What the U.S. Supreme Court decision overruling Chevron means for food companies

The highly anticipated opinion in Loper Bright and its companions case, Relentless, Inc v. Department of Commerce, addressed the question of whether courts should continue applying the type of deference first articulated in the 1984 watershed administrative law case Chevron, U.S.A. Inc., v. Natural Resources Defense Council, Inc. By a vote of 6-3, the Justices overruled the landmark 1984 decision, finding Chevron deference to be “fundamentally misguided” and “unworkable”.¹ Going forward, when statutory ambiguity exists, courts will decide the best interpretation. Below we summarize the Loper Bright and Corner Post decisions and discuss eight key takeaways food companies should know.

Background – what was Chevron deference and why did it matter?

Chevron deference referred to a two-step analysis that reviewing courts applied when asked to decide whether an agency interpretation of the statute the agency implements is correct. In the first step, the court determined whether the statute itself answered the question. If so, the statute’s plain language was to be followed and the analysis ended. If the statute did not address the issue—if there was ambiguity or a gap—then the court assessed whether the agency’s proposed reading or interpretation was a reasonable one. If so, the agency’s interpretation was upheld. In other words, when the statute was ambiguous, courts would defer to reasonable agency interpretations, on the theory that the agency was an expert in the statutory framework and well positioned to identify an appropriate interpretation.

For 40 years, courts applied Chevron to assess whether agencies’ answers to questions were reasonable interpretations of their statutes. Unsurprisingly, under Chevron, when the analysis reached step two, the agency usually prevailed.

This deference to agencies’ interpretations made agency interpretation of statutes difficult to overturn because the standard of review was simply whether the agency’s approach to an ambiguous statute was “reasonable.” It also meant an agency’s approach may change over time, so long as each interpretation was “reasonable,” leading to flip-flopping on the same statutory question between Administrations.

Loper Bright and Relentless

What happened in these two cases that led to the Supreme Court’s decision?

Loper Bright and Relentless were decided in the U.S. Courts of Appeals for the District of Columbia Circuit and the First Circuit, respectively, and were consolidated at the Supreme Court. In both cases, businesses that operate in the Atlantic herring fishery, a regulated area of water off the East Coast of the U.S., joined together to challenge an agency rule that they may be required to pay for a government-certified third-party observer on certain fishing trips. The observer was estimated to cost $710 per day, which could reduce annual returns to the vessel owner by up to 20 percent. The lawsuits argued that the governing statute, the Magnuson-Stevens Fishery Conservation and Management Act (MSA), does not authorize the agency to mandate that fishing vessels pay for the observers. Because in both cases the respective Courts of Appeals relied on Chevron in upholding the requirement, their judgements were vacated and the cases remanded for further proceedings consistent with the Supreme Court’s decision.

What was the majority’s reasoning?

Writing for the majority², Chief Justice Roberts held that the Chevron decision was “fundamentally misguided” and “unworkable.” The opinion explains that since the founding the courts have been tasked to serve as an independent check on the executive branch, and that in that role courts must be the sole deciders on questions of law. This role was further clarified and solidified by Congress when it enacted the APA in 1946, which states in relevant part that for judicial review of agency action, “the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action.” This does not diminish any express agency authority given in statutes. “For example, some statutes expressly delegate to an agency the authority to give meaning to a particular statutory term.” Opinion at 17 (internal quotations omitted).

The majority explains that “[i]n the decades between the enactment of the APA and this Court’s decision in Chevron, courts generally continued to review agency interpretations of the statues they administered by independently examining each statute to determine its meaning,” and Chevron “triggered a marked departure from the traditional approach.” Opinion at 18. The opinion explains that Chevron “defies the command of the APA” because it “requires a court to ignore, not follow, the reading the court would have reached had it exercised its independent judgment as required by the APA,” and “afford binding deference to agency interpretations, including those that have been inconsistent over time . . . even when a pre-existing judicial precedent holds that the statute means something else—unless the prior court happened to also say that the statute is unambiguous.” Opinion at 21 (internal quotations omitted, emphasis in original). “The better presumption”, the majority explains, is “that Congress expects courts to do their ordinary job of interpreting statues, with due respect for the views of the Executive Branch. And 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.” Opinion at 25.

