As Supreme Court hears Chevron deference case, warnings of 'chaos'

The Supreme Court will hear oral arguments on Wednesday in two cases asking the court to overturn the legal principle known as “Chevron deference,” a Reagan-era doctrine in which courts have deferred to federal agencies to reasonably interpret ambiguous statutes.

Legal scholars and regulatory experts are warning that the Republican-led court is expected to weaken or gut its 1984 decision in Chevron v. Natural Resources Defense Council, a case that courts have relied upon for 40 years in giving deference to federal agencies to decide how to enact law. 

The Supreme Court hears oral arguments in two case challenging whether federal agencies should be given broad deference in deciding how to enact ambiguous statutes. Photographer: Eric Lee/Bloomberg

Eric Lee/Bloomberg

If Chevron is ultimately overturned, some experts say it would usher in a new era of massive litigation against government agencies because corporations will be more willing to challenge any regulation that they can convince a judge is unreasonable especially if it hits their bottom line.

“We’re going to see complete confusion as to what is the law,” said Michele Alt, co-founder and managing director at Klaros Group and a former assistant director of legislative and regulatory activities at the Office of the Comptroller of the Currency. “It’s impossible to not sound hyperbolic about the overturning of Chevron — but this is huge.”

Chevron is the most often-cited case before the Supreme Court with thousands of lower-court cases relying on the interpretations of federal agencies, Alt said. Chevron itself was the result of a conservative agenda when Republicans viewed the courts as liberal and preferred that decisions be made by administrative agencies, not judges. That calculus has now been flipped, many legal experts said.  

The Supreme Court will hear two lawsuits in tandem brought by fishing companies challenging both Chevron deference and a federal rule that requires the companies to pay for at-sea government monitoring of their herring catch. The cases are: Relentless Inc., v. Dept. of Commerce, and Loper Bright Enterprises, v. Gina Raimondo.

Under Chevron, the Supreme Court sided with the National Resources Defense Council, an environmental group that sued the Environmental Protection Agency for enacting a rule that was more forgiving to industry on compliance costs than the original rule. At the time, the EPA was headed by Anne Gorsuch, the mother of Supreme Court Justice Neil Gorsuch.

The New Civil Liberties Alliance, a non-profit legal group that represents one of the fishing companies, has argued that federal judges are denying due process to companies that challenge a federal agency’s interpretation of a law not expressly authorized by Congress. John J. Vecchione, NCLA’s senior litigation counsel, said Chevron did not give agencies authority to interpret and resolve ambiguous congressional language. 

“The government is wrong to argue that Congress may vest agencies with ultimate interpretive authority over federal law, even explicitly,” Vecchione wrote in a legal brief. 

The oral arguments Wednesday are expected to focus on the separation of powers and what might be appropriate modifications to Chevron setting limits on federal agencies. Many experts think the high court will try to substitute a new legal theory known as “the major questions doctrine,” that came from a landmark 2022 case, West Virginia v. EPA. Chief Justice John Roberts delivered the opinion that courts should not interpret statutes as delegating major questions to an agency unless there is clear congressional authority.

“One major problem with Chevron is that it has led to quite dramatic swings in policy in many areas of regulation,” said Todd Zywicki, a law professor at George Mason University. “The primary effect would be to transfer the interpretation of a statute from the agency (de facto through deference) to the courts. So an agency could still regulate, but the outer range of its power would be set by courts interpreting the statute rather than the agency deciding its own powers.” 

Overturning or modifying Chevron is expected to unleash legal challenges to both old and new federal regulations across the entire government. It is unclear yet what that would mean in practice for an agency such as the OCC, which administers the National Bank Act, and has been given very broad deference.  

“Anything will be open to challenge,” Alt said. “We will have overwhelmed courts and rather than clarifying regulations it will leave a lot of unresolved questions.” 

She noted that the OCC and Federal Deposit Insurance Corp. had “valid when made” rules upheld last year on Chevron grounds. 

Zywicki noted that the Dodd-Frank Act of 2010 specifically provides that when the Consumer Financial Protection Bureau and any other regulator have conflicting views of a statute’s interpretation, courts are required to defer to the CFPB’s interpretation of statutes under its jurisdiction. But Dodd-Frank is silent on what the standard of deference shall be. 

Christopher L. Peterson, a law professor at the University of Utah and a former senior adviser to the CFPB, said that the Supreme Court could fundamentally restructure administrative law in a way that could increase litigation. In the long-term, limiting Chevron deference could mean more conflicting district court opinions and circuit court splits resulting in more uncertainty about the practical implications of federal law, he said.

“When a banking regulator issues a regulation, the courts must generally grant deference to the agency’s rules provided that the regulation was a reasonable interpretation of the congressional statute,” Peterson said. “If this form of Chevron deference is no longer afforded to regulations, federal agencies may be less effective at providing banks certainty and uniformity through their rule-making. The result could be more cases in litigation over what federal law means.”