U.S. Supreme Court Overturns Legal Test for Deference to Regulatory Agencies

In a split 6-3 decision, the United States Supreme Court issued its opinion in Loper Bright Enterprises v. Raimondo. In doing so, the Court overturned a decades-old legal doctrine known as “Chevron deference.”

In 1984, the Supreme Court decided Chevron v. Natural Resources Defense Council. In Chevron, the Court established a legal test for when courts should defer to regulatory agencies’ interpretation of statutes. The doctrine provided that judicial deference is appropriate where an agency’s interpretation of a statute is not unreasonable. The case dealt with regulations adopted by the Environmental Protection Agency under the Clean Air Act. Under Chevron, federal courts have deferred to “reasonable interpretations” of agency actions for 40 years.​

In Loper Bright Enterprises v. Raimondo, the Court overturned Chevron and held that such a test violates the Administrative Procedures Act (APA). In writing for the majority, Chief Justice John Roberts stated that Chevron “requires a court to ignore, not follow, ‘the reading the court would have reached’ had it exercised its independent judgment as required by the APA.” Chief Justice Roberts continued, writing that Chevron “demands that courts mechanically afford binding deference to agency interpretations, including those that have been inconsistent over time.” 

Following the Loper decision, the banking industry is optimistic that regulatory overreach will be stifled. There are several lawsuits currently pending that may be impacted positively by this decision. This includes federal courts reviewing regulatory overreach in Section 1071 small business data collection and the updated Community Reinvestment Act rules. Loper sends a clear message that unelected bureaucrats may not create their own laws. The full decision can be read here.