Agencies, Schmagencies: The Future of Federal Regulation After SCOTUS Tossed Out ‘Chevron’
It’s gonna be a mess. Here’s a primer.
THE SUPREME COURT’S 6–3 DECISION last week in Loper Bright Enterprises v. Raimondo represents a seismic event in American regulatory law. The general public can’t be expected to be familiar with what the case means or its implications for how our government works—it’s an incredibly complex subject, the kind of thing that takes weeks to teach properly in law school. But because the media coverage hasn’t done justice to some of the important details, here’s a quick-and-dirty crash course on why Loper Bright is such a big deal.
The Court expressly overruled the landmark decision in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, which was so consequential that it’s been cited by courts over 18,000 times since it came down in 1984. There’s a historical quirk here: The Chevron case involved matters that arose at the Environmental Protection Agency at a time when Justice Neil Gorsuch’s mother was its administrator (although by the time the ruling was handed down, she had resigned over other matters). Not only is Gorsuch in the majority in Loper Bright, but he wrote the 5–4 majority opinion in Ohio v. EPA, which was also announced last week. The implications of Loper Bright can only be understood when the decision is viewed alongside Ohio.
And they are grave: Although conservative commentators have depicted the Loper Bright ruling as taking power from unelected bureaucrats and restoring it Congress, and ultimately to the voters, the practical reality is that the ruling will effectively take lawmaking authority away from Congress and the executive branch—instead making judges into policymakers, with the Supreme Court justices in particular becoming the top policymakers in the land.
Let’s start with first principles.
The Constitution vests lawmaking power with Congress. Starting in the Progressive era, and again during the New Deal, Congress established many new federal regulatory agencies—what has been called an “alphabet soup” of agencies. These entities are part of the executive branch; their authority goes up a chain of command to the president. Not only do they execute the law, though, but they make laws too—that’s what “regulations” really are. In the 1930s, a series of litigants challenged regulations on the theory that only Congress can make laws under its Article I authority. But after several years of clashes, the Supreme Court stepped back, effectively approving of Congress’s deputizing agencies and constitutionalizing lawmaking by entities created by Congress but headed by the president, who is the Constitution’s chief law enforcement officer. His authority does not expressly extend to making laws. The Court reasoned that, so long as Congress includes in legislation an “intelligible principle” (a standard originally set forth in 1928) to guide agency regulations, it can effectively hand off its legislative baton to executive branch agencies to fill in the blanks of legislation that it enacts.
IN 1946, AT THE URGING of regulated industries that were worried about the lack of guiding principles for regulators, Congress passed an umbrella law known as the Administrative Procedure Act (APA), which sets forth the processes agencies must follow when they regulate, as well as the standards that courts must apply when regulations are challenged in court. Chevron is an interpretation of the APA, which has remained largely untouched since it was first enacted.
For present purposes, the critical language of the APA is contained in Section 706 (5 U.S. Code § 706), which says that if a regulation is challenged in court, a court must “decide all relevant questions of law, [and] interpret constitutional and statutory provisions.” In Loper Bright, writing for the majority, Chief Justice Roberts seized on this language and on the 1804 ruling in Marbury v. Madison (which held that the Supreme Court decides questions of law for the other branches), and held that Congress specifically directed that the courts be the final deciders when it comes to the meaning of federal statutes. Because regulations also give meaning to federal statutes, what Roberts is saying is that courts can override agencies’ reading of statutes and substitute their own judgment for that of the regulatory agencies because courts, not agencies, resolve legal ambiguities. That seems all well and good.
The problem with Roberts’s reading is that it doesn’t answer how courts should decide what Congress meant in a statute. Even after Loper Bright, there’s an argument that because Congress identifies in its statutes particular agencies as having the power to issue particular sorts of regulations, when a court applies Section 706, it should defer to the agency’s regulatory expertise because that’s what Congress wanted. In other words, in deciding “relevant questions of law,” courts should be guided by Congress’s decision that agencies should regulate. That’s fully in keeping with Marbury, too.
Essentially, that’s what the Court held in Chevron. It created a two-part test that memorialized the notion that, if a statute isn’t clear as to its meaning, courts should give agencies the benefit of the doubt and not step in and do their own regulating.
IMPORTANTLY, THE CHEVRON COURT’S rationale had three parts. The first was that, by deferring to agency regulations that are reasonable, courts create predictability and consistency within the regulated community. So long as agencies don’t go off the rails, corporations and other interested parties can assume that a regulation will be upheld. They will also know how to adapt their production and financial models to account for changes in the law. If courts instead get to decide how to regulate anew (“de novo”) then regulated entities would face a hodgepodge of laws across the country depending on which court hears a challenge. Because different courts can hear the same challenge, allowing courts to have de novo review authority could produce a result where a company has one set of laws in California and another in Texas, depending on the judge. That’s expensive, unpredictable, and possibly unworkable for companies, and ultimately, for consumers and the general public.
The second reason for deferring to agencies, the Chevron Court held, is that agencies have particularized expertise. They are populated with subject-matter experts in specific scientific and economic areas—such as water quality, airline or drug safety, or nuclear storage. Members of Congress, like federal judges, are generalists. If agencies get the benefit of the doubt, the resulting regulations are just better overall. Under Chevron, agencies received deference only if they went through a formalized process for rulemaking known as notice-and-comment, in which the public gets to weigh in on proposed rules and the agency must account for the comments when they issue a final regulation. What’s more, agencies can only engage in notice-and-comment rulemaking if Congress expressly authorizes them to. The process is laborious, tedious, and takes years—it is also further encumbered with numerous other federal statutes that bog down the process but were each aimed at ensuring the agency makes good policy judgments.
