US Supreme Court deals blow to agencies’ rulemaking authority

The US Supreme Court has sharply clipped the wings of federal agencies, overturning a legal doctrine that for 40 years has given them significant latitude to set standards in areas ranging from environmental protection to securities regulation.

The legal doctrine at the centre of the 6-3 decision on Friday is known as “Chevron deference”, stemming from a 1984 Supreme Court decision involving the oil major. Under the doctrine, courts generally defer to agencies’ interpretation of ambiguous rules and laws written by Congress.

Courts “may not defer to an agency interpretation of the law simply because a statute is ambiguous”, Chief Justice John Roberts wrote for the majority.

Legal experts have argued that overturning the Chevron doctrine could trigger a wave of litigation, emboldening parties to challenge agencies’ standards. But it may also push regulators to preemptively craft less sweeping rules in the hope they will survive legal challenge.

While Loper Bright Enterprises vs Raimondo was nominally about government monitoring of commercial fishing boats, the decision, split along ideological lines, made clear the far-reaching nature of the ruling.

“Chevron has proved to be fundamentally misguided,” Roberts wrote for the six conservative justices. “It reshaped judicial review of agency action without grappling with the [Administrative Procedure Act], the statute that lays out how such review works.”

The conservatives concluded that the doctrine was “unworkable” and gave too much deference to unelected bureaucrats. “Chevron has turned statutory interpretation into a game of bingo under blindfold,” justice Neil Gorsuch wrote in a concurring opinion.

In her dissent for the three liberals, Justice Elena Kagan argued that the court had wrongly substituted its own views for decades of precedent. The doctrine “has formed the backdrop against which Congress, courts, and agencies — as well as regulated parties and the public — all have operated for decades,” Kagan wrote. “It has become part of the warp and woof of modern government, supporting regulatory efforts of all kinds.”

She also warned that the decision “is likely to produce large-scale disruption”, noting that it had been applied “in thousands of judicial decisions”.

The majority sought to limit some of the fallout by clarifying that it was not over-ruling decisions that had previously been made using the standard, including the original Clean Air Act case involving Chevron.

Friday’s ruling is the just the latest in a series of decisions limiting the powers of federal agencies, and the second this week. The court on Thursday curbed the use of in-house courts by Securities and Exchange Commission in fraud cases.

Democratic lawmakers hit back against the decision. Dick Durbin, the Senate judiciary committee chair, said the court’s majority “shamelessly gutted long-standing precedent in a move that will embolden judicial activism and undermine important regulations”.

Consumer and investor groups also decried the Loper Bright ruling. “The government’s ability to protect and serve the American people is going to be curtailed,’ said Dennis Kelleher, of investor group Better Markets. “Every part of Americans’ lives from the meat in their dinner to the airbags in their cars is going to be affected.”

Jillian Blanchard, of Lawyers for Good Government, called the decision a “devastating blow to environmental protection and the fight against climate change . . . favouring corporate interests over public health and environmental justice, and making it harder to hold polluters accountable.”

Suzanne Clark, CEO at the US Chamber of Commerce, countered that the ruling was “an important course correction,” while other industry groups argued it was needed to strengthen the hand of companies when they opt to fight regulatory decisions. “Today’s decisions are necessary to stop an out-of-control administrative state from continuing to trample on our democracy,” said Chris Iacovella, president of the American Securities Association.