- After nearly 40 years and more than 18,000 judicial opinions in which it was applied, the Chevron doctrine was overruled by the U.S. Supreme Court on June 28, 2024, in Loper Bright Enterprises v. Raimondo. The Supreme Court then on July 1, 2024, held that the statute of limitations to challenge an agency action under the Administrative Procedure Act (APA) does not begin to run until a plaintiff is injured by final agency action. This Holland & Knight alert examines how the Chevron ruling impacts a wide range of regulated industries going forward.
For nearly 40 years and in more than 18,000 judicial opinions, federal courts have used the Chevron doctrine to defer to an agency's reasonable interpretation of an ambiguous statute. On June 28, 2024, the U.S. Supreme Court overruled that long-standing precedent in Loper Bright Enterprises v. Raimondo, Case. No. 22-451, 603 U.S. ___(2024). Following that, on July 1, 2024, the Court held that the statute of limitations to challenge an agency action under the Administrative Procedure Act (APA) does not begin to run until a plaintiff is injured by final agency action. Corner Post, Inc. v. Board of Governors of the Federal Reserve System, Case. No. 22-1008, 603 U.S. ___(2024).
Taken together, the Court's decisions in Loper and Corner Post will create a sea change in administrative law with wide-ranging implications and potential opportunities for regulated industries.
Loper Bright Enterprises v. Raimondo and Corner Post, Inc. v. Board of Governors of the Federal Reserve System
In Loper and Corner Post, the Supreme Court has created a new framework for challenges to existing and developing regulatory landscape.
First, in the 6-3 Loper decision, the Court overruled its decision in Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc.
Previously, under the Chevron doctrine, when a reviewing court determined that a statute was ambiguous or that Congress had not directly addressed the precise question at issue, the Court, rather than imposing its own interpretation of the statute, would defer to the agency's interpretation as long as the agency's interpretation was based on a permissible construction of the statute.
- In Loper, the Court concluded that Chevron deference conflicts with separation of powers principles and the command of the APA that courts, not agencies, are to "decide all relevant questions of law" and "interpret statutory provisions." Stated another way, the Court made clear that it "remains the responsibility of the court to decide whether the law means what the agency says." The Court reinforced that "courts, not agencies, will decide 'all relevant questions of law' arising on review of agency action" and prescribed "no deferential standard for courts to employ in answering those legal questions." Therefore, the Court concluded, the APA "makes clear that agency interpretations of statutes – like agency interpretations of the Constitution – are not entitled to deference." In so holding, the Court specifically rejected arguments that federal agencies, rather than courts, are better suited to determine what ambiguities in a federal law might mean, including when those ambiguities involve technical or scientific questions that fall within an agency's area of expertise. Finally, the Court noted that "to the extent that Congress and the Executive Branch may disagree with how the courts have performed that job in a particular case, they are of course always free to act by revising the statute."
Going forward, Loper means that:
- "Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority" and "may not defer to an agency interpretation of the law simply because a statute is ambiguous."
- Courts still can consider the "interpretations and opinions" of the relevant agency and should accord "due respect" for the specialized expertise and informed judgement of the agency. However, the weight of those interpretations and opinions will "depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control." Prior cases holding that specific agency actions are lawful "are still subject to statutory stare decisis despite [this] change in interpretive methodology" and "mere reliance on Chevron cannot constitute a 'special justification' for overruling such a holding."
Given the wide application of Chevron in administrative law over the past 40 years, it is anticipated that the full impact of Loper will play out in the courts, the legislature and administrative agencies for years to come. Just days after Loper, the Court issued its decision in Corner Post, which, especially when viewed with Loper, has important implications for lawsuits challenging the lawfulness of federal agency action.
Corner Post addresses the statute of limitations under the APA and, specifically, when claims accrue under it. Claims arising under the APA are subject to a six-year limitations period under 28 U.S.C. § 2401(a). But prior to the Corner Post decision, the courts of appeals were divided about when this six-year period begins to run. Six circuits had held that the limitations period begins to run on the date that the agency issues a rule, while one circuit had held that it does not begin to run until the rule injures the plaintiff bringing the claim.
Under the interpretation asserted by the agency in Corner Post (that the limitations period runs from when the rule is final), a federal agency's regulation would have been insulated from review six years after its publication. The Court rejected that argument and held that a claim brought under the APA "accrues" for purposes of the statute of limitations when the regulated party is injured by final agency action.
Based on this determination, the Court held that Corner Post's 2022 challenge of a 2011 rule was timely because it was not injured before 2018. Under this ruling, any newly created entity that is subject to the regulation or any existing entity that suffers an injury for the first time under the regulation will have an opportunity to challenge the regulation. When considered together, Loper and Corner Post will open the door to a significant number of regulatory challenges in the coming years and offer the regulated community substantial defenses against the government.
Anticipated Challenges to Existing and New Regulations
Now that the Court has overruled Chevron and expanded the circumstances in which facial challenges to federal regulations may be brought, significant impacts will be felt by regulated entities at all levels of the public and private sectors. For decades, regulated industries have relied on courts' application of Chevron deference to guide interpretations of the applicability of agency decisions on their businesses. In the wake of the Loper and Corner Post decisions, lower courts will have to interpret the decision to assess the new state of the law as applied to the specific statutory framework being decided. This may result in a rush of litigation to test the new limits of agency deference, develop new precedent and likely revisit, at least in part, existing precedent.
- Financial Services. There are many federal agencies that touch on financial services institutions. Some of the most aggressive have been the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) (both discussed further below), as well as the Office of the Comptroller of the Currency (OCC), the prudential regulator for federally chartered banks. Various rules these agencies have made with respect to the Fair Lending laws, the use of consumer data and what constitutes a credit report under the Fair Credit Reporting Act (FCRA), and regulations regarding deceptive, junk or recurring fees will all be subject to higher scrutiny. Additionally, the OCC has sometimes utilized its rulemaking powers to define the outer boundaries of what constitutes the "business of banking," which has historically resulted to federally chartered banks offering an expansive range of products and services. The future scope of institutions' activities may now garner greater, or at least different, review.
- Telecommunications. The Federal Communications Commission (FCC or Commission) has been under substantial legal scrutiny for some of its recent decisions and interpretations of the law. A prominent example is the FCC's recent order reviving its past "Net Neutrality" policy, decision and procedures based in part upon its interpretations of the Communications Act. Under Loper, the FCC likely will face even more stringent judicial review of the current Net Neutrality decision, which currently is before the U.S. Court of Appeals for the Sixth Circuit. Other current efforts by the Commission to expand its authority relate to outer space and foreign sponsorship identification, which also may be more likely to face stiff judicial challenge because of Loper.
- Consumer Protection. The FTC and CFPB are federal agencies tasked with protecting the public from deceptive, unfair or abusive business practices pursuant to their jurisdictional grants under Section 5 of the FTC Act and the Dodd-Frank Act. Both agencies have the power to investigate violations of the consumer protection laws and regulations, bring civil enforcement actions, engage in rulemaking, conduct audits or supervisory examinations, announce substantive policies that interpret the laws and regulations, and provide industry studies. Therefore, the Supreme Court's decision impacts the way a court would look at how the FTC or CFPB examines advertising, marketing practices or business operations, as well as when the FTC or CFPB investigates or engages in rulemaking, how they interpret what communications to consumers are "deceptive," what business practices are "unfair" and what types of conduct are "abusive." As a result, with the elimination of Chevron deference, our strategies for counseling and defending targets of investigations will change and provide more opportunities for advocacy. To read more click here.