After walking through the principles of stare decisis, the majority holds:

Chevron is overruled. Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires. Careful attention to the judgement 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.

Opinion at 35.

Finally, the Court concluded by emphasizing that prior decisions made using Chevron deference— including the decision regarding the Clean Air Act in Chevron itself—remain in effect.

Corner Post

Corner Post, Inc. is a truckstop and convenience store located in North Dakota. It was incorporated in 2017, and in 2018, it opened for business. Corner Post accepts debit cards as a form of payment, and such transactions are governed by the Federal Reserve Board’s Regulation II, which sets a maximum on the transaction fees that banks can charge merchants for processing a debit card transaction. In 2021, Corner Post joined a lawsuit against the Board under the APA, challenging Regulation II on the ground that it allows higher fees than the statute permits. The District Court dismissed the lawsuit as time-barred by the default six-year statute of limitations applicable to lawsuits filed against the United States.

In another 6-3 opinion and with the same voting blocks as Loper Bright³, the Court held in Corner Post that an APA claim does not accrue for purposes of the six-year statute of limitations until the plaintiff is injured by final agency action. The Court rejected the Board’s argument that that six-year limitation period begins to run when the agency action becomes final, which would in effect “put an outer limit on the right to bring a civil action that is measured from the date of the last culpable act or omission of the defendant.” Opinion at 3 (internal quotations omitted). Thus, Corner Post allows new market entrants to challenge final agency action, such as a final rule, that is older than six years, provided they do so within six years of them being injured in fact by the final agency action.

Implications of Loper Bright

The impacts of Loper Bright will play out over a number of years, as agencies, litigation, and judicial precedent adapt to the new standard. The Supreme Court’s decision marks the beginning rather than the end of a period of change, and it will be important to monitor the evolving legal landscape. Here are eight key takeaways the food industry should keep in mind.

1. Expect more litigation. When Loper Bright applies, courts will review agency statutory determinations de novo absent some clear direction otherwise in the relevant statute. This substantially shifts the reviewing court’s function and, especially as the lower courts work out how to apply Loper Bright, will likely lead to more administrative law challenges. This effect could be compounded by the decision in Corner Post, creating the potential for even very old regulations to be challenged by new market entrants. Companies should consider whether there are regulations that turn on interpretations of ambiguous statutes that would be appropriate to challenge under the new de novo approach.

2. Loper Bright will not affect every rulemaking. It is important to remember that Chevron and now Loper Bright belong to a specific category of administrative law cases. Not every APA case involves an agency interpretation of an ambiguous or silent statute. For example, Loper Bright does nothing to change how courts will approach issues where Congress expressly delegated an issue to an agency; where an agency’s interpretation came in informal, non-binding guidance; or where the agency was interpreting its own regulation. It will be important to understand whether Loper Bright applies to a particular situation.

3. Loper Bright does not immediately vacate previous Chevron decisions. Cases previously decided that relied on Chevron deference are still good law. Loper Bright will apply only to new challenges brought against agency interpretations, or those already being litigated but that have not yet been decided. Even assuming new challenges are brought to rehash old cases, only a subset of those already decided would be at risk for being overturned—cases in which the statute was silent or ambiguous at step one; the agency’s interpretation was reasonable at step two; and the agency’s interpretation of the statute was reasonable, but not in a court’s view the best. Even though Loper Bright does not overturn existing decisions, companies should consider whether there are regulations that merit revisiting.

