SCOTUS Overturn of Chevron: A New Era in Regulatory Compliance

Chevron Deference

The Supreme Court’s recent decision to overturn the Chevron doctrine weakens federal agencies’ power to interpret laws. Chevron deference has historically allowed courts to defer to agency interpretations of ambiguous statutes, recognizing agencies’ specialized expertise. The decision overturns this principle, shrinking the scope of agencies’ regulatory authority.

This development aligns with a broader strategy embraced by far-right American politicians, who have long advocated for reduced government intervention and oversight. The reversal echoes ideological pushes seen in conservative rulings, like the overturning of Roe v. Wade. That decision led to a surge in legal uncertainties for medical professionals navigating restrictive abortion laws. The same ideological currents now shape the regulatory framework, targeting the discretion agencies have long relied upon.

This case of fishing boats owned by companies like Loper Bright Enterprises required to pay for inspections to ensure compliance with overfishing regulations ended up being very, very notable. On the surface, such regulations seem straightforward—ensuring adherence to government mandates. Yet, overturning Chevron raises questions about agency authority and how American law may shift in coming years.

Chevron Deference

When Congress agrees on broad goals like ensuring clean air and water but lacks specific plans or the expertise to achieve these goals, it historically defers to relevant agencies like the Environmental Protection Agency (EPA). This practice, known as Chevron deference, allowed agencies to interpret and implement laws based on their specialized knowledge. Overturning Chevron limits agencies’ ability to regulate in ways businesses cannot easily contest.

Chevron deference was established by the 1984 Supreme Court case Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. This doctrine guides courts to defer to federal agencies’ interpretations of ambiguous statutes they administer. It is based on the belief that agencies, with their knowledge, are better suited to make complex policy judgments. Under Chevron, if a statute was unclear, courts upheld an agency’s reasonable interpretation within the statute’s bounds.

Historical Context: the Chevron Doctrine

Chevron deference, as a principle, allowed Congress to set broad goals—such as ensuring clean air and water—without providing specific implementation plans or detailed expertise. Historically, Congress deferred to agencies like the Environmental Protection Agency (EPA) to fill in these gaps. However, the recent ruling restricts agencies’ ability to regulate in ways that businesses and corporations cannot easily contest in court.

Critics argue that this shift is driven by the belief that regulations imposed by agencies create additional costs and limit business profit margins. This perspective is reminiscent of the Reagan era, when regulatory bodies like the EPA were intentionally weakened, leading to adverse environmental impacts. This historical precedent influences modern conservative thought, aiming to curtail agency influence.

Looking ahead, two primary scenarios could unfold. The first is a shift in regulatory decision-making back to Congress. Given Congressional gridlock, this scenario is unlikely. A more probable scenario is an increased role for courts in determining regulatory scope. This could be seen as a judicial power grab, with the courts increasingly shaping regulatory policy. This shift risks transforming regulatory practices into an expertise-phobic system, where judicial interpretations lack technical nuance.

The West Virginia v. EPA Case: Setting the Stage

The 2022 case West Virginia v. EPA set the stage for the Chevron doctrine’s eventual overturn. In this case, West Virginia challenged the EPA’s authority to regulate carbon emissions under the Clean Air Act. The rule was part of the Obama administration’s Clean Power Plan, designed to reduce carbon emissions. The rule was halted and replaced by Trump’s Affordable Clean Energy rule. Crucially, the EPA’s proposed rule had never been implemented, and raised complex questions about the scope of agency power and judicial review.

West Virginia’s challenge questioned whether a state could sue over a rule never enacted. This distinction was crucial as the US legal system normally requires that a plaintiff prove that they have been harmed by actions taken or not taken by the defendant. This ability to prove harm is referred to as having legal standing. The case centered on whether the EPA’s authority to regulate carbon emissions, as articulated in the Clean Power Plan, could be contested even if the rule was never put into effect. The challenge highlighted broader concerns about agency authority and the ability of states to challenge regulations before full implementation.

Overturning Chevron: Key Implications

The Supreme Court’s 2024 decision to overturn Chevron fundamentally shifts administrative law. The ruling eliminates deference to agency interpretations, imposing a stricter requirement for clarity. Agencies are now expected to operate within explicit congressional mandates, leading to several implications:

  • Increased Judicial Scrutiny: Agencies will face heightened scrutiny of their regulatory actions. Courts will interpret statutes based on their plain language rather than deferring to agency expertise. This shift could lead to increased litigation and regulatory uncertainty. Agencies will now need to justify their interpretations of statutes in court more frequently, potentially leading to delays and increased legal costs.
  • Regulatory Inefficiency: The removal of Chevron deference may result in greater inefficiencies within the federal regulatory framework. Agencies might become more cautious and slower in issuing new regulations, fearing legal challenges. This cautious approach could delay the implementation of important regulations, such as those addressing emerging environmental or public health issues. Agencies may also need help to keep pace with rapidly evolving sectors, like technology, where timely regulation is crucial.
  • Fragmented Regulatory Landscape: Without Chevron’s predictability, businesses operating across different jurisdictions may encounter inconsistent regulatory requirements and increased compliance costs. The removal of a unified approach to regulatory interpretation could lead to a patchwork of regulations that vary by state or region. This fragmentation could complicate efforts to achieve uniform standards and increase compliance burdens for businesses that operate in multiple jurisdictions.

