The Chevron Doctrine Is Dead. What Are the Implications for Business?

In June 2024, the U.S. Supreme Court overturned the long-standing Chevron doctrine, fundamentally altering how businesses interact with federal regulations. The decision will almost certainly make it easier for companies to challenge agency regulations and other agency action interpreting federal statutes (that is, federal laws passed by Congress). However, it could also introduce new uncertainties in the regulatory landscape that will pose new challenges for business. Here, I will provide some “before and after” context about the doctrine and then highlight some of the most important takeaways for businesses operating in a post-Chevron environment.

What Was Chevron?

The 1984 Supreme Court decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. established a crucial legal doctrine that required federal courts to defer to administrative agencies’ reasonable interpretations of ambiguous federal statutes. The doctrine gave agencies significant power to interpret laws. For example, a provision in the Clean Air Act required that a permit system be established to regulate “new or modified major stationary sources” of air pollution. The Environmental Protection Agency (EPA) regarded an entire plant with multiple pollution-emitting devices as a single stationary source rather than treating each device as a separate source. That interpretation allowed plants to modify or add devices without having to obtain new permits, as long as overall emissions did not increase. The Supreme Court upheld this interpretation, finding the statute ambiguous and the EPA’s view reasonable.

How and Why Was the Chevron Doctrine Overturned?

The Supreme Court overturned the Chevron doctrine in Loper Bright Enterprises v. Raimondo. This decision requires courts to use their “independent judgment” to identify the “single, best meaning” of an ambiguous statute rather than automatically deferring to any reasonable agency regulation.

The decision does not eliminate all agency influence on judicial decision-making. Loper Bright makes it clear that courts can still defer to agencies when a statute’s “best meaning” is that it gives the agency some discretion. One statute, for instance, instructs the secretary of agriculture to define the term resource-conserving crop, which confers deference on the secretary that federal courts must acknowledge. Statutes also confer upon agencies’ discretion to apply facts to the law — for instance, by instructing the Food and Drug Administration to evaluate an application to market a new drug in light of the statute’s requirements. Loper Bright also makes clear that courts, in exercising their “independent judgment,” should still give weight to an agency’s interpretation of the statute, especially if the agency’s interpretation has been long-standing and consistent.

Nevertheless, Loper Bright marks a significant shift in how courts will evaluate agency regulations, giving them more flexibility in interpreting statutes and ending four decades of practice where agencies often had the final say in interpreting ambiguous laws.

Takeaways for Business

The Supreme Court’s decision in Loper Bright alters the balance of power between regulatory agencies and the companies they regulate, creating opportunities and challenges. What follows are three important takeaways for business.

1. It should be easier to challenge agency regulations.

One clear implication of the Supreme Court’s decision is that businesses can be more aggressive in challenging unfavorable agency regulations (and other agency interpretations of federal statutes). Under Chevron, the party challenging the agency interpretation had to convince the court not just that the agency was wrong but that the agency was unambiguously wrong. Now, the party challenging an agency’s interpretation need only convince the court that the party’s reading of the statute is better than the agency’s. In many cases, that difference could have an enormous impact on the likelihood of success. Loper Bright has already been invoked in challenges to agency action, and it could allow companies to revisit unsuccessful past challenges to agencies’ interpretations of federal statutes.

2. Successful challenges will likely focus on statutory interpretations.

In considering a challenge, however, businesses should bear in mind that the benefits of the Supreme Court’s decision overturning Chevron are strongest in the case of a pure legal challenge to an agency regulation — a question like whether the EPA’s interpretation of a “stationary source” of pollution is consistent with its meaning in the statute. The Supreme Court’s decision has far less impact on a challenge to the agency’s application of the statute to a specific set of facts — such as whether a particular new drug application meets the statutory requirements for approval. For instance, a company might successfully challenge the EPA’s conclusion that costs to industry are categorically irrelevant in considering whether an environmental regulation is “appropriate and necessary,” but it might have a much harder time challenging the way the EPA balanced industry costs against other considerations in deciding whether a specific regulation was “appropriate and necessary.”

3. Regulatory compliance no longer guarantees statutory compliance.

Businesses should recognize that the Loper Bright decision does not hand them an advantage in all circumstances. For example, businesses cannot assume that their compliance with agency regulations will shield them from a claim that they violated the underlying statute. Challenges to agency regulations may come not just from businesses but from other interest groups. Regulations can, of course, be pro-business (as in Chevron itself) or at least provide welcome clarity in the face of ambiguity about a statute’s requirements. By making it easier to challenge regulations, the Supreme Court has cast some uncertainty on the validity of regulations that businesses have long taken for granted.

To offer a concrete example, the National Bank Act limits the interest rate that banks can charge in certain circumstances. The Office of the Comptroller of the Currency (OCC) has adopted regulations defining interest — regulations that were almost certainly valid under Chevron, given that the word interest is ambiguous and the regulations are reasonable. A number of lawsuits have claimed that banks’ overdraft fees constitute impermissible interest under the OCC regulations, but those suits have failed. Following Loper Bright, a similar lawsuit could now claim that, even if a bank’s overdraft fees are compliant with the OCC’s regulations, those regulations do not represent the “best meaning” of the word interest in the statute.

For those reasons, even if a business supports a given regulation — or at least does not want to challenge it — the business should evaluate whether the regulation complies with the statute. If there is ambiguity on that question, the business cannot assume that compliance with the regulation means that it is compliant with the statute. It should prepare for the risk that existing business practices or models that rely on a certain regulatory framework may be upended if those regulations are successfully challenged by other parties. And while a business could likely argue that notice and due process preclude liability for conduct that complied with governing regulations, it is unclear how courts will handle such an argument.

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Due to Loper Bright, there is likely to be a lot more uncertainty about the status of agency regulations in the coming years. For businesses operating in heavily regulated environments, it is extremely important not only to track and comply with agency regulations and action but also to evaluate whether that agency action is consistent with the underlying statutory requirements. That advice applies to identifying potential challenges to unfavorable agency action and avoiding surprises should a favorable or accepted regulation unexpectedly be set aside.