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The Death of Chevron Deference: Will You Actually See a Difference?

Several months ago, the Chamber’s Vice President of Communications suggested I write something on Chevron deference and what the Supreme Court’s decision to revisit it could mean for the business community. I practically yawned. “It’s everywhere,” I said. “Why would we need to add to the noise?” In my defense, anyone can Google what the case means or could mean. We could ask ChatGPT, although I wouldn’t recommend quoting from it in a brief. Now that the case has been decided, the desire to “sound smart” by mentioning it in casual conversations with regulated entities (read: all of the Chamber’s members) is almost irresistible.

But will it really change things? What does it mean for North Carolina? Will it lead to a sea change in the way federal agencies do business, or will it just mean your project, permit, license, or other matter will still require an uncertain litigation process to get what you believe is a lawful reading of a statute?

First, a little background. Chevron deference refers to Chevron v. NRDC, a case decided by the Supreme Court in 1984. One often overlooked fact about the case is that it was the NRDC that was challenging EPA’s restrictive reading of a statute – and therefore a restrictive reading of its own statutory authority. In other words, EPA had taken the now extremely rare position that its ability to regulate the “source” of air pollution under the Clean Air Act was more narrow than NRDC wanted it to be. The Court ruled in favor of EPA (and thus, Chevron) in a unanimous 6-0 decision. (For the nerds: three of the nine justices neither heard nor participated in the case. For the even bigger nerds, Justice Gorsuch’s mother was in house at EPA at the time, so Gorsuch has now basically reversed his mother.)

The Chevron Court set down a two-step test. First, reviewing courts must determine whether Congress directly addressed the issue that the rule sought to implement, or whether Congress clearly indicated its intent with respect to the issue. For instance, where the statute was silent or unclear as to the issue. The second step of the test is whether the challenged agency rule is based in a “permissible construction” of the statute. In other words, if a rule implements a statute that is found to be ambiguous, so long as the rule can be interpreted as being within the reasonable scope of Congressional language, it stands.

Sounds reasonable, right? But the Court did not say that the interpretation had to be the most or (even more important) the more reasonable among other possible interpretations, and that is where the problems arose. Even if the reviewing court reads the statutory command differently from the agency, it is compelled to defer. For four decades, regulated entities – NC Chamber members – have had to abide by “permissible” agency interpretations.

Now to the “blockbuster” decision released in late June. The cases consolidated under the title Loper Bright Enterprises v. Raimondo were decided on June 28. The cases arose from rules mandating that certain commercial fishing vessels in the Atlantic Ocean bear the cost of federally-certified monitors, in some cases reducing the returns of the vessels by 20% annually. (“Monitors” means, in this instance, a human being, who rides on the boat along with the crew.) The relevant statute was silent on the issue of payment for monitors in certain situations, although it spoke to this issue for monitors in other situations. Lower courts held that there was ambiguity in the statute and that requiring the vessel operator to pay for the federally-mandated monitors was a “reasonable” interpretation of the statutory language.

The Supreme Court majority agreed to hear the case solely on the issue of whether Chevron v. NRDC should be clarified or overruled. The continued viability of Chevron deference was thus teed up beautifully.

The federal Administrative Procedure Act, or APA, was enacted in 1946. A 1950 Supreme Court opinion in a case involving administrative action taken by the Federal Trade Commission observed that “the APA is a check on administrators whose zeal might otherwise have carried them to excess not contemplated in legislation creating the offices.” Sound familiar? The APA plainly states that a reviewing court, not the agency, is properly assigned the responsibility to interpret statutory and constitutional provisions and to decide all questions of law. Writing for the majority in Loper Bright, Justice Roberts pithily noted that “ambiguity is not a delegation of law-interpreting power.” He further observed that “in the business of statutory interpretation, if it is not the best, it is not permissible.” In other words, the Court was not at all equivocal in rejecting and overruling Chevron and its deference doctrine, particularly as it relates to giving agencies the ability to construct any “reasonable” interpretation of the statute in question.

So what does all of this mean to business?

The demise of Chevron deference means that federal agencies can no longer expand their jurisdiction and authority based on the wording of an ambiguous statute. Companies seeking to challenge an overbroad assertion of authority by a federal agency will now have their arguments assessed by a federal judge and not be subject to the whims of the agency exploiting poorly or incompletely drafted statutory language. (Of course, we know there’s very little of that. Ha. Haha. Hahaha.)

Federal agencies will now have to respect their lanes. They will also have to search for the “best” interpretation of the statute, even if it is ambiguous.

Congress will have to get serious about drafting statutes and will no longer be able to make broad and ambiguous grants of regulatory authority, unless they do so with specificity. No longer can those grants be accomplished through vague terms or subtle devices. Having been a part of the sausage making process at the federal level, there is no doubt this makes Congress’ job harder. Sometimes the only way a bill becomes a law is if a Cabinet member promises a certain member of Congress that the language in the legislation will be interpreted a certain way.

Going forward, Congressional action must intentionally and expressly delegate authority to federal agencies. This has the practical effect of limiting the application of federal law. The environmental advocacy community has proven itself particularly effective in broadening the jurisdictional of federal agency regulation. They will no doubt be prepared to blunt their efforts from the blow of Chevron and will likely forum shop to do so in the short run. Rest assured, however, that the business community will now at least have a fighting chance of restraining such broader readings, and those same advocates may be reluctant to create new law and thus tame their litigiousness. So, in sum, yes, Loper Bright may be the most consequential development in federal administrative law since the days of the New Deal.

But the good news regarding reining in federal agencies does not stop with the demise of Chevron deference. A day before the Loper Bright decision was announced, the Court handed down a decision in a case titled SEC v. Jarkesy. The SEC was prosecuting Mr. Jarkesy based on allegations of securities fraud and seeking substantial civil penalties. The forum chosen by the SEC was its in-house administrative process. The case was heard by an Administrative Law Judge (ALJ), employed by the SEC, and prosecuted by the SEC’s Division of Enforcement. Mr. Jarkesy sought a trial before a jury but was denied.

The SEC-employed ALJ had the authority to rule on evidence, prescribe and limit discovery, and rely on evidence not admissible before a jury. The facts determined by the ALJ were conclusive on appeal, provided there was scintilla of support for them in the record.

The Supreme Court ruled that a party against whom civil penalties were assessed is entitled to a jury trial pursuant to the Seventh Amendment where the civil penalties were punitive or deterrent in nature. In this case, the penalties were not collected for the benefit of a victim of the alleged fraud and were admittedly a deterrent.

These cases both involved federal rules and agencies, and the Seventh Amendment by its terms applies only to “Courts of the United States.” Accordingly, Jarkesy will not directly impact actions by agencies in North Carolina, unless those agencies are acting under federal law or regulation. However, Section 25 of Article I of the NC Constitution explicitly confers a right to jury trial “in all controversies at law respecting property.” This language is more explicit than, but echoes, the Seventh Amendment.

The effect of Loper Bright on NC agency action is less clear. The North Carolina Administrative Procedure Act is not the same as the federal APA. The NC APA limits the deference ALJs must give agency factual allegations and the issue of authority is specifically one that can be raised as the basis for a contested case. Not to mention that the NC Supreme Court is having its own Chevron deference moment, where Chamber member North Carolina Farm Bureau and the Chamber Legal Institute have made our views clear. But, there are many state-approved programs implementing federal law and regulations, and, at least with respect to environmental matters, the NC APA limits the degree to which state agencies can embellish federal standards and requirements.

Are these two cases together a watershed moment? Probably so. (No pun intended.)

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