On June 28, 2024, the Supreme Court handed down its decision in Loper Bright Enterprises v. Raimondo, overturning the 40-year-old decision in Chevron v. Natural Resources Defense Council. In Chevron, the Supreme Court clarified the so-called Chevron doctrine, which states that when federal law is silent or ambiguous on an issue, courts will defer to the reasonable interpretation of the federal agency responsible for enforcing the law.
In Roper, the Supreme Court reversed course and, in a 6-3 decision, held that the Chevron Principles were inconsistent with Section 706 of the Administrative Procedure Act (APA), which provides that courts shall decide “all relevant questions of law” arising in a review of an agency’s actions. The Roper majority held that while the APA requires deference to judicial review of agency policy making and factual findings, such deference does not extend to questions of statutory interpretation.
Thus, Chevron will no longer be respected, and courts will have to interpret ambiguous statutes at their own discretion.
What does this mean for the industry?
Prior cases that relied on the Chevron Principle will not be overturned. The Court specifically stated in Ropar that it will not overturn prior cases that relied on the Chevron Principle. This means that despite this new decision, parties cannot challenge prior cases that applied the Chevron Principle solely based on Ropar.
Laws that clearly address an issue remain dominant. Many commentators have described the Roper decision as a harbinger of major change, but where the law at issue is clear, the decision has no impact. The 2012 Supreme Court decision in Freeman v. Quicken Loans is a good example. In Freeman, the Supreme Court granted certiorari to address the meaning of Section 8(b) of the federal Real Estate Settlement Procedures Act (RESPA). RESPA regulators have long interpreted the statute to broadly prohibit uncollected settlement service fees, and some lower courts have followed this view and considered the statute ambiguous. The Supreme Court, however, did not agree. In a unanimous opinion written by Justice Scalia, the Supreme Court held that RESPA clearly provides that fees for settlement services must be split between two or more people to be actionable under Section 8(b). The Freeman decision did not consider deference to Chevron because the statute itself was clear. This would be the same result in the Roper decision today.
Roper has changed the way courts consider agency actions when there is a dispute over an ambiguous statute, but questions remain about how much change will actually result. The Supreme Court’s decision to abandon deference to Chevron represents an important doctrinal shift, but it remains to be seen how much change this will bring. The Roper majority argued that the Supreme Court has barely cited Chevron in the past five years, and that the doctrine has become unworkable and outdated because it has accumulated a “complex set of preconditions and exceptions.” Lower courts, however, continue to frequently cite Chevron, and studies estimate that agencies have won in most cases where the doctrine has been applied. Thus, questions remain about the degree of change that will result from Roper’s mandate that courts retain independent judgment to apply principles of statutory interpretation, such as canons of construction and legislative history, to determine the “best interpretation of the statute.”
Similarly, questions remain about the extent to which courts will continue to be guided by agency interpretations. Pursuant to Roper, courts are permitted, but not required, to use agency interpretations as guidance, as provided by the Supreme Court’s 1944 Skidmore v. Swift & Co. decision. They may also consider the statute’s interpretation at the time of enactment, or the statute’s consistent or long-standing interpretation. Moreover, the Roper majority cited Michigan v. EPA to state that when Congress’ intent suggests that an agency should have discretion over an issue, courts must consider whether the agency exercised “reasonable decision-making.” The dissenting justices in Roper argued that this analysis is little different from the first step of the Chevron analysis, which required courts to consider whether the statute is ambiguous. Courts may proceed to step 2 only if the statute contains ambiguity as to whether the agency’s interpretation is permissible under the statute.
Moreover, as Justice Kagan noted in her Roper dissent, the Supreme Court upheld Auer v. Robbins in 2019, which required judicial deference to agency interpretations when they interpret their own regulations. Initially, “Auer deference” required that an agency’s interpretation prevail “unless it is clearly erroneous or inconsistent with the regulation,” but it was narrowed in scope when it was upheld by the Supreme Court in Kissol v. Wilkie. In upholding Auer deference, the Supreme Court argued that federal courts must consider certain factors when deciding whether to apply deference. Specifically, courts must consider: (1) that the agency’s interpretation of the regulation is “genuinely ambiguous”; (2) that the agency’s interpretation of the regulation must be reasonable; and (3) that the agency’s interpretation must be “authoritative and official”; (b) that the interpretation is related to the agency’s substantial expertise; and (c) that the interpretation is fair and does not result in “unreasonable surprise” to regulated entities. Justice Kagan argued that Chevron’s case was “at least as strong as Auer v. Robbins” and that overturning the Chevron decision would have a “significant shock” to the legal system and final adjudication.
If some courts consider agency interpretations of ambiguous issues under Skidmore while other courts disagree and disregard the agency reasoning, this could lead to inconsistent interpretation of federal law. Moreover, many judges across the country may not have substantive expertise with specific regulatory schemes, particularly those related to highly regulated industries, and may interpret the very same statutes and regulations quite differently. This creates significant risk and uncertainty for regulated entities operating across jurisdictions.
Practical implications must be considered as much as doctrinal arguments. In the wake of Roper, we can expect to see more challenges to agency enforcement actions, with stakeholders arguing that courts are now free to reconsider and overturn previous agency interpretations. This is especially likely when federal agencies take novel and aggressive interpretations of the law.
We also expect to see an increase in challenges to agency rules and regulations, particularly in areas not specifically addressed by Congress or legislation. Regulators such as the Consumer Financial Protection Bureau have relied heavily on informal regulatory guidance that is not subject to notice-and-comment rulemaking or judicial review. Will the Roper decision affect agency enforcement priorities and approaches? Agencies may also consider the decision in their rulemaking process to craft regulations that are more likely to withstand challenge.
Moreover, the Roper decision may affect legislative drafting, forcing Congress to avoid ambiguities that previously had been resolved by the executive branch. Drafters can no longer assume that ambiguous statutory language will be conclusively interpreted by a friendly executive branch. Congress may choose to more explicitly delegate interpretive authority to implementing agencies to remove ambiguities that should otherwise be resolved by the courts.
Meanwhile, in day-to-day business, regulated entities are unlikely to deviate significantly from existing policies and procedures (many of which were developed based on agency guidance). It is important for companies to maintain regulatory certainty and a productive relationship with reasonable regulators.
summary
The Roper decision marks a new chapter in administrative law, but its overall impact is still unclear and will require continued attention and analysis. In the meantime, industry participants should continue to heed existing agency guidance while also considering opportunities to challenge extreme agency positions, such as when the statute clearly takes an opposing position or when the agency’s view is not the “best interpretation of the statute.”
