Thursday Thoughts with Dan Reaser: Will the Supreme Court Alter Decades of Judicial Deference to Regulators?

Government regulation impacts much of our commercial lives. Both the scope and scale of regulatory obligations on business and individuals have expanded in the last seventy-five years. At the same time, the procedures used by government to administer these rules also have become more complex and the power of government agencies has grown exponentially.

A source of that power is the concept of Chevron deference, recognized in the 1984 Supreme Court case, Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc.  Although executive branch action has been subject to judicial oversight since an early Supreme Court case in 1803, Chevron announced a two part test that limited when the federal courts would perform judicial review of federal agencies’ interpretation of federal statutes.  First, if a court determines Congress’ intent is clear, then that intent controls and the agency cannot further interpret the law to achieve a particular objective.  In the second part of the test, if the law is ambiguous, that is it could be interpreted in two or more different ways, or is simply silent on the objectives the government wants to pursue, the court must accept a government agency’s interpretation if it is not patently unreasonable even if the judge concludes that the agency has not adopted the best view of the law. 

Within a few years, almost every state had adopted a similar rule applied to state court reviews of state law.  In Nevada, that concept was fully embraced by the Nevada Supreme Court by 1988.

Decisions in a pair of cases before the U.S. Supreme Court will test the continued validity of Chevron deference.  Those two cases are Loper Bright Enterprises v. Raimondo and Relentless Inc. v. Department of Commerce. Based on statements made by the Justices during oral argument earlier this year, there is a growing consensus that the Court’s rulings this June are likely to create a paradigm shift between government and business across various industries.

Critics of Chevron deference have long noted that this rule dramatically tilts the playing field in favor of the government when businesses challenge how regulatory laws are enforced, effecting everything from employment regulations, laws on consumer and customer rights and tax laws.  As a recent statistical study by Bloomberg documented, in just shy of 70 percent of federal appeals court cases, the businesses challenging government action lost the case based on Chevron deference.  This imbalance underscores the need for the Court to reexamine how the judicial branch reviews government agency action. 

It is always a perilous proposition to predict a judicial outcome.  That said, all evidence suggests that at least a majority of the Court is prepared to revisit Chevron deference.  The most probable outcome will be decisions in which the Court jettisons the default deference to agency interpretations of ambiguous and silent statutes.  The Court should be expected to declare that the constitution does not allow Congress to confer on administrative agencies the ultimate power to interpret the law absent unequivocally direction by legislators and a set of guidelines and guardrails within which the government agency must implement the law.   We should anticipate that the Court will direct that the judiciary, not the executive branch, is obligated to declare the meaning of statutes and regulations when legislators fail to provide plain direction on business regulation.

This shift in the regulatory landscape would undoubtedly influence how I counsel my clients. Currently, I must alert clients to the inherent challenges posed by Chevron so they can appreciatethe long odds of prevailing in disputes with state and federal bureaucracies. Redirection by the Court would present new avenues for businesses to challenge regulatory overreach.  Chevron has had a dominant influence in administrative law for practically my entire legal career; a significant change will trigger decades of legal disputes redefining the work of the next generation of regulatory lawyers.