On October 13, SCOTUS granted cert. in the case of Relentless, Inc. v. Dept of Commerce, a case about whether the National Marine Fisheries Service has the authority to require herring fishing vessels to pay some of the costs for onboard federal observers who are required to monitor regulatory compliance.  Does that ring a bell?  Probably, because it’s exactly the same issue on which SCOTUS has already granted cert. in Loper Bright Enterprises v. Raimondo. (See this PubCo post.) Why grant cert. in this case too?  It’s been widely reported that the reason was to allow Justice Kenji Brown Jackson, who had recused herself on Loper Bright, to participate in what will likely be a very important decision: whether the Court should continue the decades-long deference of courts, under Chevron U.S.A., Inc. v. Nat. Res. Def. Council, to the reasonable interpretations of statutes by agencies (such as the National Marine Fisheries Service or, as has happened fairly often, the SEC, see this Cooley News Brief). The question presented is “ [w]hether 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 decision could narrow, or even completely undo, that deference. The grant of cert provided that the two cases will be argued in tandem in the January 2024 argument session. Mark your calendars.

The doctrine of Chevron deference mandates that, if a statute does not directly address the “precise question at issue” or if there is ambiguity in how to interpret the statute, courts must accept an agency’s permissible interpretation of a law unless it is arbitrary or manifestly contrary to the statute. Of course, the  conservative members of the Court have long signaled their desire to rein in the dreaded “administrative state.” (See, for example, the dissent of Chief Justice John Roberts in City of Arlington v. FCC  back in 2013, where he worried that “the danger posed by the growing power of the administrative state cannot be dismissed.”) And that’s especially true when agencies are advancing regulations that conservative judges perceive as too “nanny state.”  But, in recent past cases, SCOTUS has resolved issues without addressing Chevron, looking instead to theories such as  the “major questions” doctrine. (See this PubCo post.) This case, however, together with Loper Bright, may well present that long-sought opportunity.

Background.  The facts of Relentless are quite similar to Loper Bright, so I won’t linger on them. Let’s just say that Atlantic herring are getting their day in Court.  Both relate to interpretations by the National Marine Fisheries Service (referred to as the Agency) of the Magnuson–Stevens Fishery Conservation and Management Act (MSA), first passed in 1976 to “respond to the threat of overfishing and to promote conservation.” The MSA governs marine fisheries management in U.S. federal waters and assigns responsibility for administration to the Secretary of Commerce, who has delegated administration to the Agency, which is “charged with promoting the sustainability of the nation’s fisheries.” The MSA establishes regional councils that participate in the creation of fishery management plans, which, under the MSA, may require that observers be carried on board U.S. fishing vessels to collect data for the conservation and management of the fishery.  In 2020, the Agency approved a final rule, proposed by o ne of the regional councils, that “provided general guidelines for industry-funded monitoring in all of its fishery management plans and specifically provided for the owners of herring vessels to bear the expense of contracting for some of the monitors engaged on their vessels.” Objecting that they may be subject to costs of up to 20% of returns, the owners of two fishing vessels, one of course being named “Relentless,” challenged the authority of the Agency to adopt the rule imposing a payment requirement on vessel owners or operators.  The district court concluded that “the rule is a permissible exercise of agency authority under the statute governing fishery stocks and conservation, that its promulgation followed proper procedures, and that it does not violate the Constitution,” and granted summary judgment for the government. The Plaintiffs appealed, and a three-judge panel of the First  Circuit affirmed, concluding that the rule was “a permissible exercise of the agency’s authority and… otherwise lawful.”

First Circuit opinion.  Plaintiffs made a number of claims, but the focus here is on the application of Chevron. Employing “the familiar Chevron two-step analysis,” the Court considered first, “whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter.” Second, “[i]f the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.”

To Plaintiffs’ contention that the MSA does not authorize industry-funded monitoring and that, as a result, the Agency exceeded its statutory authority in promulgating the rule, the court viewed that argument as facing “an uphill textual climb,” especially given that the MSA expressly provided for observers that would collect data. Plaintiffs, however, contended that the statute contained “no language allowing the Agency to force plaintiffs to pay for those monitors.” The court responded that the “default norm” is that the government does not reimburse regulated entities for the cost of compliance, citing as illustrative requirements regulatory mandates for specific fishing gear or an EPA-required scrubber or a monitoring device on a smoke stack.  According to the court, “[w]hen Congress says that an agency may require a business to do ‘X,’ and is silent as to who pays for ‘X,’ one expects that the regulated parties will cover the cost of ‘X.’” Plaintiffs argued that this case is unusual in type and degree, but the court did not view those differences as material—companies have to pay for the mandatory audits of their financials, don’t they? The “fact that costs of complying with one regulatory requirement are greater than the costs of complying with another regulatory requirement does not mean that the former is unlawful.”

