Podcast - Potential Impacts of the Supreme Court's Chevron Deference Ruling

Rich Gold: Hello everybody. Thanks for joining us today. This is Rich Gold with the Holland & Knight Public Policy & Regulation Group here. We're here to talk to you today about one of the most important cases coming down at the end of the term for the Supreme Court here, which we'll review, the concept of Chevron deference. That is the degree of deference judges pay to agency interpretation of federal statutes and what Congress intended. Here with me today, I've got Amit Agarwal, who is co-chair of the Holland & Knight Appellate Team and previously was a Supreme Court clerk for Justice Alito and clerked for current Justice Kavanaugh when he was on the D.C. Circuit. Most recently before joining Holland & Knight, he was the Solicitor General for the state of Florida. Also here to look at the legislative and regulatory implications with us today is Dimitri Karakitsos. He is former counsel to the Senate Environment and Public Works Committee about eight years ago under Senator Inhofe, and many years of service on Capitol Hill, drafting statutes, including the Lautenberg Act, which reauthorized TSCA, and is generally considered a legislative drafting and congressional expert. So thank you both for joining me today. Let's start out on the decision side. Why don't you give us a little background on the case that's pending and what you heard, Amit, in oral argument, what we should be looking for here, coming down from the court and perhaps, any indication of what you think timing is as we record this, just after Memorial Day.

Amit Agarwal: Sure. So we're talking about two cases that have been consolidated in front of the court: Loper Bright v. Raimondo and Relentless v. Department of Commerce. Both of them are essentially addressing the same issue, and that is whether the Supreme Court should be revisiting its Chevron doctrine that you laid out. That's a kind of familiar two-step process by which reviewing courts assess agency interpretations of the statutes that they're charged with administering. Under step one of the Chevron framework, the court would look to traditional tools of statutory interpretation to decide if Congress has spoken to the precise question at issue. And if the court determines that the issue is kind of ambiguous, then it's step two. They would defer to a reasonable agency interpretation of that statute. So that's long been the law. It's been 40 years. Chevron is considered to be a bedrock decision in the field of administrative law. And now we're talking 40 years later about the possibility of jettisoning that doctrine altogether. The court heard argument in these consolidated cases back in January. And, in a nutshell, we don't really know what they're going to do. It seems like there's three justices who are pretty firmly committed to overruling the doctrine in its entirety. That would be Justices Kavanaugh, Gorsuch and Thomas. It seemed like there were also three justices on the other side who appeared to be committed to retaining the doctrine, that would be Justices Sotomayor, Kagan and Jackson. And there were three that were kind of in the middle: the Chief Justice, Justice Barrett and, I would say, Justice Alito as well, had asked some questions suggesting that he's taking a look at this pretty carefully. And so we don't know exactly what the court is going to do. What we do know is kind of broadly speaking, there are three buckets of possibilities. Possibility one is that the court could abandon the doctrine in its entirety. That would be a sea change in the field of administrative law. You could have vast implications for legislation, for regulatory process and, of course, for litigation. And then there's a second possibility that came out at the argument, and that's that the court might, to kind of a lesser step of scaling the doctrine back, maybe re-emphasizing that traditional tools of interpretation have to really be exhausted — that's step one of the Chevron framework — but might not get rid of the doctrine altogether. And then there's possibility number three as well, which is that the court could decide the case very narrowly and could really not tamper with the existing Chevron doctrine, and could instead just kind of apply the doctrine to the particular facts of this case and say what the agency did in this case is, for example, not permissible under step one of the Chevron framework because the statute just doesn't allow that. So we have kind of three buckets of possibilities. I'm happy to talk about those different possibilities and the practical implications more.

Rich Gold: That's great. Thanks for laying out that groundwork in an easily understandable way. So how did we get here? Kind of what's leading to the court being in this position? Not from the particular cases, but from the perspective of why judges and this court in particular are looking at Chevron as something that needs to be revisited.

Amit Agarwal: So I think it's been a long time coming. You've had some of the conservative justices in particular, over the years, expressing the view that Chevron kind of represents a massive shift in power from the legislative branch to the executive branch. And the argument is that it's really Congress that should be making policy decisions and making laws, and instead, under the Chevron doctrine, Congress doesn't have to do what it's supposed to be doing. Instead, it passes these kind of vaguely worded statutes, lets the agency take it from there, and the agencies kind of do whatever they want, and they're not being constrained adequately by the courts. So that's one criticism. The other criticism is that this is really taking away a core judicial power that, under our constitutional separation of powers — it is, you might remember, from Marbury v. Madison — that's emphatically the province and the duty of the judicial department to say what the law is. That could be considered to be maybe the core proposition of American jurisprudence for the last 200 years. There are some people, especially I'd say on the conservative side, who think that the Chevron doctrine is in substantial tension with that core proposition of American jurisprudence. And then you have kind of concerns about just practically, how is this working? Is it a formula for stability? Does it really kind of cultivate the kind of reasonable reliance that we want regulated entities and the citizenry to be able to have? And so one thing that came out of the oral argument is that there's a lot of concern about Chevron enabling agency flip-flopping. So the agencies will take one position on an ambiguous statute in one administration, then you've got an election, a new administration comes in, and all of a sudden the entire regulatory framework kind of changes overnight. And you definitely heard a lot of concern from the justices about that. And whether that's kind of a formula that is, you know, is where you have agencies doing what they're supposed to be doing, which is executing the law under our separation of powers instead of making the law. So I'd say those are some kind of the big picture concerns that some of the justices have expressed that might be animating this willingness to revisit the Chevron doctrine.

