Tag: Chevron deference

With the demise of Chevron deference, will the courts now turn to Skidmore?

In Loper Bright v. Raimondo, which overturned the 40-year-old doctrine of Chevron deference (see this PubCo post), SCOTUS highlighted the continued relevance of the doctrine articulated in Skidmore v. Swift & Co., often described as a principle of appropriate “respect” for agency interpretations, but something less than deference—i.e., the court must still be persuaded.  The doctrine of Chevron deference, as you know, mandated that, if a statute did not directly address the “precise question at issue” or if there was ambiguity in how to interpret the statute, courts had to accept an agency’s reasonable interpretation of a law unless it was arbitrary or manifestly contrary to the statute. In Loper Bright, SCOTUS made clear that, while Chevron deference might now be toast, courts could still, in exercising their independent judgment in determining the meaning of statutory provisions, “seek aid from the interpretations of those responsible for implementing particular statutes,” citing Skidmore.  Will Skidmore be the new go-to doctrine for courts adjudicating agency regulations?  Not so far, according to this new article from Bloomberg.

Democrats introduce bill to restore Chevron deference

Senator Elizabeth Warren and several other Democrats have just introduced a bill, the Stop Corporate Capture Act, designed to checkmate SCOTUS’s recent decision in Loper Bright v. Raimondo (see this PubCo post), which overturned 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. The doctrine of Chevron deference mandated that, if a statute did not directly address the “precise question at issue” or if there was ambiguity in how to interpret the statute, courts had to accept an agency’s “permissible” interpretation of a law unless it was arbitrary or manifestly contrary to the statute. According to Warren’s press release, the “Stop Corporate Capture Act codifies the Chevron doctrine and reforms the regulatory process to end corporations’ influence over the rulemaking process, prioritize scientific and public integrity, and reduce delays in implementation of laws.” The bill, she contended “will bring transparency and efficiency to the federal rulemaking process, and most importantly, will make sure corporate interest groups can’t substitute their preferences for the judgment of Congress and the expert agencies.” Senator Chris Van Hollen, another sponsor of the bill, observed that “[i]t’s impossible to overstate the harm that Americans could face if we don’t act. This legislation protects federal agencies’ bedrock authority to carry out the laws that Congress passes—while making the regulatory process more open, transparent, and grounded in the public interest.” A similar bill, introduced by Representative Pramila Jayapal, is pending in the House. Will the legislation succeed? Don’t bet on it. According to Reuters, the bill has “slim chances of passing in an election year in the Senate, which Democrats only narrowly control.” Still, there’s always next year—depending, of course, on the results of the election.  

Are the floodgates about to open after the demise of Chevron deference?

Utah v. Julie A. Su, a new opinion from Fifth Circuit, concerns an appeal of the “weighty question”—post Chevron—of whether, as phrased by the Court, “ERISA allow[s] retirement plan managers to consider factors that are not material to financial performance when making investment decisions affecting workers’ retirement savings.”  Can ERISA fiduciaries “consider ‘collateral benefits’ when making investment decisions on behalf of the pension plans they manage”? In 2021, the Department of Labor adopted a new rule that interpreted ERISA to allow retirement plan managers to consider “‘the economic effects of climate change and other environmental, social, or governance factors’ in the event that competing investment options ‘equally serve the financial interests of the plan.’” That rule had effectively reversed a “midnight regulation” adopted by the prior Administration that “forbade ERISA fiduciaries from considering ‘non-pecuniary’ factors when making investment decisions.”  The new rule was immediately challenged by a group of states, companies and trade associations, claiming that the new rule was inconsistent with ERISA and arbitrary and capricious under the Administrative Procedure Act.  The district court, following the mandate of Chevron, deferred to the interpretation of the current DOL and rejected the challenge. Plaintiffs appealed.  And then…… SCOTUS overruled Chevron. In a new decision, a three-judge panel of the Fifth Circuit has elected not to answer that weighty question on appeal—not now at least: “Given the upended legal landscape, and our status as a court of review, not first view, we vacate and remand so that the district court can reassess the merits.”   Are we about to see a slew of these types of decisions revisiting agency regulations after the demise of Chevron? Time will tell.

