Analysis The U.S. Supreme Court has ruled that judges should no longer defer to government agencies’ interpretations of ambiguous laws — a decision that could impact some of the biggest cases against tech companies.
This deference, known as Chevron deference, dates back to 1984, when the court ruled in Chevron v. Natural Resources Defense Council that the U.S. Environmental Protection Agency could define ambiguous terms in government legislation, as long as the agency tried to enforce the law as Congress intended.
Last week, the Supreme Court overturned that 40-year-old precedent with a decision covering two cases: Loper Bright Enterprises v. Raimondo And Relentless, Inc. v. Department of Commerce – on whether the U.S. National Marine Fisheries Service could compel U.S. fishing vessels to pay the salaries of federal observers in the absence of specific rules to that effect.
“The Administrative Procedure Act requires that courts exercise independent judgment in deciding whether an agency acted within its statutory authority, and courts may not defer to an agency’s interpretation of the law simply because a statute is ambiguous; Chevron is reversed,” the justices wrote in a 6-2 majority. [PDF].
The majority today grants itself exclusive power over all open questions, however expert or political they may be.
Justice Elena Kagan, in a dissenting opinion joined by Justice Sonia Sotomayor, called the decision a usurpation of judicial power because it invites judges to make decisions previously left to government agencies and expert staff.
“In one fell swoop, the majority now assumes exclusive power over all outstanding questions—no matter how expert or political—about the meaning of regulatory law,” Kagan writes. “As if it did not have enough on its plate, the majority has transformed itself into the nation’s administrative czar.”
Justice Ketanji Jackson Brown recused herself from the Loper decision — likely because of her prior involvement in the appeals court litigation — but joined the dissent as it applied to the 6-3 Relentless decision.
The move could significantly reduce the effectiveness of U.S. regulators like the Federal Trade Commission (FTC) and the Federal Communications Commission (FCC) – and thus change the way the tech industry is regulated.
The FTC, for example, is locked in battles with Adobe over subscriptions, with all the big AI players over antitrust, and is being criticized for abolishing that Silicon Valley pillar, the non-compete agreement. With Chevron’s firing, the latter could prove to be a textbook case for the new business order.
As for the FCC, many fear that the net neutrality issue will be re-litigated if control of the issue is handed over to judges. Telecom operators are not very supportive of the FCC and could challenge every fine or reprimand, simply to establish new rules.
Follow the money
The fishermen involved in the Loper Bright case were, according to the New York Times, represented by lawyers working for Americans for Prosperity — a group funded by petrochemical billionaire Charles Koch, a frequent opponent of regulation.
Patrick McLaughlin, director of policy analysis and senior fellow at George Mason University’s Mercatus Center – which Koch chairs and funds – called the court’s decision a positive step from a governance perspective.
“Under Chevron deference, if one agency interprets an ambiguous law one way and others (presumably regulated entities) interpret it another way, the deference will fall to the agency—courts will defer to the agency’s presumed expertise,” he wrote in a paper last week. “Now, in the post-Chevron world, regulatory agencies will have to justify their interpretation of ambiguous laws without the benefit of deference to agencies in cases of deference.”
The National Taxpayers Union Foundation (NTUF) welcomed the Supreme Court’s decision, citing its potential impact on the Internal Revenue Service.
“Today’s decision will level the playing field between taxpayers and government agencies,” NTUF Executive Vice President Joe Bishop-Henchman said in a statement. “Unreasonable interpretations by the IRS will no longer be automatically upheld in court, as they should be, and reasonable interpretations will always have the force of law.”
The Natural Resources Defense Council (NRDC) — the progressive environmental group that lost the Chevron case in 1984 — warned that ending deference to Chevron was a recipe for chaos, as judges across the county would be asked to interpret ambiguous laws.
“The Supreme Court has given itself and lower court judges a policymaking role that the Constitution did not give them,” NRDC argued last week. “The Court has stripped many federal agencies charged with protecting public health, public safety, and the environment—including the U.S. Environmental Protection Agency and the U.S. Food & Drug Administration, to name two—of their authority to interpret the laws they enforce. Instead, federal judges are now deciding.”
While a majority of Supreme Court justices have assured that past decisions based on Chevron — cited in some 18,000 federal court cases — will not be automatically overturned by their ruling, Kagan has doubts about that.
“The majority says that a decision is “[m]Dependence on Chevron is not enough to counter the strength of stare decisis“An opponent will need additional ‘special justification,’” she wrote. “The majority is optimistic, I am not so much. Courts motivated to overturn an old Chevron decision can always find something to call ‘special justification.’”
Kagan expects rules on the environment, health care, finance, transportation and artificial intelligence to be reshaped by judicial preference in the coming years.
“In every area of current or future federal regulation, expect the courts to play a leading role from now on,” she wrote. “This is not a role that Congress assigned them, as part of the [Administrative Procedure Act] or any other law. This is a role that the Court has now claimed for itself, as well as for other judges.” ®
