Supreme Court Overturns Judicial Deference To Federal Agencies In Historic Decision

The Supreme Court issued a 6-3 decision on June 28, 2024, overturning four decades of judicial deference to federal agencies' "permissible" interpretations of ambiguous law. In Loper Bright Enterprises v. Raimondo (Loper Bright), Slip Op. No. 22-451, the Court overturned the standard set in 1984 in Chevron USA Inc. v. Natural Resources Defense Council (Chevron doctrine), 467 U.S. 837 (1984). Loper Bright now requires courts reviewing agency action to exercise independent judgment in deciding whether an agency has acted within its statutory authority, consistent with the Administrative Procedure Act (APA).

This decision is widely seen as a win for those with longstanding concerns that the application of Chevron deference had curtailed reviewing courts with overturning the alleged overreach of administrative agencies. The Court's decision raises questions about its impact on agency practice in specialized areas, such as international trade, and opens the door to new legal arguments by litigants challenging agency decision-making.

THE DEFERENCE DOCTRINES

Chevron was preceded by Skidmore v. Swift & Co., 323 U.S. 134 (1944) — another Supreme Court decision dealing with deference given to administrative rulings, interpretations, and opinions on the relevant statute. Under Skidmore, reviewing courts consider an administrative agency's "body of experience and informed judgment" that was "based upon...specialized experience." On a case-by-case basis, courts determine how much weight to afford agency judgments based on "the thoroughness evident in {the agency's} 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." Thus, Skidmore deference provides that administrative actions are "entitled to respect," though it does not grant binding deference to agency interpretations akin to Chevron. As discussed in more detail below, after Loper Bright, Skidmore continues to apply.

For the past four decades, the decision in Chevron has required courts to defer to permissible interpretations of federal agencies administering ambiguous statutes by setting forth a two-step framework for judicial review. Under the first step, courts determine "whether Congress ha{d} directly spoken to the precise question at issue" and "reject administrative constructions which are contrary to clear congressional intent." In other words, is the statute ambiguous on the specific issue? If the answer is yes, courts moved to step two and deferred to the agency's "permissible construction of the statute," even where the reviewing court would otherwise have interpreted the statute differently.

The Supreme Court subsequently attempted to clarify the scope of both doctrines. In United States v. Haggar Apparel Company, 526 U.S. 380 (1999), the Supreme Court mandated Chevron deference for judicial review of a Customs regulation relating to the tariff classification of imported goods. In United States v. Mead Corp., 533 U.S. 218 (2001), the Court found that Chevron deference only applied in the first place if Congress delegated authority to the agency generally to make rules carrying the force of law, and the agency has made an appropriate formal ruling with a "lawmaking pretense." Thus, unlike Haggar, Skidmore deference was more appropriate for review of a Customs classification ruling that had not gone through the formal notice-and-comment rulemaking.

LOPER BRIGHT: THE END OF DEFERENCE?

Loper Bright involved a challenge by several Plaintiffs to a rule promulgated by the National Marine Fisheries Service (NMFS), requiring businesses to pay for independent observers on board domestic fishing vessels. The lower courts found in favor of the Government under the Chevron doctrine, holding that deference was warranted to the NMFS's interpretation of its governing statute. The Supreme Court granted certiorari on the limited question of whether Chevron should be overruled or clarified. On Friday, it answered this question affirmatively, at least prospectively.

The Court bases its decision, in part, on the premise that Chevron is inconsistent with Article III of the Constitution. The Court reasons that Article III assigns to federal courts the power to adjudicate cases and controversies, and that the Framers intended the final "interpretation of the laws" would be "the proper and peculiar province of the courts." Chevron, the Court reasons, takes this power away from the courts, instead forcing courts to defer to federal agencies' interpretations of the law. The Court also reasons that Chevron is inconsistent with the APA, which directs courts, not agencies, to decide "all relevant questions of law" arising on review of agency action — even those questions involving ambiguous laws. The Court finds that the APA prescribes "no deferential standards," and they should not conclusively defer to agencies' interpretations of the law. Instead, courts should independently evaluate the statute at issue to determine the best interpretation. The Court is clear that, unlike in Chevron, ambiguity in a statute should not be read as an implicit delegation by Congress to the agencies to interpret that statute, particularly because it is courts, not agencies, that have the "special competence" necessary to determine questions of law.

