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The Shift: Challenges to Regulators Mount as the U.S. Supreme Court Mulls Chevron Deference 

The 40-year-old doctrine of judges deferring to federal agencies appears headed toward demise, an apparent fate that has spurred a rash of challenges to regulations by plaintiffs increasingly confident of victory.

Federal regulations banning noncompete agreements, calling for sharp reductions in greenhouse gas emissions and requiring public companies to disclose their emissions are among recently finalized U.S. agency rules that were quickly greeted by lawsuits filed by business and industry groups arguing that the nationwide mandates exceed the agencies' statutory authority.

While courtroom challenges to regulations are not new, this recent round of lawsuits appears to have been brought with greater regularity and confidence of victory.

The U.S. Chamber of Commerce's opposition to the Federal Trade Commission's noncompete agreement prohibition is rooted in the argument that the rule violates the freedom to contract.

Meanwhile, industry is claiming that the Environmental Protection Agency paid insufficient heed to data indicating that the EPA's demand for greenhouse gas emissions reductions is too much, too soon.

And publicly traded companies are claiming that the Securities and Exchange Commission, as a regulator of the investment community, lacks statutory authority to issue regulations on environment matters.

The FTC, EPA and SEC counter that their controversial regulations fall within their respective authority under the FTC, Clean Air and Securities Exchange acts, a response that likely would have scared away would-be challengers a decade ago. At that time, courts regularly deferred to the agencies' reasonable interpretations of their ambiguous statutory authority based on the U.S. Supreme Court's 1984 decision in Chevron v. Natural Resources Defense Council.

Then, the mere mention of "Chevron deference" was generally sufficient to discourage all but the riskiest and most well-heeled plaintiffs from taking the gamble and sparing the litigation expense of mounting a court challenge. But a case now awaiting a Supreme Court decision has placed the 40-year-old deference standard in doubt and is giving hope to those opposing federal regulations.

The Conversation

Within the next six weeks, the Supreme Court is expected to render its decision in the consolidated cases Relentless Inc. v. Department of Commerce and Loper Bright Enterprises v. Raimondo.  The justices are expected to rule that Chevron remains good law or, if not, to provide guidance on whether and when courts should defer to federal agencies on their regulations.

Attorneys and other commentators are weighing in on what diminution or elimination of Chevron deference would mean for the vitality of these agencies and their rules.

Retired Supreme Court Justice Stephen Breyer, who applied Chevron deference during his years on the bench, wrote in his recently published book "Reading the Constitution: Why I Chose Pragmatism, Not Textualism" that the long-held deference standard provides "a flexible and workable understanding of the ‘judicial Power’ [which] includes the ability to defer to the reasonable interpretations of agencies on matters that Congress intended to assign to their domain of expertise.”

Retired Judge David Tatel, of the D.C. Circuit, has bemoaned the potential demise of judicial deference to the expertise of agencies.

"As the world keeps getting more complex, we need expert agencies more than ever," Tatel said recently. "Anyone concerned about the environment or with safe medicines or unadulterated food or cars that drive safely has very good reason to worry about where this Supreme Court is headed.”

But John Vecchione, the counsel of record for Relentless Inc. in the Supreme Court, called the Chevron deference doctrine "deeply flawed" and constitutionally verboten.

"Chevron directly interferes with judges' Article III duty to apply their own independent judgment when saying what the law is," Vecchione wrote in papers filed with the justices.

"The Constitution makes judges independent of the political branches precisely because their core function—exercising judgment as to the meaning of legal rules—is fundamentally distinct from making policy choices," he added. "Chevron traduces these principles: It compels courts to abandon their own independent judgment and interpret ambiguous statutes by instead deferring to the agency's policy-driven assertions of what the law should be."

However, not all believe the demise of Chevron would cause a major shift in regulatory enforcement.

