On January 17, 2024, the U.S. Supreme Court heard oral argument in the two cases in which the question presented is whether the Court should overrule its 1984 decision in Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc.  That decision established what became known as “Chevron deference,” which requires courts to accept an agency’s interpretation of federal law if indicated by the outcome of a two-step analysis set forth in the decision.  In step one, the court looks at whether the statute directly addresses the precise question before the court.  If the statute is silent or ambiguous, the court will proceed to step two and determine whether the agency’s interpretation is reasonable.  If it determines the interpretation is reasonable, Chevron instructs the court to defer to the agency’s interpretation.

The two cases before the Supreme Court are Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. U.S. Department of Commerce.  Both cases involve a regulation of the National Marine Fisheries Service (NMFS) that requires certain vessels to pay the salaries of the federal observers that they are required to carry.  The regulation implements the Magnuson-Stevens Act (MSA) which authorizes the NMFS to require fishing vessels to carry federal observers.  In both cases, the petitioners are owners of fishing vessels who challenged the NMFS regulation as exceeding the agency’s authority under the MSA.  The district court in each case, applying Chevron deference, upheld the NMFS regulation.  In Loper, a divided D.C. Circuit panel affirmed the district court and in Relentless, a unanimous First Circuit panel affirmed the district court.

With the exception of Justice Jackson, all of the Justices participated in oral argument in both cases.  Justice Jackson recused herself from Loper because it arose out of the D.C. Circuit, on which she previously served before becoming a Supreme Court Justice.  Solicitor General Elizabeth Prelogar argued on behalf of the government in both cases.  In Relentless, Roman Martinez, a former Assistant Solicitor General and law clerk to Chief Justice Roberts and to Justice Kavanaugh when he served on the D.C. Circuit, argued on behalf of the owners of the shipping vessels.  In Loper, Paul Clement, a former Solicitor General and law clerk to Justice Scalia, argued on behalf of the owners of the shipping vessels.  In total, the Supreme Court heard approximately 3.5 hours of oral argument.  The recording of the oral argument and transcript in Relentless are available, respectively, here and here.  The recording of the oral argument and transcript in Loper are available, respectively, here and here.

The principal arguments advanced for overruling Chevron by Mssrs. Martinez and Clement on behalf of the owners of the shipping vessels were:

• Chevron violates Article III of the Constitution which vests the judicial power exclusively in the federal courts.  Inherent in this judicial power is the duty of federal judges to apply their best and own independent judgment when determining what a federal statute means.  Chevron undermines that duty by reallocating interpretative authority from courts to agencies, and forcing courts to give up their interpretative authority and defer to agency interpretations that are not persuasive or the “best” interpretations.  Chevron rests on a fictional implied delegation of interpretive authority to agencies in the case of ambiguity or silence.
• Chevron violates the requirement in Section 706 of the Administrative Procedures Act (APA) that “the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning and applicability of the terms of an agency action.”  This requirement mandates the court’s de novo review of legal questions.

The principal arguments advanced for not overruling Chevron by General Prelogar on behalf of the government were:

• Article III does not require de novo review of all statutory interpretation questions.  There is no constitutional distinction between an express delegation of authority to an agency to define statutory terms and fill in gaps and the presumed or implicit delegation of authority recognized in Chevron.
• Section 706 of the APA is not incompatible or inconsistent with the two-step Chevron analysis because Section 706 does not require a universal standard of review to govern statutory interpretation questions.  Courts are interpreting statutes when they apply the Chevron analysis.  In step one, the court uses the standard tools of interpretation to determine whether Congress has spoken to the issue at hand.  If so, Chevron requires nothing further and the court has interpreted the statute.  If, at the end of that process, the court cannot determine whether Congress has spoken, the proper interpretation of the statute is that Congress left a gap or created an ambiguity and simultaneously vested the relevant agency with the responsibility to administer the statute with regulations that have the force of law.

In responding to questions from the Justices, Mssrs. Martinez and Clement presented starkly different views from those presented by General Prelogar about Chevron’s impact on reliance interests as well as the impact of a decision by the Supreme Court overruling Chevron.

According to Mssrs. Martinez and Clement:

• Chevron is a “reliance-destroying doctrine” because it “facilitates agency  to flip-flopping.”  “[I]nstead of a regulated entity being able to rely on “the best interpretation of the law,” it must “check the C.F.R. every couple years to see if the law has somehow changed, even though Congress hasn’t acted.”
• A decision overruling Chevron would not invite a flood of litigation seeking to overturn cases in which a court deferred to an agency based on  step two of the Chevron analysis.  Since the bottom line holding in those cases was that the agency’s action was lawful, it would be difficult to overturn those cases under principles of stare decisis.

