U.S. SUPREME COURT OVERTURNS LANDMARK CHEVRON CASE: SETTING THE STAGE FOR CHALLENGES TO DOT REGULATIONS
August 19, 2024
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On June 28, 2024, the United State Supreme Court decided 6-3 to overturn its landmark 1984 decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. (“Chevron”), which famously established the so-called Chevron Deference for judicial review of certain administrative law actions. Loper Bright Enterprises v. Raimondo and its companion case Relentless, Inc. v. Department of Commerce together reset judicial standards and will empower courts to take a more active role in determining whether the regulations created and interpreted by federal agencies exceed Congressional authority. In doing so, the Supreme Court has set the stage for future challenges to agency regulations and enforcement actions, including those of the Department’s which has recently promulgated several new consumer protection rules and stepped-up enforcement activities against airlines.
It is difficult to overstate the importance of the original Chevron decision within the world of administrative law. In the last forty (40) years, Chevron has become one of the most cited administrative law cases of all time. The Court in Chevron analyzed whether the Environmental Protection Agency (“EPA”) was permitted by the Clean Air Act of 1963 to define a “source” of air pollution to cover an entire industrial plant or factory. Central to this question was the fact that the term “source” was not well defined by the applicable statute. The Court held that the EPA’s definition was permissible, based on a doctrine it dubbed Chevron Deference. Moving forward, courts were to apply Chevron Deference when analyzing legal challenges to agency interpretations of ambiguous statutes. Under this two-part test, a reviewing court asks whether: (1) Congress has spoken directly to the issue at hand; and (2) is the agency’s interpretation of the statute reasonable? When Congress has not spoken directly to the issue, and the reviewing court finds the agency interpretation to be reasonable, the court must hold in favor of the administrative agency. Under this framework, Congress could generally direct federal agencies to execute on legislative intent while at the same time federal agencies could remain flexible in their rulemaking efforts without significant fear of judicial review. It is no surprise that following the Chevron decision, there was a boon in the number, size, and scope of agency regulations.
Notwithstanding, Loper Bright has done away with the Chevron Deference and stands to return power to the courts. The Supreme Court in Loper Bright was asked to review Chevron via a dispute initiated by Atlantic herring fisheries against the Secretary of Commerce and National Marine Fisheries Service (“NMFS”). NMFS was alleged to have exceeded its authority under the Magnuson-Stevens Fishery Conservation and Management Act (“MSA”) by requiring fisheries to fund its inspection services. The Court limited its decision to whether Chevron should be overturned or refined. The Court chose the former, stating that Chevron had become “unworkable,” reasoning that Chevron had always directly conflicted with the Administrative Procedures Act (“APA”) which requires the reviewing court, not the agency, to “decide all relevant questions of law” and “interpret … statutory provisions.” Moreover, the Court held that it is courts that are the most well equipped to resolve statutory ambiguity, not agencies. Lastly, the Court wished to restore the judiciary to its Constitutional role as a check to executive action. In place of Chevron Deference the Court announced a return to Skidmore Deference, which has remained good law since 1944 but had been markedly overshadowed by Chevron. Although not all encompassing, Skidmore Deference permits a reviewing court to consider aspects of agency findings and rulings when reviewing agency actions. The Court was specific to not disturb the progeny of cases decided under Chevron, holding that cases settled using Chevron would not be overturned for that fact standing alone. Taken together, Loper Bright put the nail in the coffin for automatic judicial deference in favor of federal agencies and marks a monumental turning point in American regulatory jurisprudence.
Although the ultimate results of Loper Bright will take some time to be fully understood, the decision sets of the stage for increased legal scrutiny of administrative agency actions DOT will certainly be high on the list of targeted agencies. The Department was among those asked by the U.S. House Transportation and Infrastructure Committee to send information related to any proposed or promulgated rules, adjudications, enforcement actions, or interpretive rules that it has proffered since the beginning of the current presidential administration.
DOT’s recent Final Rule on Enhancing Transparency of Airline Ancillary Service Fees rule (“ancillary fee rule”) will likely face increased legal pressure from opponents under Looper Bright because of DOT’s interpretation of the term “prompt.” Congress directed DOT to promulgate a rule that “require an air carrier or foreign air carrier to promptly provide to a passenger an automated refund for any ancillary fees paid.” Nonetheless, Congress failed to define the meaning of “prompt.” Instead, DOT provided its own definition of “prompt ticket refund.” Under Chevron, such ambiguity would likely be resolved in favor of the Department, assuming that a Court would find DOT’s definition to be reasonable. Under Loper Bright, this ambiguity would technically afford room to challenge DOT’s interpretation of legislative intent.
Importantly, Loper Bright also stands to prevent significant reversals in regulatory policy whenever a new executive administration changes. Chevron Deference required agencies to meet only a permissible standard when carrying out executive directives. Post Loper Bright, agencies will be held within a narrower zone of regulatory action. In theory, this should lead to less dramatic shifts in regulatory policy each time a new executive administration takes over, since there will be more decisions from courts regarding the outer limits of agency authority.
Those involved in the airline industry should also reevaluate other recent and potentially onerous DOT rulemakings including the Final Rule on Ticket Refunds and Consumer Protections to gauge whether these regulations exceed DOT’s authority. Although it remains to be seen how potential challenges to DOT regulations will play out in the judicial system, the Loper Bright decision will invariably cause the Department and other agencies to give real consideration before promulgating any new regulation not based on clear statutory authority.
This Aviation Blog is intended to keep readers current on developments in the law. It is not intended to be legal advice. If you have any questions, please contact Evelyn Sahr at 202.659.6622 or esahr@eckertseamans.com; Drew Derco at 202-659-6665 or dderco@eckertseamans.com; Jay Julien at 202.659.6648 or jjulien@eckertseamans.com, Andrew Orr at 202-659-6625 or aorr@eckertseamans.com, or Samanta Walter at 412.566.1920 or swalter@eckertseamans.com, or any other attorney at Eckert Seamans with whom you have been working.
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