SCOTUS overrules Chevron—a gut punch to the administrative state?

On Friday, SCOTUS issued its decision in two very important cases, Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Dept of Commerce, about whether the National Marine Fisheries Service (NMFS) has the authority to require Atlantic herring fishing vessels to pay some of the costs for onboard federal observers who are required to monitor regulatory compliance. To be sure, the transcendent significance of these cases has little to do with fishing and everything to do with the authority of administrative agencies to regulate: the question presented to SCOTUS was 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. 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” (think, “reasonable”) interpretation of a law unless it is arbitrary or manifestly contrary to the statute. In a majority opinion by Chief Justice John Roberts, the Court rejected the doctrine: the “deference that Chevron requires of courts reviewing agency action cannot be squared with the [Administrative Procedure Act].” In case you scoff at the significance of the decision, consider the seminal nature of the doctrine as described in this 2006 article by Cass Sunstein: Chevron “has become foundational, even a quasi-constitutional text—the undisputed starting point for any assessment of the allocation of authority between federal courts and administrative agencies. Ironically, Justice Stevens, the author of Chevron, had no broad ambitions for the decision; the Court did not mean to do anything dramatic. But shortly after it appeared, Chevron was quickly taken to establish a new approach to judicial review of agency interpretations of law, going so far as to create a kind of counter-Marbury for the administrative state.” Alluding to language from Marbury, Sunstein proclaimed that “Chevron seemed to declare that in the face of ambiguity, it is emphatically the province and duty of the administrative department to say what the law is.”  Not anymore. A six-justice majority of the Court has just overruled Chevron, with concurrences by each of Justices Clarence Thomas and Neil Gorsuch and a dissent by Justice Elena Kagan, joined by Justices Sonia Sotomayor and Ketanji Brown Jackson (only on Relentless). The implications of the decision are almost boundless—every current and future federal regulatory regime could be affected. As Kagan wrote in her dissent, this decision “puts courts at the apex of the administrative process as to every conceivable subject—because there are always gaps and ambiguities in regulatory statutes, and often of great import. What actions can be taken to address climate change or other environmental challenges? What will the Nation’s health-care system look like in the coming decades? Or the financial or transportation systems? What rules are going to constrain the development of A.I.?  In every sphere of current or future federal regulation, expect courts from now on to play a commanding role.”

Atlantic herring get their day in court—does it spell the end of Chevron deference?

On Wednesday, SCOTUS heard oral argument—for over three and a half hours—in two very important cases, Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Dept of Commerce, about whether the National Marine Fisheries Service (NMFS) has the authority to require Atlantic herring fishing vessels to pay some of the costs for onboard federal observers who are required to monitor regulatory compliance. And they’re important because… why? Because one of the questions presented to SCOTUS was 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.  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,” especially when agencies are advancing regulations that conservative judges perceive as too “nanny state.” And overruling Chevron is one way to do just that.  (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,” not to mention the concurring opinion of Justice Neil Gorsuch in the 2016 case, Gutierrez-Brizuela v. Lynch, where he referred to Chevron as an “elephant in the room” that permits “executive bureaucracies to swallow huge amounts of core judicial and legislative power.” And then there’s Justice Brett Kavanaugh’s 2016 article, Fixing Statutory Interpretation, in which he argues that Chevron is a “judicially orchestrated shift of power from Congress to the Executive Branch.”  See the SideBars below.)  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.) The two cases now before the Court, however, may well present that long-sought opportunity. Depending on the outcome, their impact could be felt far beyond the Marine Fisheries Service at many other agencies, including the SEC and the FDA. Will we soon be seeing a dramatically different sort of administrative state? To me, it seemed pretty clear from the oral argument that SCOTUS is likely to jettison or significantly erode Chevron. Among the most conservative justices at least, there didn’t seem to be a lot of interest in half-measures—been there, done that. (The concept of the Court’s limiting its decision to whether statutory silence should be treated as ambiguity, as some had hoped, did not even come up for serious discussion.) But what approach the Court might take—overrule Chevron with no alternative framework suggested, adopt a version of “weak deference” as outlined in a 1944 case,  Skidmore v. Swift & Co., or possibly even “Kisorize” (as they termed it) Chevron by imposing some serious limitations, as in Kisor v. Wilkie—that remains to be seen.