Plaintiffs contended that, “because Congress expressly authorized the imposition of fees in three instances, its failure to do so in the instance of observer costs…must mean that no such costs can be imposed on plaintiffs.” However, citing Loper Bright, the court pointed out that the MSA isn’t really silent on the matter; it does address payment.  In a broadly applicable section, the court pointed out, the MSA specifically allows the Agency to suspend or revoke the license of any vessel if the owner or operator of the vessel does not pay for any observer services provided. That is, the text of the statute is not silent, but rather “provides affirmative confirmation that Congress presumed that vessel owners would bear the cost of complying with monitoring requirements.” In addition, the court maintained, the three instances did not provide apples-to-apples comparisons that would give rise to an inference that the omission here was intentional.  Again citing Loper Bright, the court reasoned that the existence of a “different funding mechanism” for other fishery programs “does not indicate that Congress intended to preclude the entirely different mechanism of industry-funded monitoring,” particularly where the programs operate differently. Plaintiffs also tried, without success, to persuade the court that, while the at-sea-monitors “do not have the same duties as ‘observers’ according to the regulation, they are federal agents performing federal, not industry, tasks and interfering with their duties is a federal crime,” and that the funds paid by the industry to third-party monitors are effectively fees paid to the Agency.

In the end, the court had “no trouble finding that the Agency’s interpretation of its authority to require at-sea monitors who are paid for by owners of regulated vessels does not ‘exceed[ ] the bounds of the permissible.’”  Interestingly, the court declined to indicate whether its conclusion was a product of Chevron step one or step two. Instead, the court reiterated that the statute expressly authorized the Agency to require vessels to carry monitors. “And at the very least,” the court asserted, “it is certainly reasonable for the Agency to conclude that its exercise of that authority is not contingent on its payment of the costs of compliance.”  (By comparison, the decision in Loper Bright found that the statute was silent on requiring industry-funded monitoring, leading that court to move to step two, where it found the Agency’s interpretation to be reasonable and deserving of deference.) Accordingly, the court held that “the rule requiring plaintiffs to bear the costs of complying with on-board monitor regulation is authorized by Congress” and affirmed the judgment of the district court.

Petition. Relentless then submitted a petition to SCOTUS for cert. The petition began by comparing Secretary of Commerce Gina Raimondo to George III: likening their grievances with the Secretary and other Respondents to those caused by George III, who “sent hither swarms of Officers to harass” the people of New England “and eat out their substance,” Petitioners contended that Respondents promulgated a regulation that requires at-sea monitors “to be paid for by the very fishing vessels forced to carry them” without explicit Congressional authority. Nothing in the MSA, they contend, even “hints that such federal observers will be paid by the regulated vessels of New England’s herring fishery.” According to Petitioners, the MSA was clear that industry funding was available only in three specific circumstances, but those did not apply to Petitioners. In essence, Petitioners asserted, the Agency did not have  statutory authority to adopt the rule requiring vessel owners to pay for any monitors required under the rule. 

Petitioners warned that the danger in the decision was that whenever “a statute allows an inspector of any kind, even if Congress appropriates no money for such inspectors, the application of Chevron and the mere existence of ‘necessary and appropriate’ language in a statute will allow an agency to escape much of the ‘power of the purse,’ which is Congress’s main check against the Executive branch.”  According to Petitioners, the two fishing vessels involved here have annual gross receipts below $11 million, and the daily cost of these required monitors can “exceed the profits from a day’s fishing for herring.” This overreach by the administrative state, they contended, “endangers liberty for every citizen.” Petitioners contended that the final rules were, in part, designed “explicitly to elide Congressional prohibitions on burdening fishers in the New England fisheries and were expressed as dissatisfaction with Congressional appropriations for the observer program.”  That is, “the new requirement was imposed because the regulators wanted more monitoring than Congress would fund.”

