In Loper Bright Enterprises v. Raimondo, No. 22-451 (U.S. June 28, 2024), the United States Supreme Court (Roberts, J.) held that the Administrative Procedure Act (APA) requires courts to independently determine whether an agency has acted within its authority. The Supreme Court’s decision marks a departure from the highly deferential relationship developed between courts and administrative agencies over the last forty years. By overruling the precedent set by Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.[1] (“Chevron”), the Loper Bright decision has cleared the way for the judiciary to interpret ambiguous statutes with more autonomy than we have seen in decades.

In Loper Bright, a group of commercial herring fishermen challenged a requirement from the National Marine Fisheries Service that they pay an observer approximately $700 per day to monitor compliance with applicable fishing regulations while at sea. Emphasizing its detrimental financial impact, the Plaintiffs contended that the monitoring requirement exceeded the authority granted to the agency under the Magnuson-Stevens Fishery Conservation and Management Act of 1976.[2] The district court granted summary judgment for the government, finding the agency reasonably interpreted its authority under the act. On appeal, the D.C. Circuit affirmed.

The Supreme Court granted certiorari on the limited question of whether Chevron should be overruled or clarified. The judicial doctrine that had come to be known as “Chevron deference” previously empowered government agencies to flexibly adapt and update their interpretations of statutes. Chevron provided courts a strong basis to assume that an agency’s specialization rendered it the expert of its domain. As a result, courts generally deferred to an agency’s interpretation of an ambiguous statute over the court’s independent interpretation. The doctrine historically allowed agencies to change rules with relatively low judicial pushback as technology and other industry conditions evolved over time.

Loper Bright has upended the Chevron deference doctrine because the Supreme Court has now held that courts should no longer defer to an agency’s interpretation of an ambiguous statute. While the Court encourages “respectful consideration” of thorough and well-reasoned agency interpretations, as it contemplated in Skidmore v. Swift & Co.,[3] Loper Bright’s departure from Chevron disrupts the dynamic in a multitude of earlier decisions where courts relied heavily on agency guidance or enforcement strategies to determine how to interpret an unclear statute. Its implications extend to both agency enforcement actions and private lawsuits.

The Loper Bright decision represents a major change to the federal regulatory environment, particularly for sectors like retail and the financial services industry that are heavily influenced by agency rulemaking. At a minimum, granting the power of statutory interpretation more firmly to the judiciary may result in unpredictable and inconsistent rulings across trial and appellate courts. The law could also result in a slower response rate to new market realities because courts will need to more exhaustively evaluate agency decision-making through the use of experts and their own research. Furthermore, because Loper Bright lowers the barriers to challenge agency interpretations, overall litigation volume may increase.

For corporations, this change portends, at a minimum, an adjustment period. Industries like retail and financial services are subject to a wide range of regulatory oversight spanning consumer protection, labor laws, environmental policy, and more. The deference afforded by Chevron allowed federal agencies like the Federal Trade Commission (FTC), the Securities and Exchange Commission (SEC), and the Consumer Financial Protection Bureau (CFPB) to autonomously update and refine their regulatory approaches in response to evolving industry conditions and consumer behaviors. With Chevron deference no longer in play, retailers may find themselves navigating a more static regulatory environment where changes to regulatory interpretations could be slower to materialize and subject to increased judicial scrutiny.

While the overruling of Chevron deference in Loper Bright introduces some uncertainty and could lead to increased litigation, corporations may see positive outcomes that result from greater independent review by the courts.

Predictability in Regulation: A move away from Chevron deference could lead to a more predictable regulatory environment. Reducing agencies’ latitude to flexibly interpret statutes might mean fewer sudden changes in regulatory compliance requirements for businesses. This predictability could lend itself to easier long-term planning while reducing the risks associated with seismic regulatory shifts.

Increased Judicial Oversight: The newly increased role of the judiciary to review agency action and rethink agency guidance might result in more thorough scrutiny of regulations that impact a particular sector. Corporations who believe that certain regulations are overly burdensome or not properly grounded in statutory authority may thus have a better chance of seeing such regulations overturned or modified through judicial review.

Opportunities for Legal Challenges: Corporations who feel aggrieved by specific agency interpretations or actions may find it easier bring legal challenges, potentially leading to more business-friendly interpretations of regulatory statutes by the courts.

Greater Clarity and Uniformity: With courts exercising independent judgment over agency action, Congress may strive for greater clarity in new statutory language to properly articulate its legislative intent, thereby leaving less room for interpretation by the courts. For national or multinational corporations, this could simplify compliance efforts by reducing variability in how regulations are enforced across different regions.

Influence on Regulatory Process: The shift in the power dynamic between federal agencies and courts could encourage retailers to engage more proactively in the regulatory process. This may include providing comments during rulemaking and working more closely with legislators and regulators to shape favorable policies. Increased engagement could lead to regulations that work with various industries rather than against them.

Notably, while the Loper Bright decision binds federal courts, a ripple effect across state courts is possible. In some states like New York[4] and Illinois,[5] judicial deference to state agencies akin to Chevron remains intact. California,[6] by contrast, affords different degrees of deference depending on the particulars of each agency decision. In recent years, several states like Arizona[7] and Georgia[8] have passed laws closely cabining the deference afforded to state agencies. Corporations may therefore see a higher degree of deference in litigation outcomes in state versus federal courts where agency regulations are highly relevant.

Putting it into practice: For many industries, this transition could introduce a period of uncertainty as regulators evaluate how to continue issuing regulations responsive to innovation and market dynamics. With greater uncertainty in litigation results comes the possibility that corporations may experience greater success in challenging unfavorable agency actions and guidance. As the implications of Loper Bright unfold, businesses should consider whether and where to engage more actively in the legal processes that will shape the regulations governing the industry.

FOOTNOTES

[1] Chevron U.S.A. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).

[2] Magnuson-Stevens Fishery Conservation and Management Act, 50 C.F.R. 600 (1976).

[3] Skidmore v. Swift & Co., 323 U.S. 134 (1944).

[4] See Kurcsics v. Merchs. Mut. Ins. Co., 49 N.Y.2d 451, 458 (N.Y. 1980) (calling for deference to agency interpretation when a statute’s application “involves knowledge and understanding” of data or operations, but noting “there is little basis to rely” on agencies for questions of “pure statutory reading and analysis”).

[5] See Denton v. Civ. Serv. Comm’n, 176 Ill.2d. 144, 148 (Ill. 1997) (“While courts afford considerable deference to an agency’s interpretation of a statute it administers, an agency’s determination is not binding as to questions of law and will be rejected if erroneous.”) (citation omitted).

[6] Yamaha Corp. of Am. v. State Bd. of Equalization, 19 Cal.4th 1, 7–8 (Cal. 1998) (“The standard for judicial review of agency interpretation of the law is the independent judgment of the court, giving deference to the determination of the agency appropriate to the circumstances of the agency action.”) (citation and quotation omitted).

[7] Ariz. Rev. Stat. § 12-910 (2021).

[8] Ga. Code Ann. § 50-13-19 (2022).