How the Supreme Court’s overturning of the Chevron deference will impact design firms.
For 40 years, federal agencies have interpreted the intent and meaning of the congressional laws they administer and enforce, and courts were required to defer to agency interpretation of ambiguous or silent statutory laws when presiding over legal challenges. In turn, design firms have confidently relied on various federal agencies’ guidelines and interpretations of laws as a routine step of regulatory compliance efforts. A recent U.S. Supreme Court ruling limits agency authority and hands power back to courts, changing the country’s regulatory landscape.
While some view the depowering of federal agencies as a win, others recognize the uncertainty that inevitably results from individual courts, not federal agencies, interpreting ambiguous statutes and the breadth of agency statutory authority. This historic, fundamental shift in our country’s regulatory framework begs the metaphorical question: did the Supreme Court just muddy the waters that some federal agencies are trying to clean up, or did it simply restore the constitutional principle of separation of powers?
Separation of powers. The U.S. Constitution establishes three separate, but equal, branches of government: legislative (makes the law), executive (enforces the law), and judicial (interprets the law). Federal agencies, as part of the executive branch, are responsible for implementing and enforcing laws passed by Congress, i.e. the legislative branch. For decades, under Chevron, federal agencies possessed the power to interpret the laws they administer, and courts, i.e. the judicial branch, were required to defer to agency interpretation of ambiguous laws. Judicial deference to executive interpretation of legislation became known as the Chevron doctrine.
Chevron doctrine overturned: Loper Bright Enterprises v. Raimondo. In prior legal precedent, Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., the Supreme Court established a two-step approach to evaluate whether a governing statute permitted federal agency action: if intent is clear in a relevant federal statute, then the legislative intent controls the court’s review of the federal agency’s regulation at issue; if, instead, the federal statute is ambiguous as to intent, then the court defers to the agency’s “permissible construction of the statute.” The courts’ deference to agency interpretation of ambiguous regulatory laws enacted by Congress has since been an established legal doctrine referred to as the Chevron deference (aka Chevron doctrine).
In Loper Bright Enterprises v. Raimondo, a group of herring fishing companies challenged a National Marine Fisheries Service rule requiring fisherman to pay the fees for “observers” that collect data on fishery conservation and management. Federal law is clear that NMFS can require these monitors and lists three categories of vessels that must pay, none of which were Atlantic herring fishing vessels. The Court of Appeals of the D.C. Circuit, applying the Chevron doctrine, held that the federal law was ambiguous and that NMFS’s rule to require the fishing industry to pay for the monitors was reasonable. In a 6-3 vote, Supreme Cout justices overruled the Court of Appeals for the D.C. Circuit and overturned the Chevron doctrine, holding that courts are better suited to resolve ambiguities in federal law than agencies. In this new regulatory era, judges presiding over cases challenging agency interpretations, decisions, and mandates must do so independently, no longer deferring to agency interpretations.
Potential impacts on design firms. What does the overturning of the Chevon doctrine mean for design professionals? First and foremost, it means uncertainty. Ambiguous statutes and questions related to an agency’s statutory authority to implement and enforce regulations will now be subject to the interpretation of a judge or judges, creating risk for a design firm which relies on any agency guidance or interpretation, or even legal precedence. For example, environmental engineering firms should proceed with caution when relying on guidance published by the Environmental Protection Agency. The EPA’s interpretation of a statute no longer binds the courts, and in the post-deference era, judges now have discretion to disagree with the EPA’s analysis and/or resulting guidance.
In addition to uncertainty, the overturning of Chevron creates risk for design firms being exposed to inconsistent interpretation and application of federal law. The federal judicial system is composed of 94 district courts organized into 12 circuits, with each circuit having a Court of Appeal. Independent judicial discretion over disputes related to ambiguous or silent statutory law means a federal agency rule could be upheld in one court and overturned in another. While Congress may amend laws subject to various interpretations and different judiciary holdings, amendments are not drafted and/or approved overnight. In the interim, inconsistent rulings throughout the country could create compliance headaches for design firms with multi-jurisdictional practices, as compliance teams must now monitor state-by-state legal decisions relating to federal regulations.
In the post-Chevron wake, legal challenges to longstanding regulations are expected to ensue, and Congress is likely to consider statutory amendments aimed at clarifying ambiguous statutes in order to avoid judicial scrutiny. While the Supreme Court’s decision in Loper Bright Enterprises is expected to have the greatest impact on the healthcare industry, AEC firms must also be prepared for fallout.
Conclusion. While the ripple effects remain to be seen, the recent landmark decision marks the end of this 40-year-old court required deference, as federal courts are no longer required to defer to an agency interpretation of federal statutes when the statute is ambiguous. As a result, federal judges now have ample discretion to decide Congress’ intent when passing legislation and critique how a federal agency implements laws through administrative regulations and policies. Design firms should monitor developing cases challenging federal regulations applicable to their services, implement compliance procedures to reconcile conflicting court decisions around the country, and work with an attorney to contractually limit risk associated with the reversal of Chevron.
Taylor Dolan and Nathan Greyard are attorneys at Lee/Shoemaker PLLC, a law firm devoted to the representation of design professionals. Contact them at ttd@leeshoemaker.com or nbg@leeshoemaker.com. The content of this article was prepared to educate related to potential risks but is not intended to be a substitute for professional legal advice.
