SCOTUS Overturns Chevron Deference, Clipping Regulator Wings (Updated June 28)

The Supreme Court as composed June 30, 2022 to present. Front row, left to right: Associate Justice Sonia Sotomayor, Associate Justice Clarence Thomas, Chief Justice John G. Roberts, Jr., Associate Justice Samuel A. Alito, Jr., and Associate Justice Elena Kagan. Back row, left to right: Associate Justice Amy Coney Barrett, Associate Justice Neil M. Gorsuch, Associate Justice Brett M. Kavanaugh, and Associate Justice Ketanji Brown Jackson. Fred Schilling, Collection of the Supreme Court of the United States

In a 6-3 decision extremely important to railroads and their regulators, the Supreme Court of the United States (SCOTUS) ruled on June 28 to overturn a long-standing precedent that set the framework for evaluating federal agency action—so-called “Chevron deference,” derived from a 1984 case, Chevron U.S.A. v. Natural Resources Defense Council. The decision is 22-451, Loper Bright Enterprises v. Raimondo (downloadable below).

“While SCOTUS has not invoked Chevron in recent years, lower courts still rely on it,” notes Railway Age Capitol Hill Contributing Editor Frank N. Wilner. “The Court’s conservative majority seemed inclined during argument to overturn or significantly scale back Chevron, according to The Washington Post. SCOTUS’s decision to overturn Chevron is a blow to regulatory power and arguably beneficial to railroads.”

“For decades, the Court’s decision in Chevron U.S.A. v. Natural Resources Defense Council directed judges to defer to the reasonable interpretations of federal agency officials in cases that involve how to administer ambiguous federal laws,” the Washington Post noted. “Writing for the majority in the 6-3 ruling, Chief Justice John G. Roberts Jr. said that framework has proved unworkable and allowed federal agencies to change course even without direction from Congress. ‘The Court is finally ending our 40-year misadventure with Chevron deference,’ Roberts said, reading parts of his opinion from the bench. The court’s three liberal justices—Sonia Sotomayor, Elena Kagan and Ketanji Brown Jackson—dissented.”

“Experience has … shown that Chevron is unworkable,” Chief Justice Roberts wrote for the majority. “The defining feature of its framework is the identification of statutory ambiguity, which requires deference at the doctrine’s second step. But the concept of ambiguity has always evaded meaningful definition … Because Chevron in its original, two-step form was so indeterminate and sweeping, we have instead been forced to clarify the doctrine again and again. Our attempts to do so have only added to Chevron’s unworkability, transforming the original two-step into a dizzying breakdance … Four decades after its inception, Chevron has thus become an impediment, rather than an aid, to accomplishing the basic judicial task of ‘say[ing] what the law is.’  And its continuing import is far from clear. Courts have often declined to engage with the doctrine, saying it makes no difference … And as noted, we have avoided deferring under Chevron since 2016. That trend is nothing new; for decades, we have often declined to invoke Chevron, even in those cases where it might appear to be applicable … At this point, all that remains of Chevron is a decaying husk with bold pretensions. Nor has Chevron been the sort of “‘stable background’ rule” that fosters meaningful reliance … Chevron has proved to be fundamentally misguided …

“Chevron is overruled. Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA (Administrative Procedure Act) 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. Because the D.C. and First Circuits relied on Chevron in deciding whether to uphold the Rule, their judgments are vacated, and the cases are remanded for further proceedings consistent with this opinion. It is so ordered.”

BACKGROUND ON CHEVRON, from Railroads & Economic Regulation (An Insider’s Account)

BY FRANK N. WILNER

In 1984, SCOTUS established a Chevron deference instructing appellate courts to afford expert regulatory agencies (such as FRA and ICC, which is now STB) deference in their interpretation of a statute unless the court finds the regulators’ interpretation to be arbitrary, capricious or manifestly contrary to the statute.

In 1997, the Court expanded its Chevron Deference with Auer deference (also named for the underlying case, Auer v. Robbins), instructing appellate courts to defer to reasonable federal agency interpretations of their own regulations.

In recent years, conservative justices have expressed a desire to invalidate or reduce Chevron and Auer deference. Justice Clarence Thomas wrote in a concurring opinion in 2015 that there are “serious questions about the constitutionality of our broader practice to deferring to agency interpretations of federal statutes.” In 2016, while a judge on the 10th Circuit Court of Appeals, now-Justice Neil M. Gorsuch said, “Maybe the time has come to face the behemoth.” In 2019, Gorsuch referred to the Auer deference as “maimed and enfeebled—in truth, zombified.”

Such rationale, wrote Elizabeth Slattery in a March 28, 2019, essay published by the Heritage Foundation, is that deference “turns on its head the Court’s foundational declaration in 1803 in Marbury v. Madison that it is ‘emphatically the province and duty of the judicial department to say what the law is’”—that the federal judiciary is supreme in interpreting the Constitution.

A bright line example of Chevron deference is a 2-1 decision in July 2000 of the District of Columbia Circuit Court of Appeals (all three judges having been nominated by Republican President Ronald Reagan) to grant deference to an STB ruling imposing a 15-month moratorium on railroad mergers. The appellate court majority ruled that the STB “neither violated the statute nor otherwise exceeded its authority”—that regulatory agencies may defer actions mandated by statute when necessary to realize broader statutory objectives.

WHAT DOES OVERTURNING OF CHEVRON AND AUER MEAN FOR RAILROADS?

At the FRA, recently promulgated rules on minimum crew consist, emergency escape breathing apparatus, dispatcher certification and signal maintainer certification all are alleged by railroads to lack underlying data and, without “tilt” provided by Chevron or Auer deference are less likely to stand up to court challenge.

At the STB, a 2019 pending rulemaking, “Final Offer Rate Review” (FORR) is ripe for challenge absent Chevron deference. Under FORR, a railroad and shipper engage in narrowly tailored exchange of evidentiary information, focusing on essential information needed to prove or defend a rate case. The parties then simultaneously submit final offers, which must include an analysis of the challenged rate and the offer. The STB then chooses one of the offers without modification.

FORR was challenged by railroads before the 8th Circuit Court of Appeals in December 2023. Speculation is that the court is awaiting the SCOTUS decision on Chevron before ruling on the STB’s authority to promulgate FORR.

Also affected could be the STB’s decision on Reciprocal Switching—specifically, the Board’s conception of what “public interest” means, as it is not defined in statute.

Meanwhile, the House Republican Study Committee, in anticipation of Republicans controlling both chambers of Congress following November elections, is reportedly drafting legislation for 2025 requiring federal regulatory agencies to provide Congress all underlying data associated with proposed rulemakings. The purpose is to assert greater congressional oversight of the regulatory process ahead of finalization by agencies of their rules.