Supreme Court overturns the Chevron Doctrine, sending statutory interpretation back to the courts

In this article we consider the Supreme Court’s recent decision in Loper Bright Enterprises et al. v. Raimondo, Secretary of Commerce, et al., June 28, 2024, overturning the Chevron Doctrine, what it is, what it does, and how it might affect current and future disputes over agency decisions – with respect to ERISA, primarily decisions by the Department of Labor.

What is the Chevron Doctrine?

Quoting the Court:

Our Chevron Doctrine requires courts to use a two-step framework to interpret statutes administered by federal agencies [for example, in interpreting what is “fiduciary advice” under ERISA]. … [A] reviewing court must first assess “whether Congress has directly spoken to the precise question at issue.” … If, and only if, congressional intent is “clear,” that is the end of the inquiry. Ibid. But if the court determines that “the statute is silent or ambiguous with respect to the specific issue” at hand, the court must, at Chevron’s second step, defer to the agency’s interpretation if it “is based on a permissible construction of the statute.”

Since 1984, when the original case, Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc.. was decided, courts (including the Supreme Court) have carved out numerous limitations on, and exceptions to, the Chevron Doctrine. Nevertheless, the Chevon Doctrine has, in effect, tilted the interpretation of statutes in many areas towards the agencies’ view. With respect to the interpretation of ERISA, that has meant that courts have a “built-in tilt” towards DOL’s interpretation of what ERISA requires of plan administrators and fiduciaries, and Chevron has (one way or another) been a feature of every challenge to DOL’s interpretation/application of ERISA.

What did the Supreme Court do?

In Loper Bright v. Raimondo, the Supreme Court overruled Chevron, generally returning the interpretation of statutes administered by agencies back to the courts.

Here is the simple version:

Since the adoption of the Chevron Doctrine, courts (generally) have been required “to defer to ‘permissible’ agency interpretations of the statutes those agencies administer – even when a reviewing court reads the statute differently.”

After the Court’s decision in Loper Bright v. Raimondo, a court must come to its own conclusion – “after applying all relevant interpretive tools” – as to what a statute means.

Thus, courts are generally no longer to tilt towards agency interpretations.

After Loper Bright v. Raimondo, are there any issues on which courts may/must defer to agencies?

The Court did find two areas in which a court might wish to defer to an agency interpretation:

Where the statute grants explicit authority to the agency to interpret a provision of the statute, courts will generally defer to the agency’s interpretation.

The Court observed that “traditionally” (pre-Chevron), “respect [for an agencies’ interpretation] was thought especially warranted when an Executive Branch interpretation was issued roughly contemporaneously with enactment of the statute and remained consistent over time.”

And, in some circumstances, it may be appropriate to defer to an agencies’ expertise with respect to factual issues, although in this regard, it’s worth noting the following language in the decision:

Congress expects courts to handle technical statutory questions. “[M]any statutory cases” call upon “courts [to] interpret the mass of technical detail that is the ordinary diet of the law,” …, and courts did so without issue in agency cases before Chevron …. Courts, after all, do not decide such questions blindly. The parties and amici in such cases are steeped in the subject matter, and reviewing courts have the benefit of their perspectives. In an agency case in particular, the court will go about its task with the agency’s “body of experience and informed judgment,” among other information, at its disposal.

What about prior cases that relied on Chevron?

It appears that, generally, the fact that a court (pre-Loper Bright v. Raimondo) relied on Chevron to adopt an agency’s interpretation of a statute would not be enough to overturn that ruling/that agency interpretation. Quoting the Court:

By [overruling Chevron], however, we do not call into question prior cases that relied on the Chevron framework. The holdings of those cases that specific agency actions are lawful … are still subject to statutory stare decisis despite our change in interpretive methodology. … Mere reliance on Chevron cannot constitute a “‘special justification’” for overruling such a holding.

How might this ruling affect current fiduciary advice litigation?

We thought it would be useful to illustrate the impact of the Court’s ruling by considering current litigation over DOL’s 2024 amendment of ERISA’s fiduciary advice rule. Very briefly, in addition to Step 1 challenges (assertions that the statutory provision in question is not ambiguous), current attacks on that rule have – with the Chevron Doctrine in view – been framed as claims that DOL’s interpretation of ERISA’s fiduciary advice provision was unreasonable and arbitrary and capricious.

After Loper Bright v. Raimondo, all that may be required to overturn DOL’s new regulation is a showing that it is simply not what Congress intended, when it enacted ERISA in 1974. And, indeed, DOL’s five-part test rule (adopted in 1975) might be given more deference as an interpretation of ERISA than DOL’s 2024 amendment, because DOL’s 1975 interpretation was “issued roughly contemporaneously with enactment of the statute and remained consistent over time.”

* * *

After Loper Bright v. Raimondo, it will be significantly harder for agencies to change policy by interpreting or reinterpreting the statutes they administer.

On the other hand, deference to agency interpretation did tend to produce uniform, nationwide rules. With (potentially) 94 federal district courts and 13 courts of appeal, the process of getting to one rule with respect to an issue may long and not always productive. Consider that we still don’t have a clear set of rules for pleading an ERISA fee case.

We’ve noted some issues with DOL statutory interpretations. But, also, the status, post-Chevron,of IRS regulations (which are more technical but very much involve “real money” issues) will present its own set of complications and uncertainties.

It will take a while to sort out the long-run implications of this decision for plan administration and fiduciary conduct.

We will continue to follow this issue.