In late June, the U.S. Supreme Court took an important step toward conscribing the power of federal agencies, abandoning the “Chevron doctrine” and its requirement that federal courts defer to agency interpretations of ambiguous federal statutes. The Court’s much-anticipated decision in Loper Bright Enters. v. Raimondo, Sec’y of Commerce and Relentless Inc. v. Dep’t of Commerce, 603 U.S. ___ (2024), requires federal courts to exercise independent judgement to interpret statutory language without deference to the agency responsible for implementing and enforcing the law. The Court’s opinion continues a trend toward less deferential judicial review of agency decision making and is expected to encourage a spate of challenges to federal regulations and other agency actions, potentially providing some relief for regulated businesses.
The Loper Bright opinion addresses two consolidated cases challenging regulations adopted by the National Marine Fisheries Service, which required commercial fishing vessels to carry observers to ensure compliance with fishing limits. The Court granted certiorari to address a single question: whether to overrule or clarify the standard established 40 years ago in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), under which a reviewing court must defer to a federal agency’s interpretation of federal law unless it is clearly contrary to Congressional intent on the precise question at issue, or represents an unreasonable interpretation of an ambiguous statute.
In a 6-3 majority opinion written by Chief Justice Roberts, the Court rejected Chevron as inconsistent with the vision of the Founders and the imperative expressed in Marbury v. Madison that “[i]t is emphatically the province and duty of the judicial department to say what the law is.” 5 U.S. 137 (1803). The Court also found Chevron in direct conflict with the intent and requirements of the 1946 Administrative Procedure Act, which, according to the majority, authorizes administrative agencies to determine factual questions but expressly provides that courts must exercise independent judgment on questions of law, without any special deference to agency interpretations. Justice Gorsuch and Justice Thomas both filed concurring opinions, with Justice Thomas emphasizing that Chevron violated the implied Constitutional scheme for separation of powers.
Justice Kagan, joined by Justice Sotomayor and Justice Jackson, dissented, describing the immense importance of Chevron and predicting that its demise will result in a dramatic expansion of judicial authority. Indeed, it is difficult to overstate the historical importance of Chevron to the development of the administrative state as it exists today. Based on open-ended grants of authority from Congress, federal agencies have constructed complex regulatory schemes, particularly in the environmental arena, which may not have withstood legal scrutiny without the deference required by Chevron. However, as the majority and dissent both recognized, the Court has been moving away from the deferential Chevron standard in favor of more rigorous judicial oversight for many years. The most notable example of this change is the “major questions doctrine” first articulated in West Virginia v. EPA, 142 S. Ct. 2587, 2608–09 (2022), under which the Court has declined to defer to agency interpretations in “extraordinary cases” that present questions of great “economic and political significance.”
Although it does not stand alone, Loper Bright remains one of the most momentous administrative law decisions in a generation. The full impact of the opinion will not be known for years, but members of the regulated community can expect the following changes and opportunities to emerge.
- Court Challenges. The Loper Bright standard, along with the extended statute of limitations for regulatory challenges allowed by the Court’s opinion in Corner Post v. Federal Reserve, 603 U.S. __ (2024), will likely result in a flood of challenges to federal rules and enforcement actions, particularly in federal circuits known to be business-friendly and skeptical of regulatory authority. Regulations that rely on ambiguous or open-ended statutory authority will be particularly vulnerable to challenge. Organizations that take a considered, strategic approach will be best positioned to benefit from these events, keeping in mind that if a regulation is invalidated, a period of uncertainty is likely to follow as the agency scrambles to replace it.
- Rulemaking and Enforcement. The Loper Bright opinion and other recent decisions limiting deference to administrative authority may make some agencies more cautious in adopting new regulatory requirements and in pursuing enforcement action, but this will vary by agency and by issue. In addition, limits on administrative independence may result in less variation from one presidential administration to the next, as agencies have less freedom to reinterpret federal law to suit policy goals. Overall, though, the regulatory status quo is likely to change only slowly, and businesses should not expect immediate relief from permitting, reporting and compliance burdens.
- Legislation. Loper Bright does not limit Congressional power to explicitly delegate power to federal agencies, and Congress could respond by establishing narrower and more specific statutory schemes, leaving less to agency discretion. However, the current divisions in Washington, DC, make it unlikely that Congress will take many actions to empower regulators or clarify its intent. Because Loper Bright implicitly demands that Congress resolve ambiguities and disagreements at the legislative stage, rather than leaving them to agency interpretation, it is likely to dampen Congressional enthusiasm for significant new legislation in the regulatory arena, at least in the short term.
- State Responses. States already vary widely in the extent to which they attempt to regulate businesses above and beyond the limits of federal regulation. With Loper Bright expected to constrain federal regulation, on balance, these differences among states will grow more important. States do not have carte blanche to regulate, however. The extent of federal preemption in various fields will take on more importance if federal regulation is curtailed.
- State Court Actions. If the scope of federal regulation is limited, plaintiffs and advocacy groups may shift their efforts toward claims in state courts, especially in areas such as the environment and labor and employment. For example, environmental advocacy groups may invoke the public trust doctrine and other common law claims to pressure states to establish stricter policies or enforcement regimes to preserve natural resources and protect public health and safety. Tort claims may also become more important as a way of filling gaps in regulation—for example, if federal remediation requirements are constrained.
The Court is on a path that will result in profound changes to the function and structure of the federal government and the role and authority of states. The details will depend on how voters, legislators and lower courts respond to Loper Bright and other recent decisions, but the overall trend clearly is to exert a limiting pressure on the scope and stringency of federal regulation. As the new contours of twenty-first century governance take shape, businesses will need to stay nimble and informed, preparing for new challenges, incentives, and opportunities.