June 18, 2024
Any day now, the U.S. Supreme Court is expected to hand down rulings in two cases that could significantly alter how federal regulations are interpreted, impacting a broad range of American industries, from health care, to energy, to technology and communications.
The two cases before the court are Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce. The issue at stake is what’s known as the “Chevron deference” standard, a 40-year-old legal precedent responsible for the current rulemaking power of federal agencies. A decision striking down or weakening the Chevron deference standard would completely turn the federal regulatory landscape on its head, curbing the power of federal agencies and shifting policymaking toward the courts.
What is Chevron deference?
The doctrine of “Chevron deference” comes from the Supreme Court’s ruling in Chevron v. Natural Resources Defense Council in 1984. Since then, the standard has been referenced in more than 18,000 judicial opinions, including on issues involving the Environmental Protection Agency (EPA), U.S. Health & Human Services (HHS), the Food & Drug Administration (FDA), and the Federal Communications Commission (FCC).
In that decision, the Court laid out a two-pronged system for U.S. courts to determine whether a federal agency has the power to impose its own interpretation of a federal statute or law passed by Congress:
- Has Congress already given specific guidance for the issue at hand? If yes, then the agency – and any stakeholders impacted by that policy – must adhere to Congress’ guidance. But if not, courts are required to defer to the agency’s interpretation.
- Is the agency’s interpretation of the statute permissible/reasonable? If it is not, the court may prevent the agency’s interpretation from being codified. If it is, then the agency’s interpretation of the statute becomes the law.
Ultimately, this “Chevron deference” doctrine gives federal agencies rulemaking authority over ambiguities in federal laws and legislation. That’s when the federal agencies rely on large teams of policy experts. It’s also why federal agencies often solicit feedback from relevant industries and stakeholders any time they are issuing a new or updated regulation.
Theoretically, this prevents judges with limited knowledge of a given industry, like energy or health care, from having to make decisions and interpretations on complicated public policy matters. In turn, this standard allows industry experts—at agencies like the EPA or FDA —to call the shots.
However, this power can create overbearing agencies that act in the interests of the current administration, rather than the industries they are supposed to represent through balanced and fair regulations and policies.
What will the Supreme Court decide?
Based on oral arguments heard in January this year, the Supreme Court is expected to overturn or significantly weaken Chevron in its anticipated rulings in Loper and Relentless. Although these cases are about fisheries, their applicability is broad. There are two likely outcomes of the Court’s decision:
- Overturning Chevron altogether. A decision overturning Chevron deference entirely would roll-back the power of federal agencies. This would likely open the door to new lawsuits challenging previous regulations made under the Chevron deference standard.
- Weakening Chevron. A decision weaking Chevron deference (but not overturning it altogether) would still roll-back the power of federal agencies in determining vague or ambiguous laws passed by Congress. The Court would likely need to address what qualifies as an ambiguous law – and when the Chevron doctrine does or does not apply in the case of important policy decisions.
What does this mean for stakeholders?
The end of Chevron will usher in a new era of regulatory authority driven largely by the U.S. judiciary. With federal agencies no longer controlling industry-wide regulations, federal courts – as well as legislative bodies passing future laws – will play a crucial role in regulating any industry that is currently impacted by a federal regulation.
There will likely be a significant period of uncertainty and potential disruption. But this also creates new avenues for American stakeholders, including consumers, to engage and participate in shaping federal regulations through the judicial process.
LSG has prepared a new playbook for how to operate and influence policymaking in a post-Chevron deference world. With deep expertise helping corporations from energy to healthcare navigate federal policymaking, we’re excited to help our clients deliver impact while navigating this new landscape.