Attorneys Michael Lotito, of Littler Mendelson  and Randel Johnson, of Cornell Law School, recently wrote that, regardless of Chevron's fate, "the administrative state will grind on at the enforcement level, where the regulated citizenry most often bumps up against the awesome power of government. Indeed, whatever the Supreme Court decides, perhaps little will change at the ground level of day-to-day enforcement activities."

The Significance

The diminution or elimination of Chevron deference would likely spur more lawsuits challenging existing and future regulations as being beyond the challenged federal agencies' statutory authority.

At the same time, lobbyists seeking increased federal regulations—such as environmentalists and consumer rights advocates—would be spurred to press Congress to state with specificity in legislation each federal agency's authorities and duties, a clear-statement task for which the legislative demands of compromise are ill-suited.

U.S. Solicitor General Elizabeth Prelogar addressed this difficulty in her brief to the Supreme Court encouraging the justices to hold fast to the Chevron deference doctrine.

“Stare decisis principles weigh heavily in favor of adhering to Chevron, which has been a cornerstone of administrative law reflected in thousands of judicial decisions—and which has provided a stable background rule against which Congress has legislated—for 40 years,” Prelogar wrote. “Given its central importance, overruling Chevron would threaten settled expectations in virtually every area of conduct regulated by federal law.”

The Information

Want to know more? Here’s what we’ve discovered in the ALM Global Newsroom:

• Overruling 'Chevron' Would Trigger 'Convulsive Shock,' US Tells Supreme Court
• Supreme Court Debates Agency Expertise, Separation of Powers in 'Chevron' Case
• Breyer Makes His Case Against Texualism and Originalism
• 'Reason to Worry': Ex-DC Circuit Judge Warns of SCOTUS' Embrace of 'Major Questions' Doctrine 
• Democratic Attorneys General Back EPA's Power Plant Rule Against GOP Lawsuit
• SEC Pauses Climate Disclosure Rule Amid Legal Challenges
• On 'Chevron' Deference and a Path Forward
• Challenges to Noncompete Ban Already Hitting Courts, Setting Up Showdown Over FTC's Powers

The Forecast

The rise in legal challenges to federal agency regulations will likely be slowed only by the Supreme Court's full-throated reiteration of Chevron deference along the lines of the high court's reassurance of the vitality of Miranda warnings in its 2000 decision in Dickerson v. United States.

As is currently the case with Chevron, many Supreme Court observers believed the justices' 1966 holding in Miranda v. United States was in severe jeopardy prior to the Dickerson ruling. Dickerson put those concerns to rest as then Chief Justice William Rehnquist, writing for the 7-2 majority, stated that "Miranda has become embedded in routine police practice to the point where the warnings have become part of our national culture."

Chevron deference, despite its 40-year history, cannot be said to be so embedded in judicial culture as to withstand change by the Supreme Court, which created it. Chevron, unlike Miranda, is rooted in methods of statutory interpretation and not the constitutional rights to remain silent and have the assistance of counsel.

In addition, a supermajority of the current court has expressed skepticism of the administrative state and has found instances of statutory overreach by agencies in such cases as Sackett v. Environmental Protection Agency in 2023 and AMG Capital Management v. Federal Trade Commission in 2021.

In Sackett, the court said EPA too broadly defined regulated "waters of the United States" in interpreting the Clean Water Act. In AMG Capital, the court held that the FTC lacks statutory authority to seek equitable monetary relief such as restitution or disgorgement.

If this recent past is indeed prologue, we can expect the Supreme Court to weaken Chevron and rule that substantially less deference—if any—is owed to federal agencies regarding their reasonable interpretations of ambiguous statutory provisions related to their authority.

Such a decision would likely spur more lawsuits challenging federal regulations—and with a greater likelihood of success.

The high court is expected to render its decision on the fate of Chevron deference by the end of June.

Steve Lash is the Regulatory Editor at ALM. Contact him at slash@alm.com. On X: @Steve_Lash.