Chevron deference, the doctrine used by courts in matters involving government agencies, is being challenged by a case involving fishery management. The Supreme Court’s ruling could alter agency authority as we know it and how the executive branch operates – including the Consumer Financial Protection Bureau (CFPB).
RESPA News listened in as Ballard Spahr LLP Senior Counsel, Consumer Financial Services Alan Kaplinsky moderated a discussion between Jonathan Masur, University of Chicago law school professor and director of the Wachtell, Lipton, Rosen & Katz program in behavioral law, finance and economics, and Lauren Campisi, Hinshaw & Culbertson LLP partner, consumer financial services, on the potential impact of the decision. The group met at the American Bar Association’s Business Law Fall Meeting in Chicago.
The case, Loper Bright Enterprises v. Raimondo, No. 22-451, is slated to be determined during the Supreme Court’s fall term. The question is posited as, “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 Chevron deference doctrine
The case Loper challenges was decided in 1984 and has been used by courts to answer questions about agency actions and enforcement. Known as Chevron deference, a court first looks at the statute in question to determine whether Congress directly addressed the issue in the text. If so, the court follows Congressional intent. If the statute is determined to be ambiguous on the matter, the court will consider the agency’s interpretation. So long as that interpretation is considered reasonable, the court will defer to the agency.
“Rather than the court picking what it thinks is the correct or best meaning of the statute using the typical tools of statutory interpretation that it would normally use, the agency gets interpretive space,” Masur said.
When the Supreme Court decided Chevron, it gave its rationale for giving agency interpretations deference. Congress delegates rulemaking responsibilities to agencies, and under the canons of statutory construction, courts are obligated to go along with the rules so long as they are not considered arbitrary, capricious, or contrary to the implementing statute. These delegations can be “implicit,” as Congress cannot legislate for every eventuality when a statute is enacted.
Agencies, which are part of the executive branch and therefore more accountable to the American people than the judiciary, have considered the matter in detail and have the expertise to handle complex and technical questions under their implementing statutes, while courts do not have that same experience or expert judgment. Therefore, the Supreme Court held the judiciary should defer to agency interpretations rather than imposing their own.
Since Chevron was decided, there have been cases that narrow this deference, i.e., it is not unlimited. But it has been the standard for almost 40 years.
“The fact that agencies have had flexibility around ambiguous language has been very important to those agencies in crafting policies over time,” Masur said. “It gives the agencies lots of different options as opposed to them being bound by a particular interpretation that a court decides upon.”
Masur mentioned the Supreme Court has not cited Chevron in its decisions in several years, showing some indication that Chevron has already lost favor, at least in the highest court. What’s really important, he said, is that lower courts are continuing to cite and rely on Chevron, meaning the Loper decision could have a large impact on how federal district courts and courts of appeals make their decisions.
The case at hand
The Loper case involves a lesser-known agency, the National Marine Fisheries Service (NMFS), and how it interpreted a specific federal statute that has multiple components. The rule at issue regulates monitors on domestic fishing vessels, and in certain instances requires the vessel owner to pay for that monitor. The act passed by Congress granting NMFS the authority to administer monitor requirements explicitly stated the payment requirement in some provisions but was silent on the matter in others.
Vessel owners, already finding the federal monitor an imposition because of the limited space available on a commercial fishing vessel, objected to the cost of paying for the monitor, which could be as much as 20 percent of the vessel’s revenue.
The district court that made the first determination in the case found the statute to be unambiguous and did allow the agency to require the owner to pay for a monitor, even though the statute did not explicitly state so. This was appealed to the D.C. Circuit court, which mostly agreed, but did determine there was some ambiguity within the relevant statute. Once it found the statute to be ambiguous on the payment issue, the appellate court applied the Chevron doctrine, and affirmed the lower court’s decision by holding NMFS’ interpretation as reasonable and, accordingly, deferred to it.
“The plaintiff’s original argument is that Congress very clearly knew how to, and did, expressly require payment of monitor fees in other provisions of the same statute, did not expressly provide it in this provision, and that silence should mean the agency does not have the authority,” Campisi said. “So, part of the issue here is, what does silence mean, and did it create ambiguity or not?”
What overturning Chevron could mean
“If the Supreme Court in Raimondo overrules Chevron, this is something that probably can’t be changed by the president, any of the federal agencies that we deal with or even Congress itself,” Kaplinsky told the audience. He explained that “the Chevron holding is a framework created by the judiciary in order to carry out a quintessential judicial function – namely, deciding whether a regulation is authorized by a statute. While Congress could always amend the statute in question, it would not be able to codify and restore the Chevron doctrine. It cannot dictate to the judiciary how much, if any, deference should be given to an agency’s regulation.”
Masur said if the Supreme Court overrules Chevron, it will likely be replaced with no deference at all. This would mean, going forward, the courts would decide the best meaning of a statute and agencies would be bound by that determination. What might occur, he noted, is the Supreme Court stating the agencies will receive Skidmore deference, named for Skidmore v. Swift & Co., 323 U.S. 134 (1944).
This alternative deference model allows a federal court to determine the appropriate level of deference for each case based on the agency’s ability to support its position. That is not to say the agency’s interpretation would not be followed – it means the interpretation would be considered like any other persuasive authority in a legal argument.
