Supreme Court Axes 'Chevron' Deference; Trade Bar Anticipates Litigation Upheaval

The Supreme Court of the U.S. on June 28 overturned a hallmark of administrative law that had stood for four decades: the court's principle of deferring to federal agencies' interpretation of ambiguous statutes established in Chevron v. Natural Resources Defense Council.

The 6-3 decision, split along ideological lines, said that such deference violates Section 706 of the Administrative Procedure Act, which says that courts will decide "all relevant questions of law" stemming from judicial review of agency action. The majority opinion, penned by Justice John Roberts, added that the principle of stare decisis doesn't save Chevron deference, given that the precedent "has proved to be fundamentally misguided."

The decision instructed courts to use their "independent judgment in deciding whether an agency has acted within its statutory authority," though it added that the judiciary still must respect constitutional delegations of authority to federal agencies.

Roberts added that the decision doesn't "call into question prior cases that relied on the Chevron framework." A holding's bare reliance on Chevron "cannot constitute a 'special justification' for overruling such a holding, because to say a precedent relied on Chevron is, at best, 'just an argument that the precedent was wrongly decided,'" which isn't enough to overrule a "statutory precedent," the chief justice said.

The decision shook the trade bar, which had been gearing up for a glacial shift in the underlying principle of deference to the trade-related agencies (see 2401180060).

For years, antidumping and countervailing duty order petitioners and respondents, judges at the Court of International Trade and anyone else favoring the government's read on a trade case has repeated the following maxim: the Commerce Department is the "master of the dumping and countervailing duty laws." John Peterson, partner at Neville Peterson, said that following the high court's ruling, that principle stands in jeopardy.

Peterson noted that Commerce, "in particular, has issued a lot of regulations that make people go cross-eyed, but the trade courts have upheld them, citing Chevron." He added that things "could get very interesting very soon." Peterson suggested that the Skidmore standard of deference, which preceded Chevron, will hang around, though this standard has been referred to more as one of "judicial respect," which Justice Elena Kagan has previously described as being "nothing" at all (see 2405220031). Larry Friedman, partner at Barnes Richardson, agreed, noting that "Skidmore deference is pretty rarely meaningful."

With regard to customs cases, Peterson said the decision effectively overturns the high court's 1999 decision in United States v. Haggar Apparel, in which the court told CIT it had to afford Chevron deference to CBP's regulations. Now the trade court's "freedom to interpret Customs regulations without deference is restored. A big deal," he said.

Juscelino Colares, professor at Case Western School of Law, said the decision will lead to more challenges of Commerce and International Trade Commission decisions by petitioners and respondents. Lawyers in the trade bar "are going to try to get more creative, and they're going to try to cast certain determinations of fact as determinations of law because they no longer get as much deference for interpretations as they used to," he added.

An example ripe for such a transformation could be Commerce's "substantial transformation" test in AD/CVD scope rulings, Colares said.

Friedman added that, generally, customs cases are reviewed de novo, insulating these cases from the court's ruling. However, the ruling may mean less flexibility for CBP in Enforce and Protect Act cases, particularly when combined with the U.S. Court of Appeals for the Federal Circuit's decision in Royal Brush, establishing certain due process protection in these proceedings (see 2310230022). The effect will make EAPA cases "more transparent and predicable," Friedman predicted.

Adam Gordon, partner at the Bristol Group, said he anticipates "a significant increase in litigation as the courts adjust to this jurisprudence and parties feel they have a shot at challenging issues across the board."

Others had a more tempered reading of the court's decision. For instance, Greg Menegaz, partner at deKieffer & Horgan, warned against reading too much from the ruling. Cases at CIT involve varying levels of statutory standards, and the most fact-based proceedings will be affected least by the ruling. Colares echoed this sentiment, noting that "depending on the decision, the court already has a statutorily-mandated standard of review."

Friedman added that over the last decade "Chevron has not been named as a critical factor" by the trade court. Courts can continue applying the traditional tools of statutory construction "without deferring to the agency."

In the decision, Roberts said that Chevron's deferential standard "cannot be squared with the APA," since the APA commands the "reviewing court" to decide all relevant legal questions. Chevron deference "is the antithesis of the time honored approach the APA prescribes," the decision said.

Roberts found Chevron's presumption of deference to be "misguided" since agencies "have no special competence in resolving statutory ambiguities." Instead, "Courts do."

In a dissent, Justice Elena Kagan said this line "[s]core[s] one for self-confidence; maybe not so high for self-reflection or knowledge." While she agreed courts are adept at sniffing out congressional intent, deference only comes into play "if the court cannot do so." The notion that courts have "special competence" in settling these questions when agencies have none is "malarkey," Kagan quipped.

Regarding the majority's reliance on Section 706 of the APA, Kagan noted that while this provision doesn't include a deferential standard of review, it doesn't lay out any standard of review for interpreting statutes.

Roberts' decision also found that stare decisis doesn't require the court to stick with Chevron, since the quality of the decisions' reasoning, the workability of its rule and scant reliance on its holding all weigh in favor of scrapping the ruling. Not only does Chevron buck the APA, it has proven to be "unworkable" as an "impressionistic and malleable concept," he said.

Kagan objected to the majority's treatment of stare decisis, claiming that the court doesn't have nearly a special enough justification to overturn such a key holding, which has been affirmed over 70 times. She said a "longstanding precedent at the crux of administrative governance thus falls victim to a bald assertion of judicial authority. The majority disdains restraint, and grasps for power.”

The decision also featured concurring opinions from Justices Clarence Thomas and Neil Gorsuch. Thomas wrote to claim that Chevron also violates the "Constitution's separation of powers," while Gorsuch penned a lengthy treatise on how stare decisis actually calls for the gutting of Chevron. Gorsuch made three key points: Chevron contravenes the APA; it cuts against "mainstream currents in our law regarding the separation of powers, due process, and centuries-old interpretive rules that fortify those constitutional commitments"; and holding otherwise would imbue Chevron "with the authority of statutory language."

"Today, the Court places a tombstone on Chevron no one can miss," Gorsuch said.