The Cost of Ambiguity: Post-Chevron Compliance Could Be Expensive

In a landmark decision issued on June 28, 2024, the Supreme Court in Loper Bright v. Raimondo and Relentless v. Department of Commerce (“Loper Bright”) overturned the Court’s 1984 opinion in Chevron, U.S.A., Inc. v. National Resources Defense Council, Inc. (“Chevron”). In a 6-3 decision, the Supreme Court held that the Chevron doctrine “cannot be squared” with the Administrative Procedures Act because the Chevron doctrine required courts to ignore — and not follow — the reading of a statute that a court would have reached had it exercised its independent judgment.

How Loper Bright Case Set Stage for Change

In Loper Bright, the Supreme Court analyzed whether the National Marine Fisheries Service had exceeded its authority in interpreting laws requiring that fishing companies carry observers to monitor compliance. The National Marine Fisheries Service had interpreted this requirement to carry observers to also be a requirement to bear costs of the federal observers; however, the federal law did not explicitly require the costs to be borne by fishing companies. In reviewing this issue, the Supreme Court struck down the deference given to administrative agency interpretation under the Chevron doctrine.

Under the Chevron doctrine, where Congress empowered an administrative agency to administer a statute, courts were required to defer to an agency’s reasonable interpretation of ambiguities in the statute. The theory is that administrative agencies have subject matter expertise in the complex regulatory frameworks they administer, and therefore the agency is the correct governmental authority to interpret the statute — subject to judicial review for reasonableness. In Chief Justice Roberts’ majority decision, the Supreme Court asserted: “Chevron’s presumption is misguided because agencies have no special competence in resolving statutory ambiguities. Courts do.”

What Chevron Finding Means for the Future of Law

The future is uncertain. Since 1984, Chevron allowed the executive branch — and, by extension, federal agencies — more freedom in clarifying statutory ambiguities. Though the “reasonable” interpretation of a statute could change with presidential administrations, Chevron allowed for frequent, published guidance regarding how ambiguities in law are to be interpreted. Thus, in a post-Chevron world, there may be more long-term stability in interpretation of ambiguous statutes — but it may take longer to receive clarification of ambiguous statutes. By removing Chevron deference, the legislative branch is incentivized to pass less ambiguous statutes and defer less to administrative agencies; likewise, the courts will be charged with settling ambiguities that exist in law.

Why Businesses Should Care About This Ruling

Uncertainty is expensive. Congress often cannot gain sufficient support to pass laws that spell out specific applications of laws; therefore, we can expect Congress will continue to pass laws in the same substance and form they have for the last 40 years unless there is political will to change. Likewise, courts historically exercised judicial restraint when deciding cases — being unwilling or unable to answer questions that are not raised — and will defer only to higher courts in their own jurisdiction. This means that ambiguous statutes that currently exist or that are enacted in the future may require numerous expensive legal battles, in several courts, over several years, to clarify ambiguities in a reliable way. Given Chevron’s monumental impact, Loper Bright will undoubtedly and substantially affect the legislative process, the role of the judiciary, and the affairs of businesses and individuals that rely on predictable application of federal law.

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