Supreme Court cases underscore the importance of thorough technical analysis and persuasive rationale throughout the rulemaking process
At the end of the U.S. Supreme Court’s term in 2024, two rulings, Loper Bright and Corner Post, reverberated throughout policymaking circles due to their potential impact on regulations covering everything from climate-warming emissions to prescription drugs and healthcare. These decisions shift power from federal agencies to the courts and likely will increase challenges to agency regulations. Despite this, the objectives of non-legal agency staff developing and drafting rules remain unchanged. They must continue to ensure the rulemaking record makes a compelling case for the agency’s interpretation of statutory language by demonstrating thorough, strong factual and technical analysis throughout the rulemaking process.
Loper Bright and Corner Post
In Loper Bright Enterprises v. Raimondo, the Supreme Court overturned one of the most-cited cases in history, Chevron U.S.A. v. Natural Resources Defense Council. For decades, "Chevron deference" required courts to defer to an agency’s interpretation of an ambiguous statute if the interpretation was reasonable. This allowed federal agencies to fill the often-intentional gaps left by Congress in statutes. For example, Congress directed the Environmental Protection Agency (EPA) to issue vehicle emissions standards for pollutants that "may reasonably be anticipated to endanger public health or welfare" (Clean Air Act) and authorized the Food and Drug Administration (FDA) to set standards for tobacco products that are "appropriate for the protection of the public health" (Tobacco Control Act).
However, the Court in Loper Bright held that the Administrative Procedure Act requires courts to exercise their own judgment to determine the best interpretation of an ambiguous or vague statute.
In putting an end to Chevron deference, the Supreme Court prohibited courts from deferring to an agency interpretation of the law merely because a statute is ambiguous. Because Loper Bright requires judges to determine the best interpretation, the decision gives judges—who are not subject-matter experts on the complex issues that federal agencies specialize in—more power to overturn regulations. The decision also reduces agencies' flexibility to adapt regulations to the changing world, as Congress may have intended in drafting ambiguous language. While the Supreme Court acknowledged that courts must respect congressional delegation of authority to agencies (e.g., when a statute expressly authorizes an agency to exercise a degree of discretion), it also said that courts must determine that such a policymaking authority delegation was “consistent with constitutional limits,” which could be interpreted differently across lower courts.
However, in what may have a moderating effect on the ruling, the Loper Bright opinion emphasized that while courts must use their own judgment to interpret ambiguous statutes, their analysis may still be informed by an agency’s interpretation. And if the agency’s interpretation is persuasive, a court performing its own statutory interpretation could conclude that the agency’s interpretation is the single, best meaning. In providing this guidance, the Supreme Court cited its 1944 opinion Skidmore v. Swift & Co., which explained that agency interpretations and opinions reflect experience and informed judgment to which courts may properly look to for guidance, especially when based on specialized expertise. The Supreme Court in Loper Bright explained that the weight given to an agency’s interpretation depends on its thoroughness, reasoning, consistency with earlier and later interpretations, and other factors that may be persuasive, again quoting Skidmore. Therefore, in explaining their policymaking when acting on an ambiguous statutory delegation, agencies should provide strong legal and factual bases for their interpretations to aid the court’s understanding.
Agency rulemaking staff should continue to build strong, factual records to support agency statutory interpretations
- Coordinate early and often with your attorneys
- Rely on and clearly articulate express authority and/or delegation from Congress
- Articulate a strong technical and factual record to bolster agency interpretations as the best reading of the law
- Address any potential counter arguments or alternative interpretations of the statute and explain why they are inferior to the agency's interpretation
In Corner Post v. Board of Governors, the Supreme Court declared that the default statute of limitations for challenging agency regulations (i.e., the window for filing a lawsuit challenging a rule) starts when a plaintiff begins to experience harm from an agency regulation. This allows new entities to challenge even decades-old regulations. While Loper Bright arguably encourages litigation over rules industries do not like, Corner Post may allow industries to theoretically reach back in time to challenge a previously upheld regulation. However, this ruling does not apply to regulations issued under statutes with specific time-bar provisions. Many statutes, including those authorizing motor vehicle safety standards, occupational health and safety standards, and environmental regulations, have such timelines for filing lawsuits challenging new agency regulations.
