Federal Regulators to be in Disarray in Wake of Loper Bright  

On June 28, 2024, the U.S. Supreme Court delivered a significant ruling in the case of Loper Bright Industries v. Raimondo. The ruling overturned the doctrine of Chevron deference as held initially in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. (1984). Chevron deference played a key role in the administrative state’s development. The Supreme Court allowed regulatory agencies to interpret ambiguous statutes and formulate rules as they saw fit, given such interpretations of the law were “reasonable.”  

Chevron deference was a nightmare for American businesses and free enterprise. The doctrine contradicted the nature of the Administrative Procedure Act (APA), which sought to curtail the power of regulators looking to overstep the bounds of their statutory authority. By way of the court’s ruling in Chevron, emboldened bureaucrats got the green light to impose their partisan agendas.  

In recent years, the Securities and Exchange Commission (SEC), Internal Revenue Service (IRS), Federal Reserve (Fed), Federal Trade Commission (FTC), Department of Labor (DOL), and a slew of other agencies have arbitrarily promulgated rulemakings harming digital peer-to-peer (P2P) payment services, private markets, depository institutions, crypto firms, and retirees. Not to mention action to implement the foreign Basel III Endgame capital requirements, which harms banks and consumers alike.  

However, we may be cheerful in believing the Biden administration’s whack-a-mole regulators may soon be incapacitated. Loper Bright Industries challenged the Chevron doctrine, arguing that the Marine Fisheries Service wrongly interpreted the Magnuson-Stevens Act of 1976 by justifying imposing onerous monitoring requirements costing the enterprise over $700 a day. In a 6-2 decision (Justice Jackson was not present), the court sided with the New England fishermen. 

The justices understood that “the Framers appreciated that the laws judges would necessarily apply in resolving those disputes would not always be clear, but envisioned, that the final “interpretation of the laws” would be “the proper and peculiar province of the courts.” The Federalist No. 78, p. 525 (A. Hamilton). The bench concluded that Chevron could not be squared with the APA and returned the right of judicial interpretation to the courts as intended by the framers in Article III of the Constitution. 

Plaintiffs challenging agency regulations already have numerous legal grounds, including the APA and major questions doctrine from West Virginia v. EPA (2022). With the overturning of Chevron, these legal challenges will induce more headaches for federal regulators without the existence of Chevron deference to justify their expansive view on rulemaking authority. It will also allow Congress to do its job and write federal statutes without agencies manipulating the language every time a new administration enters the White House.  

The U.S. Supreme Court also dealt an additional blow to regulators with its ruling on Corner Post v Board of Governors of the Federal Reserve System on July 1, 2024. In the decision, the court took a more expansive view on the statute of limitations for APA claims. The justices held the statute of limitations “does not accrue for purposes of §2401(a)’s 6-year statute of limitations until the plaintiff is injured by final agency action.” This decision will give even more leeway for businesses and individuals to seek action against unfair regulatory policies that they may not have been eligible to challenge in the past due to passing the statute of limitations deadline after being harmed by an administrative rule.  

The Loper Bright and Corner Post cases will inevitably force President Biden’s regulatory chiefs to downsize their ambitious regulatory pursuits. The end of Chevron has cut the executive branch down to size. Loper Bright and Corner Post bring fresh grounds for new litigation against certain rules, such as the SEC’s climate disclosure rule, the FTC’s premerger notification rule, the Fed’s amendments to Regulation II, the IRS’s tax rules for digital assets, and regulators’ interpretation of the Collins Amendment.  

The impact of  Loper Bright is already being felt, as seen in the ongoing legal battle over the Biden administration’s ESG investing rules for 401(k) plans under the Employee Retirement Income Security Act (ERISA). The Fifth Circuit  is set to hear a challenge to this initiative, which was previously upheld based on Chevron deference. Attorneys argue the ESG rule, which allows fiduciaries to consider “collateral benefits” in investment decisions, may be in violation of federal statute without the protection of Chevron. This case has significant potential to set a wider precedent in overturning the influence of ESG factors in retirement plans and broader investment decisions. 

Federal agencies should tread lightly and carefully, thinking twice before trying to make a name for themselves by pushing for new green rules, ESG/DEI requirements, etc., lest they incur legal losses at their own expense. However, whether they will take heed and act accordingly has yet to be seen.  

The recent rulings handed down by the Supreme Court serve as a reminder that separation of powers and judicial review are constitutionally enshrined for a reason. Courts, not bureaucrats, have the right to exercise statutory interpretation. The death of Chevron will usher in a brighter future for American businesses and rightly sideline capricious regulators from promulgating rules that violate the integrity of the free market.