Relentless Inc. v. Dept. of Commerce: SCOTUS grants cert. to another case about Atlantic herring—and Chevron deference

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.

Will Chevron deference survive? Why you might really care about a case about fishing

On May 1, SCOTUS granted cert in the case of Loper Bright Enterprises v. Raimondo, a case about whether the National Marine Fisheries Service has the authority to require fishing vessels to pay some of the costs for onboard federal observers who are required to monitor regulatory compliance. So why is this relevant to public companies? Because one of the questions presented to SCOTUS was 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 SEC). The doctrine of Chevron deference, articulated in that case, mandated that, if there is ambiguity in how to interpret a statute, courts must accept an agency’s interpretation of a law unless it is arbitrary or manifestly contrary to the statute. The decision, expected next term, could narrow, or even completely undo, that deference. 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.”) But, in recent past cases, the Court has resolved issues and avoided addressing Chevron. This case, however, may well present that long-sought opportunity. Depending on the outcome, its impact could be felt far beyond the Marine Fisheries Service at many other agencies, including the SEC.

New challenge to Nasdaq board diversity rule

A new petition has been filed challenging the Nasdaq board diversity rule (see this PubCo post). The National Center for Public Policy Research filed the petition on Tuesday with the U.S. Court of Appeals for the Third Circuit, but asked the court to transfer the proceeding to the Fifth Circuit, where an earlier petition filed by the Alliance for Fair Board Recruitment is pending. (See this PubCo post.) The new Nasdaq listing rules, which were approved by the SEC on August 6, adopt a “comply or explain” mandate for board diversity for most listed companies and require companies listed on Nasdaq’s U.S. exchange to publicly disclose “consistent, transparent diversity statistics” regarding the composition of their boards.

SCOTUS keeps agency deference alive in Kisor v. Wilkie. But is it just a “stay of execution”?

Today, SCOTUS decided Kisor v. Wilkie, an important case that raised the question of whether to overrule the decades-long deference of courts to the reasonable interpretations by agencies (such as the SEC) of their own ambiguous regulations, often referred to as Auer deference (or Seminole Rock deference, referring to Auer’s antecedent). SCOTUS, with Justice Kagan writing the majority opinion (with Chief Justice Roberts as the swing vote), said no. Justice Gorsuch (and three other Justices) would  overturn Auer. According to Gorsuch, the majority’s decision was “more a stay of execution than a pardon.”

The “greatest judicial power grab since Marbury v. Madison”? SCOTUS considers Kisor v. Wilkie

As noted in this PubCo post, SCOTUS recently heard oral argument in Kisor v. Wilkie, a case involving the interpretation of a regulation issued by the Department of Veteran’s Affairs. In Kisor, a Vietnam vet, suffering from service-related PTSD, sought retroactive disability benefits from the VA. Interpreting the meaning of the term “relevant” as used in one of its own regs, the VA denied his claim for retroactive benefits.  Why is this case important to public companies?  Because the question presented to the Court was whether to continue the decades-long deference of courts to the reasonable interpretations by agencies (such as the SEC) of their own ambiguous regulations, often referred to as Auer deference (or Seminole Rock deference, referring to Auer’s antecedent). The decision, expected by this summer, could narrowly restrict, or even completely undo, that deference.

The case represents yet another example of concentrated efforts to dismantle or severely limit the administrative state—or the “deep state,” depending on your point of view.  As explained in the opening of the amicus brief of the Cato Institute, quoting Chief Justice Roberts in dissent, “[o]verturning Auer would be a modest but important check on the ‘the danger posed by the growing power of the administrative state.’ City of Arlington, Tex. v. F.C.C.” What’s more, in his cert. petition, Kisor argued that “‘[r]evisiting Auer deference [would be] an appropriate place to begin’ a more complete ‘reconsideration’ of ‘existing doctrines of agency deference,’ including under Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc.” (quoted from the amicus brief of a group of Professors of Administrative Law and Federal Regulation in support of neither party).