Taken together, many legal scholars predict that Loper Bright and Corner Post will increase litigation against current, future, and past regulations, and create uncertainty about how agencies can permissibly execute their statutory authority to regulate.
Potential impacts on existing and future regulations
While some fear that the rulings will result in regulation-skeptical judges overturning long-established regulations, the reality is likely more nuanced. First, because many statutes require challenges to be filed in the D.C. Circuit federal court, "judge shopping" will not be possible in many cases. In addition, industries will prioritize which regulations to challenge and are less likely to challenge those regulations for which industry has already heavily invested in compliance. More challenges to agency regulations are likely, but they will take time to materialize and play out in courts. Challenges may also face difficulties where statutes explicitly direct agencies to regulate at a level that is "appropriate" or "reasonable" and where the agency has justified its interpretation with a thorough and persuasive record.
The Loper Bright decision could affect rules based on broad interpretations of agency authority, such as so-called whole-of-government approaches to climate change, cybersecurity regulations, and rules aimed at tackling emerging social issues. For example, the Securities and Exchange Commission (SEC) recently issued a rule requiring public companies to disclose climate-related risks that could impact their operations and financial status. This rule is currently being challenged in federal court by 20 states, all arguing that the SEC lacks the authority to mandate such disclosures based on a statute that directs the SEC to require companies to disclose financial information and “such other information … as the Commission may … require as being necessary … for the protection of investors.” Loper Bright may complicate the SEC's defense of this rule.
The Loper Bright decision could also affect FDA drug approvals, which must be based on "substantial evidence" from “well-controlled investigations,” which FDA has interpreted to mean studies that include a control group, minimize age and gender biases, and standardize doses. In the post-Chevron world, the FDA must ensure its approval and denial decisions have thorough records to persuade a reviewing court that its determination of whether the applicant presented "substantial evidence" is the “best interpretation” of that term.
Since the Loper Bright decision, courts have been grappling with how to review agency statutory interpretations, using the case to both uphold and strike down agency interpretations. For example, the Fifth Circuit Court of Appeals upheld the U.S. Department of Labor’s (DOL) interpretation that the Fair Labor Standards Act authorizes DOL to impose a salary level requirement to qualify for certain exemptions. Although the statute does not expressly mention a salary requirement, the court found that the minimum salary established by DOL “falls within [DOL’s] explicitly delegated authority to define and delimit the terms of the [e]xemption” (Mayfield and R.U.M. Enterprises v. DOL). In contrast, the D.C. Circuit Court of Appeals ruled that the U.S. Department of Health and Human Services (HHS) did not comply with a Medicare statutory mandate to provide hospitals with additional payments to fully compensate their fixed costs. The court rejected HHS's interpretation that attributed total baseline reimbursements for treatment of Medicare patients entirely to fixed costs because some unknown portion of baseline payments covers variable costs, which the court said understates a hospital’s unreimbursed fixed costs (Lake Region Healthcare Corporation v. Becerra).
Agency rulemaking staff guidance
Agency rulemaking staff should continue to build strong, factual records to support agency statutory interpretations. The full effects of the Loper Bright and Corner Post decisions will take years to understand as agencies, Congress, and courts adapt to this major change. While some predict heightened uncertainty will slow down regulations, presidential administrations will likely continue using agency rulemaking to implement their policies to the greatest extent practicable.
Therefore, it is more critical than ever for agencies to carefully follow all required procedural steps in the regulatory process, including clearly explaining the rationale for their decisions. As outlined in ICF’s Reg Map®, rulemaking requirements apply whether an agency is establishing, revising, or removing a regulation. Because courts are permitted to consider an agency’s justification for its interpretation of a statute, agencies should continue to build strong factual records to support their decisions, convincingly address counter arguments and criticisms, and present compelling cases for why their interpretation is better than any alternative interpretations the court may consider.
ICF’s multidisciplinary team of regulatory experts offers a breadth of experience at every step in the rulemaking process and serves as a critical partner supporting a broad range of federal agencies across all steps of the regulatory development process. Please reach out to our experts with any questions you may have.
