LC-14-24
July 1, 2024

US Supreme Court Overrules Chevron Doctrine – Courts Determine What Law Means, Not Agencies

On Friday, the US Supreme Court issued its opinion in the Loper Bright Enterprises v. Raimondo case, overturning their 1984 Chevron decision. Under the Chevron doctrine, courts are required to defer to government agency interpretations of the statutes those agencies administer, even if the court doesn’t agree with the agency, as long as the agency’s position is reasonable. The decision authored by Chief Justice Roberts, states that courts must exercise their independent judgment in determining whether a government agency has acted within its statutory authority. A court may not defer to an agency’s interpretation just because a statute is ambiguous. This decision is welcomed by those who believe government agencies have been overstepping their authority. The Court’s dissenting opinion, authored by Justice Kagan and supported by Justice Sotomayor, argues that the decision gives too much power to the courts and that Congress would want the agencies to exercise the discretion allowed by statute.

The plaintiffs in the case are family fisheries. Congress enacted the Magnuson-Stevens Fishery Conservation and Management Act (MSA) to prevent overfishing. The National Marine Fisheries Service (NMFS) was charged with administering the law. The MSA allowed observers to be on board a fishing vessel to collect data and manage the fishery. The cost for the observers was to be covered by certain groups. The MSA did not address whether the plaintiff fisheries may be required to pay the costs for observers. Initially, the NMFS fully funded the observers, but then promulgated a rule requiring fisheries to pay for the observers if federal funding became unavailable. The fisheries challenged the rule in 2020, arguing that the MSA did not authorize the NMFS to mandate that they pay for the observers. The District Court granted summary judgment to the NMFS, giving deference to the agency’s interpretation under Chevron. The D. C. Circuit affirmed, again giving Chevron deference to the NMFS.

The majority opinion takes a deep dive into administrative law and the Administrative Procedure Act (APA) arguing that Chevron deference is incompatible with the APA. Congress enacted the APA in 1946 to protect against agencies that acted beyond their authority. The APA requires courts to set aside agency actions that are outside the law. The Court asserts no deference is prescribed in the APA for agencies and that the APA requires courts to apply their own judgment when reviewing agency action. This doesn’t mean that an agency has no voice. A court can look for help in the interpretation of statutes from the agencies responsible for implementing them. The agencies can be a source of guidance with their experience and informed judgment. This is the Skidmore standard of review, which is now the law of the land.

This is an important decision for the banking industry as banks and industry groups have filed numerous cases against the banking agencies. While the Supreme Court was clear that cases decided in the past based on the Chevron doctrine are not impacted by this decision, it certainly impacts the cases that have not yet been decided. This includes the MBA and Lake Central Bank’s case against the FDIC, the Texas Bankers Association and ABA’s cases against the CFPB on the UDAP manual and the 1071 rule, and the ABA’s case against the CFPB’s late fee rule. The courts in those cases will be able to look to the agencies for guidance in areas of ambiguity, but will need to apply their own judgment in reviewing the agencies’ actions.