With regard to the Chevron issue, on which SCOTUS granted cert., Petitioners observed that “this case travels with Loper Bright.  While the vessels differ, the statute and the regulation at issue are the same.  The wrongful application of Chevron is also the same.  In fact, the application of Chevron by the First Circuit was even worse and more sweeping than what the D.C. Circuit did….The profligate use of Chevron in this case demonstrates how it strips citizens of their right to control their government at every stage.” According to Petitioners, when Congress decided to require vessels to carry observers, “no citizen of New England could tell from reading the proposed statute that the fishing vessels would have to pay for these officers doing work for the government.” The First Circuit’s application of Chevron, and particularly, they argue, that court’s assertion of a “default norm”—that “[w]hen [C]ongress says that an agency may require a business to do ‘X,’ and is silent as to who pays for ‘X,’ one expects that the regulated parties will cover the cost of ‘X’”—“creates an expansion and overreach of the regulatory state and its burdens beyond anything this Court has ever countenanced….The opinion below, if not corrected, will allow the administrative state unprecedented leeway to use silence, ambiguity and a default finding of ‘reasonableness’ to get any regulation upheld.” According to Petitioners, “Congress was not silent.  It stated clearly when observers could be paid for by industry.”

By not deciding whether its decision was a product of Chevron step one or step two, Petitioners contended, the First Circuit did not apply the proper tools of statutory construction and disregarded the implications of specific exclusions. First, the court’s invocation of a default norm “that requires regulated entities to pay for government inspectors when Congress does not is novel and destroys many of the guardrails this Court has placed around Chevron.” Second, Petitioners highlighted that SCOTUS “has been firm that ‘[w]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.’” Accordingly, Petitioners contended, this case just “exposes the futility of trying to cabin Chevron in the lower courts by admonitions to be careful and detailed in using all the traditional tools of statutory construction.” Given that futility, the implication seems to be, might as well overrule Chevron altogether.

On that note, Petitioners claim that Chevron is rife with problems, the “two most glaring” being the “violation of judicial independence and the assault on due process that it presents.”  Citing a 2016 law review article by Justice Kavanaugh, Petitioners argue that Chevron causes courts to leave statutory interpretation to the executive branch, a massive “judicially orchestrated shift of power[.]” With regard to due process, they contend that it is “patently unfair for a court to defer to an agency’s interpretation, especially when the agency itself is a litigant, before that same court, in the actual case at hand.” The First Circuit “not only uses Chevron to allow agencies to do almost anything, unchecked by searching judicial review, but it also has a presumption that Chevron deference is warranted whenever an agency engages in notice-and-comment rulemaking.”

Petitioners also pointed to a split in the circuits on the application of Chevron to the MSA, with the Fifth Circuit “denying Chevron deference when the MSA was silent on aquaculture.”

Respondents brief. As described by Respondents, the MSA provides that fishery management plans “may ‘require that one or more observers be carried on board’ any domestic vessel ‘engaged in fishing for species that are subject to the plan.’”  In addition, the MSA  defines  an “observer” as “any person required or authorized to be carried on a vessel for conservation and management purposes by regulations or permits” under the MSA, “including private parties hired to collect data.” Moreover, Respondents indicated, “when ‘any payment required for observer services provided to or contracted by [a vessel] owner  * * *  has not been paid,’ the [MSA] authorizes the Secretary to impose sanctions on the owner.”

Under the New England fishery management plan, if the government-funded monitoring did not meet the established coverage target of 50%, then third-party monitoring would fill that gap, arranged and paid by the vessels’ owners.  The Agency acknowledged that monitoring costs could cut annual returns-to-owner by “up to 20 percent,” but expected that number to decline with the application of various waivers and exemptions, and, in practice, the rule’s “monitoring provisions have had no financial impact on regulated vessels,” as all costs have been reimbursed.

After reprising the analyses in the decisions of the district and appeals courts, Respondents contended that the First Circuit was correct when it held that the Agency was acting within the scope of its authority in adopting the rule, which “reflects a reasonable interpretation of the Magnuson-Stevens Act that should be upheld under the Chevron framework.” Because SCOTUS had already granted cert in Loper Bright, Respondents advocated that “it would be appropriate to hold the petition in this case pending the Court’s decision in Loper Bright and then to dispose of the petition as appropriate in light of that decision.”

Cert granted. SCOTUS granted cert on the question of “[w]hether 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 case is expected to be argued, together with Loper Bright, in January.

Posted by Cydney Posner