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Supreme Court Overturns Chevron Doctrine

July 2, 2024

On June 28, in what has been called a “blockbuster” and “monumental” ruling, the Supreme Court overturned the Chevron Doctrine, a standard from a 1984 case that required courts to defer to an agency’s interpretations of ambiguous statutes. The Loper Bright v. Raimondo decision requires courts to exercise their independent judgment in determining the meaning of an ambiguous statute.

Why it matters: The decision is provoking strong reactions. Critics contend it will exacerbate uncertainty in the regulatory sphere as businesses ramp up lawsuits against regulation.

According to Politico, the ruling delivered “a major victory for conservatives and business groups seeking to curb the power of the executive branch.”

• The 6-3 ruling fell along the traditional conservative and liberal lines, with Chief Justice John Roberts authoring the majority opinion. However, the Court explicitly affirmed previous cases with outcomes that relied on Chevron.
• Courts must now exercise their “…independent judgment in deciding whether an agency has acted within its statutory authority...” and need not defer to agencies when a statute is ambiguous.
• The 1984 ruling had been considered a victory for President Reagan’s deregulatory agenda. However, as Bloomberg reports, “conservatives eventually came to loathe the doctrine as liberal administrations relied on it to justify broad regulations.”

The majority opinion relied on the Administrative Procedures Act (APA) for support that courts are best equipped for deciding issues of law when a statute is unclear:

“Perhaps most fundamentally, Chevron’s presumption is misguided because agencies have no special competence in resolving statutory ambiguities. Courts do.” -Chief Justice Roberts Majority Opinion

Justice Elena Kagan wrote in her dissent,

“In one fell swoop, the majority today gives itself exclusive power over every open issue—no matter how expertise-driven or policy-laden—involving the meaning of regulatory law. As if it did not have enough on its plate, the majority turns itself into the country’s administrative czar.” -Justice Kagan

What they’re saying: Some legal experts are warning the ruling will lead to regulatory confusion and instability as agency decisions will be more easily challenged in court. Others contend the decision shifts power back to Congress.

• The White House described the decision as “yet another deeply troubling decision that takes our country backwards.”
• Sen. Chuck Grassley (R-IA) tweeted, “Congress will now be under extreme pressure to be more specific when writing legislation, so that a bill’s plain text can be clearly interpreted by the courts & fed agencies when legislation becomes law. This decision brings enhanced accountability to Congress + executive branch.”
• William Buzbee, a Georgetown Law professor who specializes in administrative and constitutional law, shared his concerns with Politico ahead of the ruling: “If Chevron deference is struck down, the big problem could be a risk of a sort of balkanized country, or a country which actually might have 11 different (court of appeals) rules about what an agency can do. And businesses tend to dislike instability and uncertainty.”

Yes, but: According to Axios, Chief Justice Roberts noted the court's decision does not apply to prior cases that relied on Chevron because they "are still subject to statutory stare decisis despite our change in interpretive methodology.” The majority also recognized that courts still must respect agency action when Congress properly delegates power: 

“And when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it.”

What’s next: According to earlier reporting by Axios, House Republicans have been preparing to roll back certain regulations following an overturn of the Chevron doctrine.

• A memo from the Republican Study Committee states that “each House Committee should scour Biden era regulatory actions and highlight any that should be considered for judicial review post-Chevron."
• Several regulations that CREFC has covered closely, including the Securities and Exchange Commission's climate disclosure requirements and elements of the banking agencies’ Basel endgame proposal, will likely be scrutinized in a post-Chevron world.

But, wait, there’s more: In a separate ruling on June 27, the Supreme Court restricted the use of in-house judges in regulatory enforcement cases. American Banker called this “a watershed decision that's expected to benefit both banks and individual bankers in situations where their regulators have accused them of wrongdoing.”

• As American Banker reports, this decision grew out of a fraud case that the Securities and Exchange Commission filed against the founder of a hedge fund, but “has large implications for a wide range of federal agencies.”

The bottom line: The Supreme Court’s Loper Bright decision will have a major impact on how lower federal courts address challenges to regulation. Ultimately, the outcome of any particular challenge may be more dependent on which court is hearing a case.

What's Next? CREFC will continue to monitor these developments and report back to you.

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