On June 28, the Supreme Court of the United States overturned a 40-year-old opinion that controlled how courts reviewed an administrative agency’s authority. People who had never heard of Chevron Deference were suddenly mourning its demise like the death of a relative. They were certain democracy was over, they just weren’t sure why. However, a historical look at administrative agencies shows the opinion simply resets to a traditional legal review of an administrative agency’s delegated authority.
The Supreme Court opinion in Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc. was issued in 1984. At the time, the United States was 208 years old. The U.S. Constitution had been in force for 196 years. For most of that time, independent administrative agencies were not a consideration. Congress (the legislative branch) wrote and passed laws. The President and the executive branch enacted them. The judicial branch reviewed them.
The first independent agency was established in 1887 with the creation of the Interstate Commerce Commission. The ICC was delegated authority by Congress to regulate the railroad industry. However, that authority was limited. The ICC could regulate, not legislate. This was further established by SCOTUS in 1892, when the Court stated: “Congress cannot delegate legislative power to the President is a principle universally recognized as vital to the integrity and maintenance of the system of government ordained by the Constitution.” This became known as the non-delegation doctrine.
The Court amended the doctrine over time as the need for independent agencies expanded. In 1928, the Court had altered its interpretation to allow for Congress to delegate regulatory authority as long as Congress gave the agencies an “intelligible principle” to base the regulations.
Then came the New Deal. Between 1933 and 1938, President Franklin D. Roosevelt introduced a series of reforms to address the Great Depression. This created wave of new agencies that pushed the boundaries of the non-delegation doctrine and brought multiple legal challenges before the Supreme Court.
At the time, the Court was divided into two groups. Four conservative justices, Justices Pierce Butler, James McReynolds, George Sutherland, and Willis Van Devante, were labeled by the media as “The Four Horsemen.” While the three liberal justices, Louis Brandeis, Benjamin Cardozo, and Harlan Stone, were called “The Three Musketeers.” The swing votes were Chief Justice Charles Hughes and Justice Owen Roberts.
The Four Horsemen, typically with Roberts, issued a series of opinions overturning New Deal policies. This frustrated President Roosevelt to the point he pushed both for an age limit of 70 for Supreme Court Justices and a plan to pack the Court. Neither were successful.
In 1935, the court struck down the National Industrial Recovery Act in Schechter Poultry Corp. v. United States. In the NIRA, Congress had broadly delegated the regulation of poultry to the President. The Court ruled the delegation was unconstitutional, stating “Congress is not permitted to abdicate or to transfer to others the essential legislative functions with which it is thus vested.” The opinion was unanimous.
In the decade that followed, Congress and the President worked to find a solution that allowed administrative agencies to create regulations, within the constitutional limitations. During that time, Congress began to grow weary of the growing powers of independent agencies. After a few failed proposals, the Administrative Procedure Act was adopted in 1946.
The intent of Congress was not to enable agencies to have more authority, but to restrict them by creating a framework of processes and limitations. Rather than delegating broad lawmaking authority to agencies, as occurred with the NIRA, Congress would pass laws with general guidelines and delegate the details to the agencies. Agencies then create “rules” to regulate the specifics, within the bounds of the delegated authority.
The 1946 language of the APA included a simple rule making procedure that required agencies to provide notice of the rule, procedures for public input, and effective dates. It also included the often-repeated phrase “arbitrary and capricious” as factors courts should consider in reviewing if a rule is valid. The APA has been amended and expanded since, but the process still follows that basic outline.
The rule making process typically works well. Congress is just too cumbersome to effectively draft the details and respond in a timely manner. They also lack expertise. Delegating the details to the agencies, who then follow a process to create rules and get public input, is an effective form of government.
