In most gathering places like concert halls, movie theaters, and lecture venues, the echoes of hundreds of conversations can range from white noise to a cacophony.
But not here. In this court room, people file in quietly, take their seats, and wait. While there may be an occasional whispered word between docents or colleagues, they are muted by the velvet drapes. The atmosphere emphasizes the weight of the conversations that happen between the justices and the parties who bring cases before them.
RESPA News was amongst the quiet audience on Jan. 17 as the U.S. Supreme Court heard oral arguments on whether Chevron deference, an interpretive rule used by the judiciary, should be overturned.
The court heard two cases with substantially similar fact patterns, both dealing with a rule requiring fisheries to provide the salary for the federal monitors aboard their boats. Petitioners in Loper Bright Enterprises v. Raimondo, No. 22-451 and Relentless, Inc. v. Department of Commerce, No. 22-1219 challenged the lower court’s determinations under Chevron by alleging this deference is an impermissible delegation of congressional power, mandates judicial bias, and encourages agency overreach. They also argued it violated the Administrative Procedure Act (APA), which governs how federal agencies develop rules and regulations.
Petitioners’ arguments
Roman Martinez represented Relentless before the court and was the first heard. In his argument, he laid out the reasons why Chevron should be overturned. Chevron violates the Constitution, he said, because it undermines the courts’ power under Article III by forcing them to adopt interpretive authority from agencies over the court’s own.
As to violating the APA, Martinez asserted Section 706 of the statute requires a de novo review of legal questions. De novo, Latin for “anew,” refers to a standard of review when the court decides an issue without deference to the previous court’s opinion. By requiring judges to defer to agencies in cases of statutory ambiguity, he asserted Chevron prevents judges from providing the standard of review required by the APA.
“This court’s only justification for Chevron is the implied delegation theory, but that theory is a fiction,” he said. “There’s no reason to think that Congress intends every ambiguity in every agency statute to give agencies an ongoing power to interpret and reinterpret federal law in ways that override its best meaning. In this case, the agency misinterpreted the MSA [Magnuson-Stevens Fishery Conservation and Management Act] to force struggling fishermen to pay up to 20 percent of their annual profits to federal agents.
“The government says that even if all nine of you agree with us that the agency’s construction is worse than ours, you should nonetheless defer to that construction and uphold their program under Chevron,” he added. “That’s not consistent with the rule of law. If we have the best view of the statute, we should win this case.”
Associate Justice Clarence Thomas opened the questions by asking: how much deference is too much? Martinez replied any deference that has allocated interpretive authority from Article III courts to an agency is too much. He explained deference can become a problem when it requires “a judge to say ‘x’ when really the judge thinks the law means ‘y.’”
“Of course, courts should pay special attention to what agencies say, but the agency ultimately has to bring its expertise to bear in a way that’s persuasive,” Martinez said. “And if the [agency] isn’t persuasive, if the court thinks that the law means ‘x’ even though the agency thinks the law means ‘y’, then the court needs to go with the best interpretation of the statute, just like it does in every other area of statutory or constitutional interpretation.”
Associate Justice Elena Kagan provided hypotheticals where Chevron could be applied. She focused on agency expertise and understanding and the role of agencies to be subject matter experts once Congress passes a statute. One timely example she provided was a theoretical artificial intelligence (AI) statute. In the event Congress passed a statute to regulate AI, creating multiple delegations – maybe even a new agency – Congress inevitably will have left a gap. She asked Martinez whether he thought Congress would want the courts or the agencies to fill that gap. Martinez asserted Congress would want the courts to do the interpretive work.
“What Congress wants, we presume, is for people who actually know about AI to decide those questions,” Kagan said. “And also, those same people who know about AI are people who, to some degree, in some way, are accountable to the political process. They have constituencies. They have fact-finding abilities. They are obligated to go consult with people. They report to a president, who needs to be elected. In all kinds of ways, both with respect to expertise and with respect to their connections to the public and to other policymaking entities, those are the people Congress wants to decide questions about AI. We [the court] don’t even know what the questions are about AI, let alone the answers to them.”