Current Status of Chevron

In August 2024, the Chevron doctrine was overturned by the Supreme Court in a landmark decision. Weeks later, the decision continues to provoke debate among legal scholars and policymakers. This decision followed the 2022 lawsuit challenging Chevron deference, setting the stage for a broader reevaluation of agency autonomy and regulatory oversight.

Legal ruling

The ruling was significantly influenced by conservative think tanks and political donors, notably the Koch brothers. Their longstanding advocacy for deregulation and reduced government intervention played a crucial role in advancing this judicial shift. The Koch brothers’ efforts to shape regulatory policy reflect a broader trend where powerful private interests drive changes in legal doctrines to align with their economic and ideological goals.

Impact on Organizations and Everyday Compliance

With the removal of Chevron deference, agencies must ensure that Congress explicitly authorizes their regulatory actions. This change is likely to result in a more cumbersome regulatory process, where the need for clear legislative directives may slow down the creation and implementation of new regulations.

  • Increased Litigation Risk: Agencies may face a surge in legal challenges as businesses and interest groups seize opportunities to contest regulatory actions. This could lead to a more adversarial regulatory environment, where agencies must navigate complex legal battles in addition to their regulatory responsibilities. For instance, businesses may challenge regulations on the grounds that they exceed the agency’s statutory authority or lack explicit congressional authorization.
  • Adapting Compliance Strategies: Businesses will need to adapt their compliance strategies to navigate a more unpredictable regulatory environment. This may involve increased investment in legal and regulatory expertise to manage risks associated with ambiguous or evolving regulations. Companies will also need to engage more actively with the legislative process to advocate for clear and stable regulatory frameworks. Additionally, businesses may need to develop more robust internal compliance mechanisms to address the heightened risk of regulatory scrutiny.
  • Example Scenario: Consider a company operating in the energy sector, where environmental regulations are critical. Without Chevron deference, the company might face uncertainty regarding regulatory requirements for emissions control. This could lead to increased compliance costs as the company invests in legal consultations and regulatory adjustments. Additionally, inconsistent regulations across states could complicate the company’s efforts to implement uniform environmental practices.

Potential Consequences and Motivations

The overturn of Chevron is not merely a legal technicality but a reflection of broader political and ideological trends. Critics argue that this decision could exacerbate inefficiencies and hinder effective regulation. By demanding explicit congressional authorization for significant regulatory actions, the ruling could slow down legislative processes and complicate responses to evolving issues.

US Congress

The decision aligns with a Federalist perspective aimed at limiting the power of the administrative state, echoing the famous Lee Atwater quote stating that good government should be “small enough to drown it in the bathtub.” This perspective supports the notion that regulatory power should be carefully meted out, and Congress’ to authorize explicitly. The idea is that reducing the power of federal agencies will limit government intervention and enhance individual freedoms. Still, it raises concerns about the ability of the government to address complex and rapidly changing issues effectively.

Judicial Standing and Purpose

A critical aspect of West Virginia v. EPA was the issue of standing. To bring a lawsuit, plaintiffs must demonstrate specific and material harm caused by the defendant’s actions. The Supreme Court’s acceptance of the case says a lot about the Court’s interest in broader issues of agency deference. This emphasis on legal standing underscores the Court’s focus on the tangible impacts lowering the standard for legal standing. This standard has been lowered in this case because, as mentioned, the law West Virginia sued over had not ever been put into effect.

  • Example Cases: Historical cases where standing played a crucial role include Lujan v. Defenders of Wildlife and Clapper v. Amnesty International. These cases illustrate how standing requirements can influence the Court’s approach to regulatory issues, setting precedents for how plaintiffs must demonstrate harm to challenge regulatory actions effectively.

The Supreme Court’s decision to overturn the Chevron deference precedent reflects a significant shift in regulatory policy driven by a combination of political ideology and judicial interpretation. As businesses and regulatory agencies adapt to this new legal landscape, the long-term consequences of this ruling will unfold.

Conclusion: Navigating a New Regulatory Era

The overturn of the Chevron doctrine marks a significant shift in administrative law, with profound implications for businesses and federal agencies. As the regulatory environment becomes less predictable, businesses will need to remain vigilant and adaptable. Active engagement in the legislative process and strategic planning will be crucial for navigating the new regulatory landscape.

The evolving balance of power between Congress, federal agencies, and the judiciary will shape the future of regulatory compliance in the U.S. As businesses and agencies navigate this new era, understanding the implications of the Chevron doctrine overturn, and adapting accordingly will be key to managing regulatory challenges and ensuring effective compliance. Businesses should anticipate increased regulatory uncertainty and be prepared to invest in legal and compliance expertise to manage emerging risks.

Catherine Darling Fitzpatrick

Catherine Darling Fitzpatrick is a B2B writer. She has worked as an anti-bribery and anti-corruption compliance analyst, a management consultant, a technical project manager, and a data manager for Texas’ Department of State Health Services (DSHS). Catherine grew up in Virginia, USA and has lived in six US states over the past 10 years for school and work. She has an MBA from the University of Illinois at Urbana-Champaign. When she isn’t writing for clients, Catherine enjoys crochet, teaching and practicing yoga, visiting her parents and four younger siblings, and exploring Chicago where she currently lives with her husband and their retired greyhound, Noodle.

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