On June 28, 2024, the United States Supreme Court issued a 6-3 decision in Loper Bright Enterprises v. Raimondo that overturned the “Chevron deference” standard laid out in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.  

The Chevron Standard

In the 1984 Chevron case, the Supreme Court established a two-step process for determining whether a federal agency has properly interpreted a statute it administers.  First, the court must determine whether Congress, in the applicable statute, directly spoke to the precise question at issue.  If congressional intent is clear, the inquiry ends here — the court must reject an agency’s statutory construction which is contrary to the clear congressional intent.  However, if the statute is ambiguous or silent as to the question at issue, the second step of the analysis requires a court to defer to the agency’s interpretation, so long as it is a permissible construction of the statute.  Thus, Chevron required judicial deference to an agency’s statutory interpretation where Congress did not provide unambiguous guidance.

The Loper Dispute

The Plaintiffs in Loper Bright Enterprises were a collection of family fishing businesses who challenged the National Marine Fisheries Service (NMFS) interpretation of the Magnuson-Stevens Fishery Conservation and Management Act (MSA).  Congress enacted the MSA to prevent overfishing off the U.S. Coast.  NMFS promulgated a regulation requiring that some domestic fishing vessels have “observers” on board to gather fishing data and that the vessel owners pay for the observers.  However, the MSA does not make clear whether private fishing businesses can be required to bear the cost associated with hiring observers.  Loper Bright Enterprises and other family fishing businesses challenged the rule in two separate cases, arguing that the MSA does not authorize NMFS to impose such a charge. 

Both trial courts granted summary judgment to the Government, finding that they must defer to the NMFS’s interpretation of the MSA pursuant to the Chevron deference standard.  The D.C. Circuit and Fifth Circuit affirmed these decisions, also citing Chevron. 

The Loper Court’s Reasoning

The Supreme Court overturned Chevron in the Loper Bright Enterprises decision and remanded the two cases for reconsideration by the lower courts without deference to the agency’s interpretation.  The decision, authored by Chief Justice John Roberts, found that the Chevron deference standard ignored the dictate of the Administrative Procedure Act (APA) that courts must decide all relevant questions of law when reviewing agency action.  The opinion noted that the APA specifically mandates that judicial review of agency policymaking and fact-finding be deferential, but has no such requirement for questions of law.  Chief Justice Roberts’ decision recognized that some statutes expressly delegate a degree of discretion to agencies, but it is error to assume such delegation merely because the statute is unclear.  The decision emphasized that the role of the reviewing court is always to independently interpret the statute and effectuate the will of Congress. 

The Court noted that Congress enacted the APA “as a check upon administrators whose zeal might otherwise have carried them to excesses not contemplated in legislation creating their offices.”  Deference to an agency’s interpretation of a statute, and abdication of the court’s unique role in statutory interpretation, is especially inappropriate when the issue is the agency’s own power.  The Court also expressed the view that every statute has “a single, best meaning,” and courts should not defer to an administrative agency’s “permissible” interpretation when the court believes its interpretation is more accurate.  Indeed, if an interpretation “is not the best, it is not permissible.” 

The decision addressed the arguments of the Government in support of Chevron: (1) Congress must generally intend for agencies to resolve statutory ambiguities because agencies have subject matter expertise regarding the statutes they administer, (2) deferring to agencies promotes uniform construction of federal law, and (3) resolving statutory ambiguities can involve policymaking best left to political actors, not courts.  Addressing each of these arguments in turn, the Court’s opinion first addressed the issue of a court’s expertise.  The Court found that interpreting issues arising from a regulatory scheme is the province of the court and agencies “have no special competence in resolving statutory ambiguities.”  When technical expertise is helpful, the reviewing court can rely on the parties’ briefing.  Regarding uniform construction, the Court replied that judges have inconsistently applied Chevron’s two-step process, “transforming the original two-step into a dizzying breakdance.”  

Finally, looking at the policymaking, the Court made clear that policymaking should be left to political actors, but it remains the job of the court to interpret statutes even when agency policymaking is involved.  The Court complained that Chevron granted agencies a license to repeatedly change positions on their statutory authority whenever an ambiguity exists, “leaving those attempting to plan around agency action in an eternal fog of uncertainty.”  Moreover, “[b]y forcing courts to instead pretend that ambiguities are necessarily delegations [of authority], Chevron does not prevent judges from making policy.  It prevents them from judging.”

The Court’s holding firmly overrules Chevron, stating that courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires. 

The Immediate Impact of the Loper Bright Enterprises Decision in FTC Dispute

The Loper Bright Enterprises decision will have wide-reaching impact, and the decision comes in the wake of a great deal of press regarding the Federal Trade Commission’s (FTC) Non-Compete Clause Rule (16 CFR Part 910).  The FTC Rule bans non-competition agreements outright after the effective date (September 4, 2024), and requires that employers notify their employees that their non-competes will not be, and cannot legally be, enforced against them.  The rule has two caveats: (1) “senior executives” (defined in the Rule) who entered into non-competes prior to the effective date remain subject to their non-competes, and (2) causes of action that arise prior to the effective date remain viable. 

In the wake of this rule, several lawsuits were filed challenging the FTC’s authority under the FTC Act to issue a ban on non-competition agreements.  One such lawsuit, in the Northern District of Texas, argued that the FTC lacked the authority to make the Rule and violated the APA by enacting the Rule.  The Plaintiff further argued that the Rule was unconstitutional.  The Plaintiffs moved for a stay of the effective date of the Rule and a preliminary injunction. 

In response to the Motion, the FTC argued that it had authority to make the Rule because the FTC Act authorizes the Commission to prevent unfair methods of competition through adjudication and rulemaking.  The FTC further stated that the Rule falls within its expertise and delegated authority. 

In an order issued on July 3, 2024, the Northern District of Texas stayed the effective date of the Rule and granted a preliminary injunction enjoining enforcement of the Rule, limited in scope only to the Plaintiffs before the Court.  The Court found that the Plaintiffs met the standard for proving a preliminary injunction, demonstrating a substantial likelihood of success on the merits, irreparable harm, a balance of equities, and that the injunction would not disserve the public interest.  The Court noted that the scope of the injunctive relief was limited to the parties before the Court because the parties failed to raise in their briefings any basis on which to grant universal injunctive relief.  However, the Court has instructed the parties to further brief the merits, and stated that it intends to enter a merits disposition by August 30, 2024.

In its discussion of the Plaintiffs’ likelihood of success on the merits, the Court briefly referenced Loper Bright Enterprises, relying on the Supreme Court decision for the proposition that the deference Chevron required “cannot be squared with the APA.”  The Court explained that it must construe statutes so as to give effect to the legislative intent, not the interpretation of an agency.  Thus, it is clear that the Supreme Court’s decision is already changing the landscape of administrative law and will certainly impact the FTC’s (and other agencies’) position regarding their statutorily-designated authority. 

This article was republished in the August 2024 issue of HR Legal & Compliance Excellence on HR.com, “How SCOTUS’s Loper Bright Enterprises Decision Will Impact FTC Disputes.”