4. Regulations turning on an agency’s statutory interpretation will face greater uncertainty until fully litigated. With Chevron deference, the odds were that a reasonable, properly supported agency interpretation would withstand judicial scrutiny. Under Loper Bright, even a wellreasoned agency interpretation will stand only if a reviewing court agrees that it is the best interpretation of the statute. Although time will tell how aggressively courts assert their own views, how well agencies can craft regulations to withstand judicial review, and whether additional glosses on Loper Bright emerge, many new regulations will face a period of substantial uncertainty, possibly for extended periods of time, as they are litigated under the new de novo standard. This could place companies in the difficult position of needing to take steps to comply with a regulation without knowing whether it will be upheld. Companies should also carefully monitor litigation targeting key regulations and consider whether industry intervention would be appropriate, because once the issue is decided, it will be settled. Given the Corner Post decision, this monitoring could be an ongoing exercise.

5. Loper Bright will curtail, but not eliminate, agency flexibility and initiative. The executive branch has increasingly relied on broad agency action to implement policy changes in the face of Congressional inaction, facilitated by the knowledge that even significant actions could be justified by a “reasonable” agency interpretation of its statutory authority. Broad actions remain possible under Loper Bright, but now they must be based on an interpretation that would withstand de novo review by a reviewing court, injecting considerable uncertainty into regulatory initiatives and making it more difficult for agencies to expansively interpret their statutory authority. Combined with other limitations on expansive agency rulemaking, such as the “major questions doctrine,” it remains unclear whether agencies will pull back and adopt more cautious interpretive approaches or will move forward on contentious rulemakings regardless, effectively choosing to take their chances in court.

6. Loper Bright will modulate broad swings between political administrations. Whereas Chevron deference allowed agencies to shift one from “reasonable” statutory interpretation to another, Loper Bright’s holding means there is only one correct interpretation—whatever a reviewing court decides. This will make it more difficult for different political administrations to reinterpret statutory authorities to support their policy preferences, especially if the matter has been resolved in court. Companies should prepare for less dramatic swings on issues decided in court and may need to be strategic in what type of changes they advocate for.

7. Loper Bright puts more pressure on Congress to be clear or at least clearly delegate interpretive authority to the agency. This will be particularly important for provisions affecting the scope or critical details of a statutory scheme. Agencies can continue to fill in the gaps in ambiguous legislation, but their judgment will be subject to de novo judicial review. Efforts to influence legislation should reflect the new paradigm.

8. Arguments made in rulemaking comments will change. Comments on rulemakings involving agency interpretations of statutes should now focus on whether the interpretation is the best interpretation, not merely a reasonable one, and will likely be more impactful than when Chevron deference applied. This will be a particularly significant change for comments that support a rulemaking. Companies should incorporate administrative law expertise into comment preparation for important rulemakings.

Conclusion

Companies should monitor the changes wrought by Loper Bright and Corner Post very carefully. It is not too early to begin analysing key regulatory schemes that may be susceptible to challenge, being careful not to overlook regulations that a company would hope withstands challenge. We will continue to monitor and report on key administrative law developments. Additional views from the Hogan Lovells appellate team can be read here.

Please do not hesitate to contact us if you have any questions.

Authored by Brian Eyink, Mary Lancaster Grywatch, and Danielle Desaulniers Stempel.

References

1 Relentless was decided on a 6-3 vote, but Justice Jackson did not take part in the decision for Loper Bright. Functionally, because of the way the cases were paired, Chevron was overruled 6-3.

2 Chief Justice Roberts delivered the opinion of the Court, in which Justices Thomas, Alito, Gorsuch, Kavanaugh, and Barrett joined. Justices Thomas and Gorsuch filed separate concurring opinions. Justice Kagan filed a dissenting opinion, in which Justices Sotomayor joined and Justice Jackson joined only as it related to Loper Bright.

3 Justice Barrett delivered the opinion of the Court, in which Chief Justice Roberts and Justices Thomas, Alito, Gorsuch, and Kavanaugh joined. Justice Jackson filed a dissenting opinion in which Justices Sotomayor and Kagan joined.