According to General Prelogar:

• Chevron promotes national uniformity by dampening ideological divisions between courts through their application of uniform agency rules. “[In] the alternative world where’s there is no Chevron…there will open up wide disputes among the lower courts…and I think it could mean that regulated parties are subject to different rules in different parts of the country.”
• Although the Supreme Court has not applied Chevron in recent years, there is “real world” reliance on Chevron.  Congress, agencies, states, regulated entities, and the public have all relied on Chevron and the regulations upheld under Chevron to make important decisions that could be upended by overruling Chevron.  This is because thousands of judicial decisions sustaining an agency’s rulemaking as reasonable would be open to challenge.  Individuals have made investment decisions on the basis of agency regulations “that have been on the books for decades” and have also made decisions regarding what contracts to enter into on the basis of such regulations.  The disruption that would result from overruling Chevron is unwarranted because Congress could modify or overrule the Chevron analysis at any time and has considered, but never acted on, proposals to modify Chevron.  Instead, Congress has legislated for decades with Chevron as the background rule informing the amount of discretion that Congress has chosen to confer on federal agencies.

General Prelogar raised the possibility that rather than overrule Chevron, the Court could provide more guidance to lower courts on how to conduct a Chevron step one analysis.  Justice Barrett referred to this as a suggestion that the Court “‘Kisorize’ Chevron.”  “Kisorize” refers to the Supreme Court’s 2019 decision in Kisor v. Wilkie in which the court clarified how lower courts should apply Auer deference.  Auer is the Supreme Court’s 1997 decision in Auer v. Robbins in which the Court established a framework for when courts must defer to an agency’s interpretation of its own regulations.  Rather than overrule Auer, the Supreme Court, in Kisor, provided a more rigorous analysis that a court must conduct before deferring to an agency’s interpretation.

In response to Justice Kagan’s question asking her what it would mean to “Kisorize” Chevron, General Prelogar indicated that there are four steps the Court could take consisting of:

• Reemphasizing the “rigor” of the Chevron step one analysis (i.e.  a court should not “waive the ambiguity flag too readily.”)
• Reinforcing that reasonableness “is not just anything goes.”  A court should enforce any outer boundaries in the statute and make sure the agency has not transgressed them.
• Emphasizing that a Chevron analysis only applies in situations where an agency has been directly empowered by Congress “to speak with the force of law” and is “then exercising appropriately a formal level of authority in implementing the statute.”
• Emphasizing the importance of “look[ing] at any other statutory indication that Chevron deference was not meant to apply.”  This would include situations “where the nature of the statutory question as the Court has said in other cases isn’t one where you would expect Congress to give that to the agency.”  (General Prelogar stated that “there’s a flavor of this in the major questions doctrine case.”)

General Prelogar also indicated that where an agency has changed its interpretation, it would be under additional burdens to justify its rulemaking and would get “a harder look.”

Of the nine Justices, Justices Kavanaugh, Gorsuch, and Alito appeared to be the most overtly in favor of overruling Chevron, with their questions and comments appearing primarily designed to highlight what they perceive to be Chevron’s flaws, particularly the lack of a clear definition for what constitutes an “ambiguity” that would trigger step two of a Chevron analysis (termed the “ambiguous ambiguity trigger” by Justice Gorsuch).  Justices Kagan, Sotomayor, and Jackson appeared to be clearly in favor of a decision that did not overrule Chevron, with their questions appearing primarily designed to highlight what they perceive to be Chevron’s appropriate recognition of the limits of judicial expertise and the value of agency expertise in resolving questions of statutory interpretation as well as Chevron’s role in insulating courts from the need to make policy decisions.  Chief Justice Roberts and Justices Barrett and Thomas were less revealing of their positions, with their questions and comments appearing primarily designed to probe the limits on delegation of judicial authority and how the Chevron analysis would apply in different scenarios.  Justice Barrett (like Justices Kagan and Sotomayor) also probed the impact of overruling Chevron on cases that have been decided by courts based on step two of the Chevron analysis (i.e., cases in which the court deferred to an agency rule).

The Court will issue decisions in both cases before the end of its term in June 2024.  We cannot readily predict based on the oral arguments that arguments that a majority of the Court will vote to overrule Chevron.  However, we do not expect Chevron to survive unscathed.  Rather, we expect that if the Court does not overrule Chevron, it will effectively create a new framework for Chevron deference that requires a more rigorous analysis in Chevron step one with the goal of significantly limiting the circumstances in which a court can defer to an agency’s interpretation. 

On February 15, 2024, we will host a special webinar roundtable featuring Professor Kent Barnett, two other renowned administrative law professors and Carter Phillips, a leading Supreme Court practitioner, who will share their observations and reactions to the Loper and Relentless oral arguments, insights based on questions posed by the Supreme Court justices during the arguments, and further predictions of the outcome and implications for the future of regulatory regimes and agency authority. 

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