The Supreme Court v. the Administrative State II

The outlook is not rosy for Democrats, neither politically nor in court. Democrats’ hopes that President Biden – who, according to some polls, is trailing Trump in all seven swing states¹⁾ – could turn the odds in his favor in an early debate have been dashed by his disastrous performance.²⁾ To add insult to injury, in three 6-to-3³⁾ rulings along ideological lines, the Supreme Court further reigned in on administrative agencies, putting Biden’s regulatory agenda at risk. The most far-reaching of these decisions is, undoubtedly, Loper Bright Enterprises v. Raimondo.⁴⁾ This case marked a milestone⁵⁾ for the conservative legal movement’s fight against the administrative state, i.e., the administrative agencies’ regulatory power – the six conservative justices overruled Chevron, a decades-old precedent requiring federal judges to defer to agencies in cases where the law is ambiguous or Congress fails to clarify its intentions. The practical relevance of the decision in Loper cannot be overestimated. Chevron was so important to the functioning of the modern U.S. administrative state that Speaker Mike Johnson, who had joined Senator Ted Cruz and 34 other Republican members of Congress in an amicus curiae brief arguing in favor of overruling Chevron,⁶⁾ even praised Loper as the long-awaited “beginning of the end of the administrative state.”⁷⁾ Mike Johnson’s comment is perhaps a little too apocalyptic. But the overruling of Chevron is going – as Justice Kagan wrote in her dissent – “cause a massive shock to the legal system, ‘cast[ing] doubt on many settled constructions’ of statutes”⁸⁾ with potentially devastating consequences for the well-functioning of the U.S. administrative state as we know it today.

The Chevron doctrine

The Chevron doctrine dates back to 1984. That year, in Chevron v. Natural Resources Defense Council – which, as Chief Justice Roberts doesn’t forget to emphasize, was decided by a quorum of only six Justices⁹⁾ – the Court had to determine the scope of the Environmental Protection Agency’s (EPA) regulatory authority under the Clean Air Act (CAA).¹⁰⁾ The question was one of statutory interpretation: whether the provisions of the CAA encompassed the regulatory authority claimed by the EPA. To answer that question, however, the Supreme Court did not employ the classic tools of statutory interpretation. Instead, it employed a two-step approach that has gone down in history as the so-called Chevron doctrine. As a first step, courts had to determine whether Congress had “directly spoken to the precise question at issue” using the traditional tools of statutory interpretation.¹¹⁾ If such clear congressional intent could be ascertained, the statute was unambiguous, and no room for an administrative construction remained. If such intent could not be ascertained, courts were required to move to step two: it was up to the agency – not the courts – to construct the meaning of the ambiguous statutory provision, and as long as the construction was permissible, courts had “to defer to the agency’s construction.”¹²⁾ Applying this new test, the Court reached the conclusion that a clear congressional intent could not be ascertained with the necessary “level of specificity” in the CAA and that the EPA’s interpretation was permissible and, thus, “entitled to deference.”¹³⁾

Doctrinally, the Chevron doctrine has been framed as a presumption: If Congress didn’t specify a statutory term, it was assumed as a “default rule” that it intended to defer to agencies – not the courts – to fill the gap because, in the relevant area of law, agency administrators had more (technical) expertise than federal judges.¹⁴⁾ In essence, Chevron gave agencies the prerogative to construct the very statutory delegations that empower them and, thus, to some extent, let the fox guard the henhouse. For that reason, it has been widely perceived as a pro-government and (depending on the government) pro-regulation tool. The Chevron doctrine had, therefore, been a thorn in the conservatives’ side for quite some time.

Since conservatives now enjoy a whopping 6-to-3 majority on the Supreme Court, they had been waiting for the right moment to overrule Chevron and limit the federal government’s regulatory power. With Loper Bright Enterprises v. Raimondo, that moment finally came.

The case: Loper Bright Enterprises v. Raimondo

In Loper Bright Enterprises v. Raimondo, the question at issue was whether the National Marine Fisheries Service (NMFS), which administers the Magnuson-Stevens Fishery Conservation and Management Act (MSA) under a delegation from the Secretary of Commerce, had the authority to mandate that Atlantic herring fishermen pay for observers required by a fishery management plan enacted by regional fishery management councils. Loper Bright Enterprises and the other petitioners, all businesses operating in the Atlantic herring fishery, challenged that rule, arguing that the MSA did not authorize NMFS to mandate the payment for required observers. The essence of the petitioners’ argument was that the express statutory authorization of three industry funding programs not concerning the Atlantic herring fishery demonstrated – e contrario – that NMFS lacked the broad implied authority it claimed to have to impose such a program on herring fishermen. The lower courts, relying on Chevron, essentially deferred to NMFS’s contrary interpretation and, thus, rejecting the petitioners’ argument, granted summary judgment to the Government. The Supreme Court granted certiorari limited to the question of whether Chevron should be overruled or clarified.