“Skidmore deference is the same thing as saying no difference at all,” Masur said. “Deference means, ‘I don’t necessarily agree with your view, but your view is reasonable. So, I’ll allow your view to stand even though I might have taken an alternative approach myself.’ That’s Chevron deference in its various forms.
“Skidmore deference is deference based on the power to persuade: ‘If you have persuaded me that your view is the correct view, agency, I will agree with you and let your view stand.’ That’s just saying that the agency gets a shot to persuade the court that its view of the statute is correct.”
Masur said the Supreme Court will likely overturn Chevron. The Supreme Court’s lack of reliance on the doctrine in recent years and the fact it granted certiorari on a question of whether Chevron should be overruled in its totality are indications they are strongly considering it, he explained.
The professor also emphasized the importance of another case related to Chevron and another form of regulatory interpretation known as the major questions doctrine. West Virginia v. EPA, 142 S. Ct. 2587 (2022), stated a new theory of the major questions doctrine (historically seen as a limitation to Chevron deference). The Supreme Court in that case held if the relevant statute implicates a major question, the agency does not have the power to regulate that issue unless the statute explicitly grants the agency the power to do so.
“West Virginia v. EPA is not really a carve out to Chevron. … This is something bigger and more important than just an exception to Chevron,” Masur said.
Kaplinsky and Campisi also agreed it is likely Chevron will be overturned. But what does that mean for those cases that have already been decided that exclusively relied on the doctrine?
Campisi reviewed several significant cases to show how the Supreme Court has been treating Chevron deference, showcasing how the decisions are “going all over the place.” One of the more recent examples she mentioned was PHH Corp., et al. v. CFPB, a case determined in the D.C. Circuit Court of Appeals in 2018.
“The 2018 en banc decision limited its holding to whether the CFPB’s structure was constitutional,” Campisi said in a follow-up with RESPA News. “The prior panel opinion, insofar as it related to the interpretation of RESPA and its application to PHH, was reinstated as the decision of the three-judge panel on those questions. That panel found RESPA unambiguous, and therefore did not defer to the CFPB’s interpretation consistent with the first step of the Chevron deference test.”
She also mentioned there are deference considerations in a case currently pending in the Seventh Circuit Court of Appeals, CFPB v. Townstone, No. 23-1654. The point, she said, is there are case decisions that have been relied upon for years, like the seminal Supreme Court decision in Smiley v. Citibank that allows for exportation of late fees as interest, and Loper has the potential to turn these decided matters of law into areas of uncertainty.
The fallout of Loper can be broken down into two parts, Masur said. The first is a statute of limitations issue – can these previous decisions be challenged, or has the period to bring the case run out? While the Administrative Procedure Act (APA) does not explicitly state a statute of limitations, in general, there is a six-year limitation to bring private actions against the federal government. The question then becomes, when does that six-year countdown start, Masur said, and right now, it is impossible to say.
Some precedent states the statute of limitations begins to run as soon as a rule is promulgated, closing the window on any challenges after six years. Others might find each new enforcement action an agency brings would start a new six-year period during which the private party can file suit. There are also questions about how courts would handle a private party that did not exist during the limitations period, however calculated.
The second consideration of Loper is the resulting precedential weight that old cases decided under Chevron will have going forward. This calls into questions of stare decisis – a Latin term literally meaning “let the decision stand.” Stare decisis is the foundation of most common law systems and holds that courts and judges should honor the decisions and opinions from prior cases. In this instance, once Chevron is overruled, stare decisis may have little weight, because the prior decisions will have been built on a foundation (Chevron) that no longer exists.
Masur mentioned there was a possibility that because of this, the Loper decision may lead to a “free for all,” with previous decisions being challenged under the new, non-Chevron analysis, and possibly being overturned. However, the concept of stare decisis could prevent this from happening.
“Stare decisis is about not upsetting people’s reliance interests,” Masur said. “[For example,] a whole industry has grown up on an understanding of what the word ‘interest’ means, or what the word ‘creditor’ means. If we were to overturn that understanding now, that would throw things into turmoil. It would be very difficult for everyone trying to operate in the space.”
This argument has some weight, Masur said, and may save some of the previous cases, but probably not all.
Policy-wise, Campisi said there is “significant costs and no benefit” to the uncertainty that Loper could cause.
“If all the work that agencies are doing has no weight, and could be disagreed with in any particular court, we end up with a host of conflicting, different interpretations in different geographies within jurisdictions all over the place, and that is very costly,” she explained. “And that cost is borne not just by the entities trying to figure out how to comply with those rules, but ultimately by consumers as those costs are passed down.”
Masur said the overturning of Chevron could be a double-edged sword. On the one hand, as Campisi mentioned, it could cause a lot of short-term uncertainty. On the other, it could lead to some long-term stability because the agency will then have a definitive meaning of a statute (once it is interpreted by the courts), and so political issues, like whether a president is pro- or anti-regulation, would become less important.
“It’s probably not the best state of affairs, because I believe in agency expertise, but it could lead to stability in the longer term,” Masur said.