Yesterday, I moderated a live and virtual program at the American Bar Association Business Law Section 2023 Fall Meeting in Chicago. The program was entitled: “U.S. Supreme Court to Revisit Chevron Deference: What the SCOTUS Decision Could Mean for CFPB, FTC and Federal Banking Agency Regulations.” My co-panelists were Professor Jonathan S. Masur from the University of Chicago Law School and Lauren Campisi from Hinshaw & Culbertson.
In Loper Bright Enterprises v. Raimondo, No. 22-451, the Supreme Court has agreed to hear a case in which the petitioners are challenging the continued viability of the Chevron framework that courts typically invoke when reviewing a federal agency’s interpretation of a statute. The Chevron framework derives from the Supreme Court’s 1984 decision in Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U. S. 837. Under the Chevron framework, a court will typically use a two-step analysis to determine if it must defer to an agency’s interpretation. In step one, the court looks at whether the statute directly addresses the precise question before the court. If the statute is ambiguous, the court will proceed to step two and determine whether the agency’s interpretation is reasonable. If it determines that the interpretation is reasonable, the court must defer to the agency’s interpretation.
The petition for certiorari was filed by four companies that participate in the Atlantic herring fishery. The companies had filed a lawsuit in federal district court challenging a National Marine Fisheries Service (“NMFS”) regulation that requires vessels that participate in the herring fishery to pay the salaries of the federal observers that they are required to carry. The Magnuson-Stevens Act (“MSA”) authorizes the NMFS to require fishing vessels to carry federal observers and sets forth three circumstances in which vessels must pay observers’ salaries. Those circumstances did not apply to the Atlantic herring fishery.
Applying Chevron deference, the district court found in favor of NMFS under step one of the Chevron framework, holding that the MSA unambiguously authorizes industry-funded monitoring in the herring fishery. The district court based its conclusion on language in the MSA stating that fishery management plans can require vessels to carry observers and authorizing such plans to include other “necessary and appropriate” provisions. While acknowledging that the MSA expressly addressed industry-funded observers in three circumstances, none of which implicated the herring fishery, the court determined that even if this created an ambiguity in the statutory text, NMFS’s interpretation of the MSA was reasonable under step two of Chevron.
A divided D.C. Circuit, also applying the two-step Chevron framework, affirmed the district court. The majority concluded that under step one of Chevron, the statute was not “wholly unambiguous,” and left “unresolved” the question of whether NMFS can require industry to pay the costs of mandated observers. Applying step two of Chevron, the majority concluded that NMFS’s interpretation of the MSA was a “reasonable” way of resolving the MSA’s “silence” on the cost issue.
The Supreme Court granted certiorari to consider the second question presented in the companies’ petition for certiorari. That question is:
Whether the Court should overrule Chevron 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 takeaways from our program were:
- Industry generally favors the Chevron doctrine because it creates more certainty which leads to a more stable business environment.
- The panelists believe that the Court will overrule the 1984 Chevron framework. The Supreme Court has not cited Chevron in many years and is very suspicious of administrative agencies. In various cases, the Supreme Court has eroded the Chevron framework.
- There are hundreds of cases where courts have validated federal agency regulations based exclusively on Chevron deference, including many cases in the Supreme Court. One of the cases is the 1996 Supreme Court opinion (Citibank, N.A. v. Smiley) upholding the validity of an OCC regulation defining “interest” under Section 85 of the National Bank Act to include late fees on loans.
- It is unclear whether such regulations would be subject to further attack and whether the courts would uphold their validity based on stare decisis. The Supreme Court in Raimondo is unlikely to provide any guidance about those earlier opinions that have validated regulations based exclusively on Chevron.
- There is likely to be increased litigation challenging past and future federal agency regulations and more of those regulations will be invalidated by courts.
If you missed this program, you should consider watching the recording.