its judicial arguments supporting the legality of the Affordable Care Act.)

 

Chevron opponents have been trying for several years to challenge the principle.

 

In 2022, they got their chance. As Oyez explains, a group of commercial herring fishermen sued the U.S. National Marine Fisheries Service (NMFS) after it promulgated a rule that required industry to fund at-sea monitoring programs at an estimated cost of $710 per day to the fishermen. The fisherman argued that the 1976 law NMFS cited as giving it the authority to issue this regulation did not, in fact, authorize the agency to create an industry-funded monitoring system and these requirements.

 

This case is the one SCOTUS is considering now. It has the potential to have significant repercussions for more sectors than just the fishing industry.

 

What Would Happen If The Chevron Deference Principle Were To Be Overturned?

Currently, the NRDC, the environmental group that lost the 1984 case in which the Chevron deference principle was established, has changed its tune. It now argues that overturning the doctrine is a “recipe for chaos” since it would give judges and justices leeway to overturn dozens, if not hundreds, of federal regulations.

 

“[T]he judicial appointments process has become increasingly partisan, the range of these judges’ views has gotten even wider,” the NRDC writes. “Ending Chevron deference would be tantamount to throwing a dart at a lower-court dartboard and hoping for the best.”

 

The left-leaning Center for American Progress (CAP) agrees. “Overruling Chevron could affect every federal agency in the government, especially if the court chooses to replace agency expertise with judicial policy preferences,” CAP writes. “Discarding Chevron will only further politicize administrative law.”

 

CAP also notes, “The ruling could flood the federal courts with corporate interests challenging regulations in every sector, risking Americans’ access to fair pay and acceptable working conditions, safe food and medications, affordable health care, clean water and air, stable financial markets, student loan forgiveness, civil rights protections, and much more.”

 

When it comes to financial services and financial technology, for example, overturning Chevron could subject almost every rule ever promulgated by the Consumer Financial Protection Bureau (CFPB) or the Securities and Exchange Commission (SEC) into question unless, as in the case of the CFPB’s Section 1033 open banking rule, Congress specifically and explicitly empowered the agency to write that regulation.

 

Overturning Chevron also could have a chilling effect on future rulemakings. Would the SEC, for example, be less likely to issue final regulations like its climate disclosure rules for public companies in a Chevon-less world? Perhaps, and that certainly is what organizations like the U.S. Chamber of Commerce and the National Association of Manufacturers are hoping.

 

Which brings us to this question: Is SCOTUS likely to grant that wish?

 

Does SCOTUS Seem Inclined To Overturn The Chevron Deference Principle?  

The case brought by the fishermen is not the only challenge to the Chevron deference principle SCOTUS has heard over the last 40 years. As a 2016 article in the Maine Law Review explains, in the summer of 2015 SCOTUS struck down an EPA power plant rule on the grounds that the agency had unreasonably interpreted the Clean Air Act. “This holding represents a significant departure from the traditional application of Chevron, and a sign that the court may be moving away from a deferential standard of review of agency statutory interpretation,” the article says. That ruling didn’t fully abandon the Chevron deference principle, though.

 

But this time may be different. The questions the justices asked in last week’s hearing indicate the majority of the court may indeed be ready to fully move away with the Chevron deference principle.

 

SCOTUSBlog is one of the few news sites in the United States that is devoted exclusively to reporting on what is happening in the federal courts. In an article written after last week’s hearing in the case brought by the fisherman, SCOTUSBlog said the highest court in the land is “likely” to overturn the Chevron deference principle since SCOTUS’s conservative majority clearly opposes it.

 

Justice Brett Kavanaugh, for example, argued Chevon breeds business and economic uncertainty since it leads to a new “system every four or eight years when a new administration comes in” that implements “massive change” in areas like securities law, communications law, and environmental law. Justice Neil Gorsuch picked up on the same theme but talked about the uncertainty “the little guy” — consumers, immigrants, veterans seeking benefits, and Social Security claimants — face when federal regulations are constantly shifting.

 

Harvard Law School professor Jody Freeman told The Harvard Gazette the court’s eventual ruling will have less to do with protecting businesses or consumers from overregulation, however. It will reflect how the majority of the court feels about the federal government — and how the majority’s view has changed from 1984 to now.

 

“Justice Stevens’ [1984] opinion for the court was respectful of the agency and humble about the court’s relative competence to decide complex policy questions embedded in a detailed statute Congress had intentionally designed. That mood is gone,” Freeman says. “These cases will tell us a lot about how the current court thinks about the federal government. I expect they do not think much of it.”

 

SCOTUS is expected to deliver its decision on this case by the end of June.


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