Notably, while the Supreme Court's decision in Loper Bright invalidates the Chevron standard for future cases, it makes clear that under the principles of statutory stare decisis, prior holdings under Chevron remain good law. The Court also makes clear that, while the binding nature of Chevron is no longer appropriate, other deferential doctrines, such as Skidmore, continue to apply.

DEFERENCE IN INTERNATIONAL TRADE LITIGATION

The APA does not apply to antidumping and countervailing duty (AD/CVD) cases, unlike proceedings before most other administrative agencies. These cases are highly technical in nature and therefore the administering agencies have historically been afforded substantial deference. These agencies include the Department of Commerce (Commerce) and the International Trade Commission (ITC), with determinations reviewed by the U.S. Court of International Trade (CIT), a specialized Article III Federal district court; the CIT's decisions are appealable to the Court of Appeals for the Federal Circuit (Federal Circuit). The specialized nature of trade remedies is reflected in the pertinent legislative history and the related judicial review, in practice.

In passing the Trade Agreements Act of 1979, the Congress carefully outlined the scope of judicial review for AD/CVD actions. It did so, inter alia, by: (1) increasing the equitable powers of the CIT; (2) requiring exhaustion of administrative remedies; and (3) restricting the CIT's review of AD/CVD cases to the agency record. Specifically, 19 U.S.C. § 1516a(b)(1)(B)(i) states that "{t}he court shall hold unlawful any determination, finding, or conclusion found...to be unsupported by substantial evidence on the record, or otherwise not in accordance with law." The Senate Finance Committee's report on the 1979 Act clarified that Congress's intent was to "remove all doubt on whether de novo review is appropriate by excluding de novo review from consideration as a standard in antidumping and countervailing duty determinations." S. REP. No. 249, 96th Cong., 1st Sess. 251-52 (1979), reprinted in 1979 U.S.C.C.A.N. 637. By contrast, there is no analogous standard of review for the Federal Circuit which infrequently hears trade cases. However, the Federal Circuit itself has recognized that it "must accord substantial weight to an agency's interpretation of a statute it administers." American Lamb Co. v. United States, 785 F.2d 994, 1001 (Fed. Cir. 1986) (quoting Zenith Radio Corp. v. United States, 437 U.S. 443, 450-51 (1978)). In dissenting from a denial of petition for rehearing en banc, Judge Wallach of the Federal Circuit noted, "{d}eferential review is appropriate because of the CIT's unique appellate role and its institutional expertise in trade matters." NSK Corp. v. U.S. Int'l Trade Comm'n, 542 F. App'x 950 (Fed. Cir. 2013) (Wallach, J., dissenting).

In practice, a review of nearly 200 CIT cases over the past 5 years reveals that less than 20 relied on Chevron deference in upholding agency determinations, which suggests that the impact of Loper Bright and the repeal of Chevron may be limited in the trade remedy context. However, the CIT's limited reliance on Chevron in recent years may be more a recognition of the power of Chevron in limiting challenges to established agency practice or interpretations of governing statutes and the invalidation of Chevron may invite fresh challenges to various aspects of agency administration in the trade context. Among the most interesting impacts to watch will be the following:

• How Commerce and the ITC (and interested parties) address issues previously sustained by the CIT under Chevron in new or ongoing proceedings.
• Whether the invalidation of Chevron leads interested parties to more aggressively challenge established Commerce and ITC practice as contrary to law.
• How, if at all, the current composition of the CIT (and individual judges) will choose to address deference in their opinions, which have already trended away from Chevron.
• How the Department of Justice will address the deference doctrines in defense of Commerce determinations.
• How the ITC will reconcile the principle of "consistency with earlier and later pronouncements" (a factor in favor of deference as described in Skidmore) with its reliance on the sui generis nature of each case.
• Whether it results in less regulatory flexibility and less discretion in implementing and enforcing regulations for Commerce, despite a new set of final rules.

These questions are particularly important and relevant in the context of trade remedies, but the impact on other types of trade law, including customs, sanctions/national security, and Section 337 litigation before the ITC will likely be varied.

At base, the Loper Bright decision certainly impacts private litigants seeking to have a court invalidate an agency's decision-making in trade and compliance matters.

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