Associate Justices Amy Coney Barrett and Sonia Sotomayor focused their questions on the impact of Chevron, as up until this point, it has been uncertain as to what would replace it. Skidmore deference is a likely contender, providing that instead of mandating the judiciary to defer to the agency in cases of ambiguity, the court defers to the agency’s interpretation according to the agency’s ability to demonstrate persuasive reasoning. Associate Justice Brett Kavanaugh phrased Skidmore as the power to persuade, as opposed to the power to control.
Should Chevron be overturned, Barrett stated concerns about an increase in litigation, as previously decided cases could be subject to review. Martinez said stare decisis, the legal doctrine stating courts should adhere to previous courts on related matters, should prevent this issue. Barrett and Associate Justice Ketanji Brown Jackson both expressed doubt about how effective this stare decisis theory would be in practice.
Paul Clement, counsel for petitioners in Loper, argued Chevron was “unworkable” because its threshold question of ambiguity and Congressional intent is ambiguous itself. There is no current definition of the word to guide lower courts, and often some judges will find ambiguity frequently, while others will never find a statute to be ambiguous. Associate Justice Neil Gorsuch mentioned during the Relentless proceedings that government counsel has previously stated before the court “I don’t know what ambiguity means,” indicating a potential way for the court to narrow Chevron, should they elect to uphold the doctrine.
Gorsuch also mentioned that while the late Associate Justice Antonin Scalia had originally supported Chevron deference, he stated in later opinions that he regretted the holding in that case. Clement followed up on that, as Scalia mentioned several times how Chevron never mentioned APA §706 and did not resolve the possible conflict between the two.
Respondent’s argument
Solicitor General Elizabeth Prelogar represented the government’s interests, arguing Chevron should be upheld, as it has been relied upon by the courts and the legislature for the last 40 years. She said overturning Chevron would be “an unwarranted shock to the legal system.”
Prelogar contended the theory that APA §706 requires de novo review and Chevron was a violation of that provision was inconsistent with the statute’s history and the way it has been understood since its enactment. When Thomas asked about the section’s absence from the Chevron holding, Prelogar responded: “Section 706 says that courts should decide all relevant questions of law and interpret statutes, but none of that is inconsistent with the Chevron framework because 706 doesn’t prescribe a universal standard of review to govern those kinds of statutory interpretation questions. And the courts are interpreting statutes when they walk through the Chevron framework.”
Should Chevron be overturned, Prelogar said thousands of judicial decisions sustaining an agency’s rulemaking or adjudication as reasonable would be open to challenge. Sotomayor asked for the respondent’s opinion about whether there would in fact be a deluge of cases – as petitioners had argued was unlikely because of stare decisis. Prelogar said it was more likely that litigants will “come out of the woodwork” to open those decisions for review.
Chief Justice John Roberts asked the solicitor general whether the Supreme Court had overruled Chevron “in practice,” as the court hasn’t relied on it in over 10 years. Prelogar said the fact the court hasn’t had a step two case in recent years should not indicate that in cases where Congress is leaving ambiguities or gaps, Chevron no longer sets the ground rule for the scope of delegation.
Prelogar also noted how Congress has been legislating with Chevron as a “background rule” for 40 years, using it to inform the degree of deference it can confer to agencies. If Congress had an issue with how the courts used Chevron deference, it could have legislated against it at any time, and has elected not to do so.
Kavanaugh and Gorsuch focused a lot of questions on the lack of definition for ambiguity, noting that even during her oral argument, Prelogar gave two different definitions. Gorsuch mentioned a dozen or more circuit judges have written to the court, requesting Chevron be overturned, because of the uncertainty around when a statute can be considered ambiguous.
While respondents argued Chevron provides stability, Kavanaugh disagreed, stating Chevron causes a “shock to the system” every four to eight years, as administrations change and new agency heads are appointed. Prelogar responded, stating there is no evidence of agencies “flip-flopping” left and right, or doing so on a whim, that would support that concern.
Gorsuch also raised a point about how often agencies prevail in court cases when Chevron is applied. The solicitor general emphasized Chevron as “value-neutral,” where regulated participants will prevail over government agencies, and vice versa. But for other cases where the party opposing the agency is an individual, such as a veteran seeking benefits or a social security disability applicant, the cases are always resolved in favor of the agency. Gorsuch said he wondered if in these cases Chevron is having a disparate impact on different classes of persons.