The notion that regulators are unaccountable, out-of-control actors is, in general, just not true. There are exceptions—any system as complicated as this will produce errors and cases that judges must correct—but in general, enacting a regulation is a monster of a job, with many built-in checks and balances.
The third rationale behind Chevron was groundbreaking, and it had to do with the separation of powers. The Court essentially reasoned that because regulations are laws, and because Congress can hand off its legislative baton to agencies, deference to agency rulemaking is deference to Congress. It serves the separation of powers by keeping judges out of the business of policymaking. If voters don’t like what agencies do, they can vote for members of Congress to change the law, or for presidents to change how agencies operate. They can’t do anything about judges.
Which brings us to the second important part of Section 706. It goes on to say that courts can “hold unlawful and set aside agency action, findings, and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; . . . contrary to constitutional right, power, privilege, or immunity; [or] in excess of statutory jurisdiction, authority, or limitations, or short of statutory right.” Under step one of the Chevron test, courts always had the power to strike down any regulation that was “in excess of” the power Congress gave an agency. If a regulation was not obviously contrary to a statute, step two required courts to defer to agencies’ reasonable interpretations—an analysis that closely mirrored the “arbitrary” and “capricious” language of Section 706. Congress thus baked into the APA a standard of judicial review that was not de novo—courts can upend agency interpretations only if they are “arbitrary” and “capricious,” which is a much higher bar than just “not what the judges would prefer.”
In Loper Bright, the majority opted for the latter standard—what you might call the “judges-know-better” standard.
THE OHIO CASE case applied the “arbitrary” and “capricious” language of Section 706. The case came before the Court on a request for immediate injunctive relief—a high standard that requires a showing that the plaintiff will likely win once the case gets fully underway. It also requires a showing that if the Court doesn’t step in right away, the plaintiff’s injury will be irreparable. In the Clean Air Act, Congress directed EPA to regulate states that effectively dump their polluted download air currents on neighboring states. The EPA went through the arduous notice-and-comment process and reached a conclusion that certain states had not complied with the Clean Air Act and had to take additional steps to comply. The majority (Justice Gorsuch, joined by Chief Justice Roberts and Justices Thomas, Alito, and Kavanaugh) held that the decision was so obviously arbitrary and capricious that the complaining states were entitled to emergency relief. Justice Amy Coney Barrett, in her dissent (which was joined by Justices Sotomayor, Kagan, and Jackson) rightly noted that the majority’s decision ignored a slew of standards both under the Clean Air Act and the test for injunctive relief—in effect affording the Supreme Court more power than it actually has.
Because Ohio was such an overreach, we can anticipate that the upshot of Loper Bright is that the Court will continue to grab lawmaking power for itself by striking down regulations it doesn’t like—for whatever reason and without a whiff of concern for expert agencies’ contrary judgments.
Another problem is that the lower courts will now have to figure out whether agencies get any deference anymore. On that front, some commentators have brought up a pre-Chevron test contained in a 1944 decision called Skidmore v. Swift & Co. It is true that that precedent is left intact under Loper Bright. But that case just laid out a bunch of factors courts could use to give agencies optional deference if an agency’s regulation is particularly persuasive. Step two of Chevron was more definitive. So Skidmore doesn’t meaningfully constrain courts from becoming policymakers-in-chief. Meanwhile, Congress, agencies and regulated industries have been functioning with the backdrop of Chevron for decades. All of that is now in flux.
There’s another strain of deference, Auer deference, which isn’t about agencies’ reading of statutes. Instead, it gives deference to agencies’ interpretation of their own regulations, assuming the regulations were lawfully promulgated in the first place. In Kisor v. Wilkie, the Court upheld Auer deference in 2019, which presents a slightly different issue than the one presented by Loper Bright, but could also be overruled by the Court’s new majority in due course.
TO BE FAIR, THE COURT arguably abandoned Chevron long ago, ignoring it in a number of important rulings. In recent years, the Court’s conservative justices carved out a new “major questions doctrine” that empowers the Court to decide for itself to ignore certain regulations if the majority believes that Congress could not have meant what it said in giving an agency broad powers. The major questions doctrine already effectively did what Loper Bright does: give the justices ultimate regulatory authority in America. Loper Bright is just more sweeping in its power grab (the “major questions doctrine” is a case-by-case test with no obvious standards to guide the justices’ discretion on which statutes qualify and which don’t).
What will result from last week’s ruling, undoubtedly, is uncertainty and confusion within the lower courts and among the broader public—much like the majority managed to produce with its disturbing rulings on abortion and guns.
Justice Kagan summed things up well in her dissenting opinion: “A longstanding precedent at the crux of administrative governance thus falls victim to a bald assertion of judicial authority. The majority disdains restraint, and grasps for power.” Perhaps most disturbingly, it’s not even evident that Congress could do anything about Loper Bright’s power grab, even if it wanted to. In his concurring opinion, Justice Clarence Thomas wrote that Chevron’s “license to exercise judicial power” is itself unconstitutional. For the right-wing majority, the Supreme Court is the branch that gets to do it all.
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