Supreme Court Issues Landmark Decision Curbing Authority of Federal Agencies

July 1, 2024 | Insights

By Travis Wussow and Michael J. Nasi

On Friday, June 28, the Supreme Court handed down a decision in one of the most consequential administrative law cases in decades. In Loper Bright v. Raimondo (consolidated with Relentless v. Department of Commerce), the Court addressed the question of whether to overturn its 40-year-old precedent in Chevron U.S.A. v. Natural Resources Defense Council, Inc.

The Supreme Court’s 2023 Term was a continuation of a trend of the Supreme Court hemming in the power of federal administrative agencies and restructuring the balance of power among the three branches of government. The summary below includes discussions of two other major cases handed down this term as well.

What was this case about?

Loper Bright involved a challenge to a federal regulation brought by several family-owned fishing businesses on the Atlantic coast. The businesses challenged a 2013 National Marine Fisheries Administration (NMFA) regulation that required Atlantic herring fishermen to pay observers to be carried onboard the fishing vessel to monitor compliance with NMFA regulations, such as catch limits. While the Magnuson-Stevens Fishery Conservation and Management Act (MSA) does authorize the NMFA to require three categories of fishermen to bear the costs of observer services, the statute is silent on whether the NMFA may do so for Atlantic herring fishermen.

Prior to the rule in question, NMFA paid for observers directly with federal funding, but the 2013 regulation shifted the cost burden for observer services to the fishermen in some cases. The NMFA estimated that the cost of an observer could be as much as $710 per day, reducing the profitability of the fishing business by up to 20%.

Loper Bright Enterprises and several other family businesses challenged the rule, arguing that because the MSA did not specifically authorize NMFA to shift the cost burden of observer services to the fishermen, NMFA was prohibited from doing so. The fishermen lost in district court and the D.C. Circuit—both courts upheld the NMFA’s 2013 regulation, deferring to the agency interpretation of the MSA under Chevron.

What is Chevron deference?

Decided in 1984, Chevron U.S.A. v. Natural Resources Defense Council dealt with an air quality regulation issued by the Environmental Protection Agency (EPA) that had to do with the meaning of the term “stationary source.” The EPA had issued a rule that treated equipment within the same industrial grouping as a single stationary source for the purposes of air permitting. The Natural Resources Defense Council (NRDC) challenged the EPA’s interpretation of the term “stationary source,” arguing that each part of the process needed to be permitted separately.

The Court ruled in favor of the EPA’s interpretation and established a two-step process for the courts to use when reviewing any federal agency’s action. First, the court should determine whether Congress had “directly spoken” to the question at issue, that is, whether the statute is ambiguous. If the court determines that the statute is clear, that is the end of the matter.

However, if the statute is ambiguous, the court should move to the second step, which is to determine whether the agency’s interpretation of the statute is reasonable. If it is, the court should defer to the agency’s interpretation rather than substituting its own interpretation of the statute.

This brief explanation glosses over significant complexity—since Chevron was decided, the Supreme Court has added a number of exceptions and caveats to the original decision. But in general, lower courts have applied Chevron for 40 years to defer to agency statutory interpretations.

What did the Court decide?

In Loper Bright, the Court overruled Chevron in a highly philosophical opinion that extensively quoted the Federalist Papers and the 1803 landmark case Marbury v. Madison. The Court ruled 6-2 and 6-3 (Justice Jackson was recused from Loper Bright but ruled on Relentless).

The Court held that Chevron was inconsistent with the Administrative Procedure Act, which was passed in 1946 and established a framework for judicial review of federal agency actions. Writing for the majority, Chief Justice Roberts reasoned that resolving matters of statutory interpretation, especially where statutes are ambiguous, falls within the special competence of the courts. The Court held that while a court may of course consider an agency’s position when resolving a statutory ambiguity, courts “need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.” Slip Op. at 35.

Justices Thomas and Gorsuch each wrote concurring opinions. Justice Kagan, joined by Justice Sotomayor and Justice Jackson, dissented.

What’s next?

It will likely take some time for its full impact to be realized, but Loper Bright is one of the most significant administrative law cases decided by the Supreme Court in decades. While formally about statutory interpretation, the case rebalances power between the legislature, executive, and judiciary.

The Court decided two other major administrative law cases this term as well. The first, Securities Exchange Commission v. Jarkesy, held that where an agency is bringing a suit for civil penalties against a defendant, the defendant is entitled to a jury trial. Since the 2010 passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Securities Exchange Commission has brought enforcement actions seeking civil penalties through administrative proceedings. The Court held that this practice violates the Seventh Amendment’s guarantee of a jury trial, which will require the SEC to bring such actions in district court moving forward.

The second, Corner Post v. Board of Governors of the Federal Reserve System, deals with the question of when the six-year statute of limitations to bring an Administrative Procedure Act challenge first accrues. In that case, Corner Post, a truck stop in North Dakota, brought a challenge to a Federal Reserve regulation setting the cap on debit card fees more than six years after the regulation was issued—but three years after Corner Post opened. The Court ruled 6-3 that Corner Post’s claim is not barred by the statute of limitations because the claim did not accrue until the plaintiff was actually injured by the regulation.

Taken together, these cases mean that regulated individuals have a more potent set of tools at their disposal for bringing Administrative Procedure Act challenges to new regulations. Over the long term, Loper Bright should produce greater regulatory stability, as courts will provide more oversight over attempts by agencies to expand regulatory scope through novel statutory interpretation. Further, agency interpretations that shift between administrations will be afforded less deference, creating more stability over time.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice. For questions about the Supreme Court’s decision overruling Chevron, please contact Travis Wussow or Michael J. Nasi or reach out to a member of the Energy and Environment & Natural Resources practice.

Meet Travis

Travis Wussow is a regulatory and governmental affairs lawyer with extensive experience solving complex regulatory and public policy problems. As an advisor and advocate, Travis assists clients in navigating and shaping their regulatory landscape, helping them maintain compliance while advancing their broader strategic goals. His extensive public policy experience spans healthcare, technology, education, constitutional law, and international human rights. This diverse background allows him to bring a unique perspective to his practice.

Meet Mike

Michael J. Nasi serves as founder and Chair of Jackson Walker’s Climate Change & Carbon Management group and practices in the Jackson Walker’s Environmental and Energy practice areas. Mike is counsel for parties in ongoing regulatory proceedings relating to carbon dioxide, interstate air quality, regional haze, and coal combustion residuals, including appeals pending before the U.S. Courts of Appeals for the Fifth, Eighth, Tenth, and D.C. Circuits, as well as the U.S. Supreme Court. He also practices before the EPA, TCEQ, the Texas Railroad Commission, and the Texas Legislature.