The Court’s decision

The Supreme Court did, in fact, overrule Chevron in a 6-to-3 decision along partisan lines. In overruling Chevron, Chief Justice Roberts, delivering the opinion for the Court, relied primarily on the Administrative Procedure Act (APA), especially on its Section 706, arguing that the deference that Chevron required of courts reviewing agency action cannot be squared with the APA. According to Chief Justice Roberts, Section 706 of the APA “codifies for agency cases the unremarkable, yet elemental proposition reflected by judicial practice dating back to Marbury: that courts decide legal questions by applying their own judgment.”¹⁵⁾ Roberts further specifies that it is up to the courts, not agencies, to decide “all relevant questions of law”¹⁶⁾ arising on review of agency action, even those involving ambiguous laws. In her dissenting opinion, Justice Kagan, joined by Justice Jackson and Justice Sotomayor, rejects this notion and argues that the APA’s text is inconclusive since it “does not specify any standard of review for construing statutes.”¹⁷⁾ Hence, “when a court uses a deferential standard – here, by deciding whether an agency reading is reasonable – it just as much ‘decide[s]’ a ‘relevant question[] of law’ as when it uses a de novo standard.”¹⁸⁾ In response to this, Chief Justice Roberts points out that while Section 706(2)(A) and (2)(E) do mandate that judicial review of agency policymaking and factfinding be deferential, these provisions do not prescribe any such deferential standard for courts to employ in answering legal questions.¹⁹⁾ Justice Kagan goes on to argue that agencies have more expertise in these areas of law and are, therefore, better suited to construct the statutory provisions at issue.²⁰⁾ Chief Justice Roberts, however, notes that interpretive issues “may fall more naturally into a judge’s bailiwick than an agency’s.”²¹⁾ In other words, if it comes to the law, lawyers are best trained to construe it – even in highly technical areas. Hence, it’s (again) up to the courts to interpret vague statutory provisions. Since the courts in the cases at issue here relied on Chevron in their judgments, the Supreme Court reversed the decisions and remanded the cases for further proceedings.

Where do we go from here?

What consequences will the decision in Loper have for the agencies’ work, in particular, and the government’s agenda, more generally? From a German perspective, the uproar in the U.S. may initially come a bit as a surprise; after all, it is common practice in Germany for questions of law to be resolved by courts. It is the courts’ foremost duty to interpret and apply the law – even in technical areas like environmental or competition law. Of course, German law, too, knows limits to judicial review in certain areas of law, for example, when an independent expert body has to assess whether a statutory requirement has been met.²²⁾ Similarly, judicial review is limited when no legislation specifies “how to address a legal matter that is based on non-legal ecological criteria and if experts and scientists have not formed a generally recognized opinion regarding the specialist issues and the surveying methods to be used in the individual case.”²³⁾ These cases, however, are rare exceptions and concern determinations of fact, not of law. It is still up to the courts to define how the law shall be understood, i.e., what the statutory requirements are; only the question of whether these criteria are factually met is left to the agency.

Why, then, did the end of Chevron cause such an outcry in the U.S.? The reason lies in the political environment in which this legal principle operated: the U.S. is a deeply polarized country. In Congress, it has become almost impossible to reach compromises. Even in good times, the U.S. legislative framework is not “legislation-friendly.” The filibuster in the Senate (which is not based on any constitutional²⁴⁾ provision), for example, requires 60 votes to end a debate and bring a bill to a vote. Given today’s political polarization²⁵⁾ and narrow majorities, passing legislation is hardly achievable, if not outright impossible. As a result, meaningful legislation in areas such as climate, finance, health care, labor, consumer protection, and technology has been rare. To fill the resulting regulatory gap, agencies often must step in and enact regulations to address the salient issues. To do this, agencies rely on (sometimes quite old) statutory delegations of regulatory power employing broad language. Chevron enabled agencies to construct those delegations in ways supporting wide-ranging regulations.²⁶⁾ Due to Loper, this is now over. The decision in Loper will have a twofold impact on government regulation: First, the number of challenges against agency regulations by conservative interest groups and lobby organizations will likely increase now that the agencies’ statutory construction is no longer authoritative, putting many other regulations in jeopardy.²⁷⁾ Secondly, the decision might have a chilling effect on agencies, which now may refrain from enacting wide-ranging regulations altogether out of fear that their regulation might be successfully challenged in court.

The decision in Loper fits seamlessly into a series of cases in recent years in which the Supreme Court had increasingly reigned in on administrative agencies’ regulatory power. With the major questions doctrine, a tool of statutory interpretation²⁸⁾ essentially stating that it cannot be assumed that Congress intends to delegate “major policy decisions” onto administrative agencies,²⁹⁾ the Supreme Court had already limited the scope of Chevron³⁰⁾ by exempting decisions of vast economic and political significance from its presumption. Now, the Court has overruled Chevron altogether. The scope of the major questions doctrine, however, goes beyond Chevron. The major questions doctrine is, therefore, likely here to stay: courts will employ this doctrine to narrow the scope of agencies’ regulatory power by excluding decisions that (they deem to) have far-reaching political and economic consequences. It remains to be seen whether the Court, in its “crusade” against the administrative state, will also give new meaning to the so-called non-delegation doctrine – as some of the Justices hinted at in Gundy v. United States.³¹⁾ In Justice Gorsuch’s understanding of the non-delegation doctrine, a legal concept rooted in Article I, Section 1, of the U.S. Constitution limiting Congress’ power to delegate regulatory power to agencies,³²⁾ Congress could only authorize agencies “to fill in […] details, to find facts that trigger the generally applicable rule of conduct specified in a statute.”³³⁾ This would have devastating consequences for the proper functioning – some even argue for the very existence³⁴⁾ – of the administrative state. We are not there yet. But by overruling Chevron, the conservative Justices on the Supreme Court, once more, have shown that they are determined to curb the administrative state’s regulatory power and will not be deterred even by decades-old precedents and the principle of stare decisis. That does not bode well for the administrative state’s future.

Many thanks to Eric Belgorodski and Philip Schreurs for their help drafting this post.