Takeaways
Jonathan Masur, University of Chicago law school professor and director of the Wachtell, Lipton, Rosen & Katz program in behavioral law, finance and economics, told RESPA News the arguments were similar to what he expected.
“Probably the most surprising part was that the court seemed to be lining up pretty strongly along ideological lines,” he said. “All three Democratic appointees seemed to be defending Chevron, and all six Republican appointees seemed to be criticizing it. That wasn’t inevitable in this case, particularly given that justices such as Thomas and Scalia have defended Chevron in the past.”
Masur predicted a 6-3 court in favor of eliminating Chevron, though noted it is possible the court may narrow the doctrine in the way Prelogar suggested (though that seems less likely).
“The most surprising statement was actually something that Prelogar said for the government,” he noted. “She broached the idea that Chevron deference should be understood to apply only when the statute provided no answer to the question at hand, and not when there were multiple reasonable interpretations of the statute. She suggested that if the court could find a ‘best interpretation’ of the statute, that interpretation should control, even if there were other reasonable interpretations.
“That is not the conventional understanding of Chevron or the conventional understanding of what it means for a statute to be ambiguous, and the court seemed somewhat surprised and skeptical of this position. It seemed possible that she was trying to save Chevron by narrowing it.”
David Friend, former senior counsel at the Consumer Financial Protection Bureau, said overturning Chevron, if that is what the court does, will likely cause the increase in legislation the petitioners warn against and cause instability in the judicial system.
“You’re going to get a lot of litigation,” he said. “And not just businesses trying to get regulators off their back. I think what you’ll see is a lot more consumer litigation, as well. People that are trying to expand the meaning or challenge the meaning that a regular regulator has come up with, to address an ambiguous provisional statute.”
In a post-Chevron world, what level of persuasion is needed for a party to make their case could depend on which district the case is brought, or even which judge is assigned the case, Friend added. There are 13 federal circuit courts across the U.S., which include 89 district courts (94 if you include Puerto Rico) and without a replacement lined up for Chevron deference, these districts are free to determine what deference to give to agency interpretation. Should the judges in different districts come to different holdings, consistency across the federal courts would decrease.
Overturning Chevron could also cause issues on the legislative side. Congress often includes ambiguous language so an agreement can be made and the law passed. With Chevron no longer working as a backstop, Congress may be required to legislate at a level of specificity that would result in nothing being accomplished.
“The reality is Congress is not going to stop passing ambiguous legislation – it’s just not going to happen,” Friend said. “So, how do we resolve these ambiguities? I’d like to know.”
A perfect example of ambiguous regulations are those surrounding qualified mortgages (QMs). Mandated by the Dodd-Frank Act, QM regulations are designed to provide protections to lenders and borrowers but contain vague language and terms with which the industry already takes issue. The loss of Chevron deference would not make complying with them any easier.
Ballard Spahr Mortgage Banking Group Leader Richard Andreano said he expects the court will not completely overturn Chevron but will likely modify the framework or clarify its application, although even this change could have a significant impact on how the federal courts interpret agency actions going forward.
“Based on their questioning of counsel, Justices Sotomayor, Kagan and Jackson appear to support retaining the Chevron framework,” he said. “Justice Jackson reflected a concern that if Chevron is overturned, courts would become involved in making policy decisions and could become ‘uber-legislators.’ Justice Sotomayor was concerned that overturning Chevron could result in litigants in prior cases decided based on the Chevron framework to re-litigate the issues in those cases. This concern was shared by Justice Barrett.
“In the past, Justices Gorsuch and Kavanaugh have criticized Chevron, and reflected their dislike for the Chevron framework in their questioning,” he added. “At one point Justice Gorsuch stated ‘One lesson of humility is to admit when you’re wrong. Justice Scalia, who took Chevron, which nobody understood to include this two-step move as originally written, turned it into what we now know, and late in life, he came to regret that decision. What do we make of that lesson about humility?’”
Andreano also noted Kavanaugh’s questions reflected opposition to the Chevron framework, but the justice also referred to competing concerns that make the issue of how to deal with the framework difficult to determine.
“Justices Roberts, Thomas and [Samuel] Alito did not appear to be as critical of Chevron in their questioning, but they have expressed dislike for the Chevron framework in the past and their questions did not suggest that they have changed their minds.”