‘Very, Very Fuzzy’: Opinion Overruling Chevron Creates Uncertainty for Regulated Industries

Our recent webinar featured a conversation with noted legal scholars Craig Green, Charles Klein Professor of Law and Government at Temple University Beasley School of Law, and Kent Barnett, recently appointed Dean of the Moritz College of Law at The Ohio State University. Both said regulated industries and their counsel are in for a period of severe unpredictability due to the U.S. Supreme Court's ruling in Loper Bright v. Raimondo, et al. and the majority opinion authored by Chief Justice John Roberts. 

“What comes next, I think, is at least as uncertain as anything we’ve encountered in the administrative law field,” Professor Green said. “And there’s almost no guidance at all from Chief Justice Roberts’ opinion.”

Dean Barnett added that the majority opinion “didn’t feel as much like law as it felt like trying to just press a certain policy view.”

The Chevron Deference Doctrine, established in the landmark 1984 Supreme Court case Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., was a cornerstone of administrative law that directed courts to defer to a government agency’s interpretation of ambiguous statutory language as long as the interpretation was reasonable. The Supreme Court’s recent ruling in Loper Bright overturned that required deference­.

And the majority opinion makes it difficult to predict the future course of government regulatory and enforcement authority, the legal scholars said.

Ruling on Constitutional Grounds Would Have Been 'Much More Disruptive'

Both experts noted with encouragement that the Court’s majority relied on the Administrative Procedures Act (APA) in overruling Chevron, and not on Article III constitutional grounds—which “would’ve been much more disruptive,” Dean Barnett said.

Professor Green added that “one big surprise is that Chief Justice Roberts’ opinion, although it says the words Article III, it actually relied on the APA. It’s a statutory opinion. And it claims that the APA, which had been hanging around this whole time since the 1940s…actually bans all of Chevron deference. The APA actually renders all of that illegal. And this is the (Court’s) fundamental basis for overturning this … 40-year-old opinion by the Supreme Court, applied time and time again.”

Because the Loper Bright ruling stands on statutory grounds, Congress could enact legislation reinstating Chevron, the experts noted. In fact, such a bill has been introduced, but its prospects are unclear.

“I’m glad they left this as a statutory matter so that Congress can deal with this either globally or in specific areas,” Dean Barnett said.

Skidmore Takes Center Stage

In negating Chevron, the majority opinion points to a different case, Skidmore v. Swift & Co., for guidance on how courts can exercise independent judgment in determining the meaning of statutory provisions consistent with the APA.

“So Chevron has been overruled, leaving in place Skidmore,” Professor Green said. “Skidmore, we are told, is appropriate under the APA.”

Under Skidmore, the court would “look at the thoroughness of the agency’s decision-making, the validity of its reasoning, the consistency of its reasoning, the contemporaneity of the interpretation with the statutory provision that had been enacted by Congress, and perhaps some other factors,” Dean Barnett said. “And of course, the catch-all in Skidmore, which it’s famous for—it’s a bit of a tautology: all of those other factors that persuade.”

The lack of clarity in Skidmore, along with ambiguous language in the Loper Bright opinion saying that courts should give federal agencies “due respect,” “the most respectful consideration,” and “great weight,” blurs the picture of what to expect going forward, they said.  

“So there is a really, a very, very fuzzy, difficult set of words on the back end of the Roberts opinion that make it very, very challenging to understand where all this is headed,” Professor Green said. “I think that’ll be a pervasive theme as we move forward.”

“The unknown … that really is the effect,” Dean Barnett said. “Now that Chevron is gone, I think of it like an ecosystem where you have an organism that is removed. Well, what happens when that organism is removed? Does everybody still act the same or do the other organisms start acting in different ways?”

The Major Question Doctrine Lives On

Another aspect of that ecosystem is the Major Question Doctrine, a judicial doctrine that holds that, for questions of “vast economic and political importance,” any authority afforded to agencies must be clearly delegated by Congress. Dean Barnett and Professor Green expect the Major Question doctrine to play a larger role in light of Loper Bright.   

“The big takeaway from all this is the Major Question Doctrine is alive and well,” Dean Barnett said. “We still don’t know exactly how it functions; it often seems to be in the eye of the beholder, whether good or bad, conservative, liberal. But it’s here to stay, and it’s likely going to have much more effect, I think, on major regulatory actions than the debate over whether or not Chevron or Loper Bright was the correct decision.”

This despite the main criticism regarding the Major Question Doctrine: “The Court … hasn’t told us what a ‘major question’ is,” Dean Barnett said. “How do you know whether something is of vast economic or political significance? There has been absolutely no further definition of what that means.”

Uncertainty: Not General Counsels' Friend

All these evolving factors add up to uncertainty. That’s a reason to question the conventional wisdom that businesses in regulated industries are happy about the demise of Chevron.  

“I’m not sure this is good for regulated parties at all, along with other decisions that the Court has decided that concern adjudication and rulemaking,” Dean Barnett said. “I think what you’re going to see agencies doing is issuing much more in the realm of guidance documents as opposed to rulemakings or adjudications. And if I’m the general counsel of a regulated party, I don’t like that because I don’t have nearly as much certainty about what an agency is going to do.”

“As somebody who has practiced in this area for decades, what I have found is that our clients need certainty,” said Ballard Spahr Senior Counsel Alan Kaplinsky, former longtime leader of the firm’s Consumer Financial Services (CFS) Group. “Actually, certainty is more important to them than what the regulation actually says. They may not like the regulation, but if they know the odds are very, very high that the courts are going to uphold it, that’s what they want.

“They figure, ‘My competition is all subject to the same regulation that I’m subject to, and we all probably don’t like it, but we’ll all comply with it, and at least we’re not going to risk some draconian judgment in a class action lawsuit down the road.’ ”

Richard J. Andreano, Jr., leader of the firm’s Mortgage Banking Group, said he and Ballard Spahr colleagues are closely watching cases challenging regulations from the Consumer Financial Protection Bureau (CFPB) now that Chevron is reversed—including when a statute authorizes the CFPB to adopt regulations to implement the law.   

“So (what) this is really going to come down to in the post-Chevron world, with a direct congressional directive to adopt a rule and a congressional authorization to go beyond the statute, what are the courts going to do?” he said.

John L. Culhane, Jr., partner in the CFS Group, expressed a hope that has been voiced by many: that the ultimate effect of the demise of Chevron will be to spur agencies to engage in more thoughtful and specific rulemaking.

“I would really like to see this result in a more thorough and thoughtful analysis by federal agencies and the rulemaking process so that we don’t see … an agency just ignoring the provisions of its prior regulation and commentary,” he said. “Hopefully this will force agencies to be more thorough in their decision-making and more precise in their analysis.”

To listen to the full webinar recording, The Demise of the Chevron Deference Doctrine and the Impact on the Consumer Finance Industry, click here.

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