However, sometimes agencies like to push the boundaries of their authority. For parents, it is like giving your child instructions. If you tell them to come home after school, some children will do just that. They will take the direct path from school to home without any delays. Others will find creative interpretations of the instructions. Some children may think the instructions mean a winding path through the neighborhood. Others may push the limit and stop at a friend’s house or the park, claiming they still came home after school. Sometimes legal challenges are filed by those who believe an agency has wandered outside the instructions in the delegated authority. It is then up to the courts to interpret the law.
Interpretation of that authority varies and sometimes the law isn’t well written. Since 1984, the interpretation of an administrative agency’s authority to act has been based on precedent set in Chevron v. Natural Resources Defense Council. The Chevron case was a challenge by the oil company to the Environmental Protection Agency’s interpretation permitting provision in the Clean Air Act of 1977.
That case resulted in a standard for how courts review the authority of an agency to act. First, the courts look at the original law to see the intent of Congress and if there is any ambiguity in the language. If the language isn’t clear, then the court looks at the agency’s interpretation. If the agency’s interpretation is rational or reasonable, then the agency gets the deference in its interpretation. This is known as the Chevron Doctrine, sometimes referred to as the Chevron Deference or the Chevron Two-Step.
Chevron wasn’t perfect. Over the next 40 years, the Court issued a series of opinions that narrowed the scope of Chevron. That came to a head in the combined cases of Relentless v. Department of Commerce and Loper Bright Enterprises v. Raimondowhen a 6-3 majority overturned the Chevron Deference.
This raises the burden for administrative agencies to prove they have the authority to create a rule. If a law is ambiguous, the agencies no longer get the presumption they are right. The court will look at the original law and the intent of Congress, then hear evidence as to why the rule may or may not be within the agency’s authority. Rules that have been upheld under Chevron are still valid and cannot be challenged under the change.
This is frustrating some advocates that have learned how to use the rule making process to get results. I am certain this means the death of the Securities and Exchange Commission’s Climate-Related Disclosure Rule. However, contrary to what others may say, the Department of Labor’s ERISA rule relating to the consideration of environmental, social, and governance factors by fund managers is safe as it is within the clear authority of the agency.
Additionally, the change does not close the door on those types of regulations. If the Court says an agency does not have the authority, Congress can grant it the authority through legislation.
As to the full rationale behind the opinion, below is a series of excerpts from the syllabus and majority opinion delivered by Chief Justice John Roberts.
“Congress in 1946 enacted the APA ‘as a check upon administrators whose zeal might otherwise have carried them to excesses not contemplated in legislation creating their offices.’ Morton Salt, 338 U. S., at 644.”
“The text of the APA means what it says. And a look at its history if anything only underscores that plain meaning. According to both the House and Senate Reports on the legislation, Section 706 ‘provide[d] that questions of law are for courts rather than agencies to decide in the last analysis.’” Quoting from a 1945 Congressional record.
“Nothing in the New Deal era or before it thus resembled the deference rule the Court would begin applying decades later to all varieties of agency interpretations of statutes.”
“And when the best reading of a statute is that it delegates discretionary authority to an agency, the role of the reviewing court under the APA is, as always, to independently interpret the statute and effectuate the will of Congress subject to constitutional limits. The court fulfills that role by recognizing constitutional delegations, fixing the boundaries of the delegated authority, and ensuring the agency has engaged in ‘reasoned decision-making’ within those boundaries.”
“Chevron cannot be reconciled with the APA by presuming that statutory ambiguities are implicit delegations to agencies. That presumption does not approximate reality. A statutory ambiguity does not necessarily reflect a congressional intent that an agency, as opposed to a court, resolve the resulting interpretive question.”
“Perhaps most fundamentally, Chevron’s presumption is misguided because agencies have no special competence in resolving statutory ambiguities. Courts do.”
“That is not to say that Congress cannot or does not confer discretionary authority on agencies. Congress may do so, subject to constitutional limits, and it often has.”
“This Court, for its part, has not deferred to an agency interpretation under Chevron since 2016.”
“Chevron is overruled. Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires. Careful attention to the judgment of the Executive Branch may help inform that inquiry. And when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it. But courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.”
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