Courts, Lawmakers Question Agency Deference

Published July 25, 2016

A June 20, 2016, decision issued by the U.S. Supreme Court concerning judicial deference given to the interpretation government agencies make when creating regulations could have a profound impact on dozens of cases challenging various regulations now before courts across the country.

In Encino Motorcars v. Navarro, the Supreme Court ruled in a 6–2 decision it is inappropriate for judges to defer to agency interpretations of a law if the agency fails to give a rationale for the rule.

The ruling offers a clarification of the “Chevron deference” doctrine, which arose from the Supreme Court’s decision in Chevron v. Natural Resources Defense Council (1984). In Chevron, the Court was charged with determining what standard of review should be applied by a court to a government agency’s interpretation of a statute it is charged with administering. In a unanimous decision, the Supreme Court held if Congress has directly spoken to the precise question at issue or the intent of Congress is clear, that is the final word for courts and for agencies.

The Court also determined when the courts determine Congress has not directly addressed the precise question at issue, rather than a court simply imposing its own construction of the meaning of the law, courts should consider “whether the agency’s answer is based on a permissible construction of the statute,” and if so, courts should defer to the agency’s interpretation of the law.

The Chevron decision requires litigants challenging a regulation to show an agency’s interpretation of the law is arbitrary or capricious. In cases challenging the Obama administration’s Clean Power Plan, the Environmental Protection Agency (EPA) is citing Chevron deference as a defense against those attempting to overturn the rule.

The majority decision in Encino Motorcars v. Navarro establishes new criteria for when Chevron deference is appropriate. In Encino, the Department of Labor changed its multi-decade interpretation of what constituted a “salesman” without explanation. The Court refused to grant Chevron deference, calling the Department of Labor’s rulemaking “procedurally defective,” as it upended existing law and did so without providing an adequate rationale. 

Coal Case Cites Encino Ruling

Two days after the Supreme Court issued its opinion, attorney Paul Clement—the former solicitor general during the George W. Bush administration who is representing Arch Coal in a case before the U.S. Court of Appeals for the District of Columbia Circuit—argued to the Court of Appeals the Encino ruling helps his company’s challenge of EPA rules blocking a mountaintop-removal mining project in West Virginia.

As reported by Greenwire, Clement said the Supreme Court in the Encino case overturned the “salesman” rule in part because it “was arbitrary and capricious and not entitled to deference because [Department of Labor] failed to account for reliance interests implicated by its about-face.”

Reliance interests are compensable harms suffered by a party as a result of a breached contract that result from the party’s reliance on the agreement.

Arch subsidiary Mingo Logan Coal is arguing EPA “failed to engage in reasoned decision making,” because it gave no weight to the company’s reliance on an Army Corps of Engineers dredge-and-fill permit issued to its Spruce mining project when EPA vetoed the permit years later.

EPA argues it’s entitled to deference under the precedent set in Chevron

Legislators Take Action

Some lawmakers, expressing their frustration with the amount of power and latitude granted to executive agencies, are introducing bills to end or limit deference given to regulatory agencies.

The Separation of Powers Restoration Act, or SOPRA, was introduced in the U.S. House of Representatives by Rep. John Ratcliffe (R-TX) in March. The bill would end Chevron deference by requiring courts to interpret statutes rather than rely on interpretations made by executive agencies.

Ratcliffe says getting rid of Chevron deference will help to ensure regulations are created in line with lawmakers’ intent.

“Under Chevron deference, regulators are essentially allowed to grade their own homework,” said Ratcliffe to Environment & Climate News. “If the Chevron decision is overturned, regulatory agencies would be incentivized to more faithfully engage in the rule making process in a manner consistent with congressional intent because the Judicial branch, not the agencies themselves, would be interpreting the will of Congress.”

Ratcliffe’s bill has 113 cosponsors, and a companion bill in the U.S. Senate has 12 cosponsors, including Sens. Orrin Hatch (R-UT), Rand Paul (R-KY), Mike Lee (R-UT), and Chuck Grassley (R-IA), chair of the Senate Judiciary Committee.

Ratcliffe is also one of several conservatives in Congress, including Lee and Rep. Jeb Hensarling (R-TX), who have launched the Article 1 Project, which is aimed, in part, at restricting the power given to regulatory agencies. Article 1 Project members say all regulations should be approved by a vote of Congress. Passing SOPRA, which would put an end to Chevron deference, is part of the Article 1 Project’s proposed reforms.

“Right now, the cards are stacked against regulated entities [and] in favor of regulators in challenges before the courts,” Ratcliffe said. “The Separation of Powers Restoration Act would ensure that all parties are on equal footing.” 

Ann N. Purvis ([email protected]) writes from Dallas, Texas.