WASHINGTON — A conservative majority on the Supreme Court appeared poised to overturn, or at least moderate, a legal principle known as "Chevron deference," a decision that some banking experts worry could undercut the power of federal agencies and
The Supreme Court heard oral arguments for two similar cases on Wednesday, and in both cases parties challenged the doctrine of Chevron deference, in which federal courts defer to an agency's interpretation of ambiguous statutes. In both cases, herring fisherman are challenging a rule that required their companies to pay for federal monitors on their fishing vessels. Under Chevron, lower courts deferred to the agency that ordered the monitors, the National Marine Fisheries Service, part of the Department of Commerce's National Oceanic and Atmospheric Administration.
The stakes are high for the decision,
"If Supreme Court rules as most expect and kills Chevron, many fear it could throw the modern administrative state into chaos. Decades of regulations could face fresh legal challenges and bury agencies in endless litigation," said Erin Bryan, co-chair of Dorsey and Whitney's Consumer Finance Services Group.
At oral arguments in the two cases, at least four justices on the nine-member court expressed doubts about the Chevron deference. Those justices fell on the conservative side of the spectrum: Clarence Thomas, Samuel Alito, Neil Gorsuch and Brett Kavanaugh.
Solicitor General Elizabeth Prelogar argued that overturning the doctrine would be an "unprecedented shock to the legal system."
But Kavanaugh questioned the impact a decision to that end would have, and said that Chevron itself provides "shocks to the system" as presidential administrations turn over and agency priorities change.
"That is at war with reliance," he said. "That is not stability."
Gorsuch, an outspoken critic of the Chevron deference, pressed the counsel on why a judge who disagrees with an agency's interpretation would want to "abdicate that responsibility and say, automatically, whatever the agency says wins.
"The government always wins," he said.
Gorsuch also criticized the piecemeal way that the Chevron doctrine has evolved. The rule has been modified in a variety of other cases, making it confusing, he said, for lower courts to make decisions.
"Lower court judges, even here in this rather prosaic case, can't figure out what Chevron means," he said.
Others, although less outspoken, signaled opposition to the doctrine.
"Justice Thomas, who is famously silent at oral arguments, asked the first questions of the solicitor general, probing how much judicial deference is too much deference," Bryan said.
Justice Amy Coney Barrett, another conservative, could wind up being a key swing vote in the final decision. In her questions to both the petitioners and to Prelogar, she asked about ways to tailor and tweak Chevron rather than overturning it. She at one point said that she's concerned about the "disruptive consequences" of a decision to overturn the doctrine.
Roberts also didn't appear as keen as others to oppose the Chevron decision.
"How much of an actual question on the ground is this?" he asked. The Supreme Court hasn't used Chevron in years, but Roman Martinez, who represented one of the fisheries, said that it's still a very relevant legal question.
"The lower courts still have to apply it," he said.
Liberal justices warned that overturning Chevron could put judges at the center of the policymaking process, and said they were worried about the impact such a decision might have more broadly.
Justice Ketanji Brown Jackson said that her concern is that "if we do away with Chevron, the court will suddenly become a policymaker.
"I see Chevron as doing the very important work of helping courts stay away from policymaking," she said. Jackson heard arguments for the first case, but recused herself from the second because of her involvement when she was a judge on the U.S. Court of Appeals for the District of Columbia Circuit.
Justice Elena Kagan pointed to specific situations when an agency, with its technical expertise and institutional knowledge, might be better suited to enact rules rather than a judge. She said, in those cases, it's more effective to "defer to people who actually know things."
She also expressed skepticism that there could be a legislative fix, where Congress more explicitly spells out areas where agencies have the ability to interpret their intent, and to enact laws. That, she said, would require foresight on evolving issues, such as artificial intelligence. It also would be difficult for Congress to predict and account for gaps that they don't know exist yet.
"Congress can hardly see a week in the future," she said.
Decisions in the two cases (Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce) are anticipated by the end of June.
The impact of the case could be immediate on banking policy, warned Klaros Group partner Michele Alt.
"The elimination of Chevron deference may be the nail in the coffin for the Basel III Endgame," she said. "Critics are more likely to succeed in their arguments that the proposed rule is overly burdensome and does not provide a 'sufficient basis for refutation' as required by the [Administrative Procedures Act]."
