On a six to three ruling by the U.S. Supreme Court in the decision on Loper Bright Enterprises v. Raimondo, regulation of nearly all aspects of American commerce was upended by overturning a four-decades-long precedent that has served as a bedrock of modern administrative law.
The Chevron deference doctrine, as it is frequently referred to, required judges to defer to an agency's reasonable interpretations of a congressional statute as guided by a two-step framework. First, courts were instructed to ask whether Congress has "directly spoken to the precise question at issue." If the answer to that question was no, then the second step was applied, requiring courts to uphold the agency's decision unless the decision was not a "reasonable" construction of the statute.
Because broad statutes are often susceptible to multiple reasonable interpretations, statutes frequently changed meaning from administration to administration and creative agencies were rarely stumped in their search for a broad statutory grant that would support specific policy or political objectives.
Citing the "rapid expansion of the administrative process," Chief Justice Roberts stated, "Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the Administrative Procedure Act requires."
Justices Elena Kagan, Sonia Sotomayor and Ketanji Brown Jackson dissented, predicting the ruling "will cause a massive shock to the legal system."
So, how will this affect regulated industries, and how should corporations respond?
This shift in methodology levels the playing field and allows courts to play a more active role in scrutinizing federal regulations. Additionally, this decision will make it more difficult for the current administration to defend its mandates on electric vehicles, and most certainly complicate the already embattled Securities and Exchange Commission's effort to force public companies to disclose information about their climate risks, as well as the EPA's latest effort to curb power plant emissions.
More specifically, a recent decision by Federal Judge James David Cain gives insight into how this decision may play out. On July 1, Judge Cain of the U.S. District Court for the Western District of Louisiana called the pause for LNG export permits "completely without reason or logic." Cain ordered that the "LNG export ban be stayed in its entirety, effective immediately." Cain also said that the export halt "departs from DOE's past policies and precedents," noting that the DOE "has never found an LNG export application to be inconsistent with the public interest and has approved every other past LNG export application."
The overturning of the Chevron deference has introduced a new era of uncertainty as the legal and regulatory landscape adapts. The true impact of this decision will likely be defined through years of litigation, as courts, agencies and Congress grapple with its practical implications.
While this significant shift will lead to more legal challenges and a need for employers to stay vigilant about court decisions affecting agency rules, Industry Makes believes this decision marks a significant victory for those challenging federal regulations. We applaud this decision as it provides an opportunity for the federal courts to rein in regulatory overreach and spares businesses and industries from changes in administrations and political leanings. This decision clearly signals that courts should serve as a check on agency authority.
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