Supreme Court Ends the Chevron Doctrine
July 16, 2024
By: Thomas J. Moran
In this edition of the Surety Today: The Blog, we discuss the Supreme Court decision that was just issued on June 28, 2024, in the case of Loper Bright Enterprises et al. v. Raimondo, Secretary Of Commerce, et al., No. 22–451 that ended the Chevron doctrine. Constitutional precedent often comes from the most unexpected places, and this has never been more true than in the Supreme Court’s Loper Bright decision, which will fundamentally change the interplay between the three branches of American government – particularly the executive and judicial – for the lifetimes of most, if not all who will read this article.
Loper Bright, a family-run fishing business in the North Atlantic, was required by the National Marine Fisheries Service (“NMFS”) to pay the fees – as much as $710 per day – to have federal observers aboard its vessels to ensure compliance with the various laws and limits placed on the fishing industry. The applicable statute does not explicitly require businesses such as Loper Bright to pay these fees. Only foreign vessels, limited access vessels, and vessels in the North Pacific are mentioned in the statute. But the NMFS had applied the requirements of the statute to include vessels in the North Atlantic as well.
For the last 40 years, this would have been enough to conclude the case under the Supreme Court decision in Chevron U.S.A., Inc. v. Nat’l Resources Defense Council, 467 U. S. 837 (1984), which established the concept of “deference” to governmental agencies. Under the deference principle, when a federal agency interprets a statute that is silent or ambiguous as to a particular issue in a way that is “permissible,” the courts must defer to the agency on that issue rather than interpret the statute for themselves. This was not a high bar for a federal agency to clear, and indeed, Loper Bright ran into the deference wall at both the trial court and circuit court of appeal levels, with those courts refusing to second-guess the NMFS. But the Supreme Court, in a 6-3 majority decision penned by Chief Justice Roberts, applied a 1946 law, the Administrative Procedure Act, to find that the courts are required to interpret statutory provisions and determine the meaning or applicability of an administrative action. Chief Justice Roberts referred to the Chevron doctrine as “fundamentally misguided” and “unworkable” within the APA’s regulations. Justice Roberts stated that “Chevron 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.’” Concluding, the Court observed that while a court may rely on the interpretation of a statute by the agency, it is not required to defer to it as it was under Chevron. Accordingly, under the Loper Bright decision, rather than defer to the agency, courts are now required to use their own independent judgment to decide whether the agency has acted within its statutory authority. However, the Court did note that lower courts must still defer to agencies if the statute has a “clear” congressional delegation of authority, but the Court did not define what “clear” means. The Court also created a carve-out of protection for cases previously decided under the Chevron doctrine.
But you may be reading this and thinking, “I don’t run a commercial fishing business in the North Atlantic, or anywhere for that matter. Why do I care?” The implications of Loper Bright reach far beyond the fishing industry. Regardless of what you may think of the decision overall, it is hard to disagree with dissenting Justice Kagan’s conclusion that Loper Bright will be a “jolt to the legal system.” Any matter within the reach of the many tentacles of federal regulation is potentially impacted.
The AGC commented that the decision “will rein in federal agencies’ power and leeway to fill in the blanks dictating their authority to write detailed regulations implementing legislative statutes. From now on, courts must determine what statutes mean by employing traditional tools of statutory construction as they have always done. This decision may bode well for AGC’s current litigation efforts to protect construction companies from federal agency overreach.” The AGC noted that the Loper Bright decision may impact its current challenges to “new costly and onerous federal regulations that were promulgated based on an expansive reading of statutory authority, including U.S. DOL’s new Davis-Bacon Prevailing Wage Rule; U.S. EPA’s new PFAS Superfund Rule; U.S. OSHA’s new Walkaround Representative Rule; NLRB’s new Joint Employer Rule; and U.S. EPA and USACE’s definition of Waters of the United States.” The Associated Builders and Contractors’ vice president of legislative and political affairs, said the decision will make it more difficult for each new administration to “engage in incessant flip-flopping on issues … leading to unmanageable uncertainty for the employer community.” One can also look for impacts in cases under the Contract Disputes Act and on bid protests, as the GAO and Court of Federal Claims will no longer be bound by Chevron deference. Finally, another particular realm of life where federal regulations play a big role is in employment. Regulations promulgated by the Department of Labor, the Equal Employment Opportunity Commission, the National Labor Relations Board, and the Federal Trade Commission may all face increased scrutiny or challenge in the wake of Loper Bright.
Surety companies will need to closely follow the developments flowing from the Loper Bright decision and its impact on the construction industry. Sureties should also keep in mind that the Supreme Court’s decision may provide an avenue to challenge and defend against the application of unjustified or overly broad regulations that may adversely impact a surety on a given project and as an industry overall.
If you have questions regarding the issues discussed in this post, please do not hesitate to contact Tom Moran at (804) 362-9434/tmoran@wcslaw.com or any member of the Surety and Fidelity Practice Group.