Rich Gold: So Chevron came in the wake, in the early '80s, of the major, kind of, bedrock lawmaking, and increase in authority of the executive branch agencies in a way that they didn't preexist. We had, you know, agencies like the Environmental Protection Agency and Occupational Safety and Health Administration sort of pop up overnight in the '70s and be staffed out over a period of time with tens of thousands of employees who were, in essence, creating new standards for the American public, for industry and for all of us to live by, and arguably benefit in some way, shape or form, writ large. We're at a point now where if the authority of those agencies is in question and revisited, we are going to see the shift of power. How do you see it, from a legal perspective, impacting agencies on a daily basis? And, frankly, the structure and authority of the executive branch.

Amit Agarwal: A great question. And what we know is that there's a lot at stake, and that this decision could have a really big impact on the way that agencies do their job. It could have a really big impact, potentially, on the legislative process, and certainly a big impact in terms of the ways that courts assess cases or challenging the legality of agency action. But the real answer is we don't know exactly what impact the case is going to have. Because in part, we don't know what the decision is at this point, but also because there are just kind of empirical questions that came out of the oral argument that we don't know the answers to. So, for example, let's assume for the sake of argument that the court decides that it's going to overrule the Chevron doctrine in its entirety. Well, one question then is how will reviewing courts respond if you get rid of Chevron deference and you replace it with what used to be the law, and that is what's called Skidmore deference. Skidmore deference basically says, well, you know, the reviewing court should take a careful look at what the agency says because the agency consists of experts and they know how this statute works. So you should take a close look at what the agency says. And if you find what the agency is saying persuasive, then you go with that. And that would place a lot of emphasis on the agency to come up with a consistent, and maybe even a contemporaneous, interpretation of the statute. So that would be kind of the, you know, the fallback if Chevron is overruled. Now, we do have some empirical evidence that courts rule in favor of the government about 20 percent more of the time when they purport to be applying Chevron than when they purport to be applying Skidmore. So that will give you some sense of this could make a substantial difference in the litigation and litigation involving agencies. But we also don't know how courts are going to respond to a change in the analytical framework. And let me give you an example that suggests why. Courts for 40 years have really gotten in the habit of deferring to reasonable agency interpretations of the statutes that agencies are charged with administering, especially when you're talking about really kind of technical questions that seem to call for expertise, and where there's just not kind of a clear answer in the statute. So one thing we don't know is how will courts respond if you change the analytical framework? We know that they're going to nominally be applying a different analytical framework, but is it possible that you're going to have judges who say, look, this is a really tough question, it's a question the statute just doesn't seem to speak to directly, and so I'm going to reach the same bottom line conclusion, and that is I'm going to go with the agency interpretation, but I'm slapping a different analytical label on it. And the truth is that we just don't know kind of how big the proportion of cases it is, where the change in the framework is going to make a really substantial difference. I think what we do know for sure is that if the court abandons the Chevron doctrine, then it will be easier to challenge agency interpretations of statutes. We don't know exactly how much. And then, you know, another example in terms of like, how does this affect the ways that agencies do their work, do their business? Well, you know, one thing that we might see is agencies might start to rely more heavily on statutory text and other indicia of congressional intent, because they want to make sure that their decisions survive judicial review. And those would be the types of things that courts would be paying more attention to in a post-Chevron world. So that's something that you could probably predict. On the other hand, it's also possible that your agencies might respond by saying we no longer get a lot of benefit by resorting to these complex, burdensome, protracted processes like rulemaking. And so maybe we don't resort to those processes as much as we otherwise would, because it's just not worth it from a practical standpoint.

Rich Gold: So let me ask you, sort of, the man-in-the street question on this: Skidmore versus Chevron. Explain to me, with you as judge, the question effectively you're asking in one versus the other, and sort of how you think that changes your view of a particular rule.

Amit Agarwal: Yeah. So under Chevron, bottom line, we defer to a reasonable agency interpretation of an ambiguous statute. Under Skidmore, you really, as a reviewing court, as a judge, they're going to go with what you think is the right answer. And you only go with your agency if you think the agency's view is persuasive. Justice Kagan, at the oral argument said, you know, that's not really deference. That basically means zero deference. And you pretty much do what you want to do anyways. And so it's not really a deference doctrine, it's more a way of saying be respectful and take a close look at what the agency says. And I do think that's a substantial difference.

Rich Gold: So this really comes in a space, and I want to get to the impact on Congress and rule writers in a minute with Dimitri, but this really puts not only an immense amount of power in a judge hearing a case in a way that is different than Chevron. Right? Not that you're phoning it in on Chevron, but, you know, you definitely are in the role of reviewing, for instance, as a clerk, I'm sure, reviewing all the comments and trying to see whether the agency conclusion is supported by the comments and reviewing, obviously, the black letter of what Congress said, but also other legislative intent and including conference reports to follow the trail through and basically ask the question at the end, do I end up where the agency ended up?

Amit Agarwal: Yeah, absolutely, absolutely. And, you know, I think that reminds me of one of the important points that came out in the argument, which is the justices who were more in defense of Chevron, saying, look, there might be some problems with the Chevron framework. Maybe it's hard to decide when a statute is so ambiguous that you say that the law has sort of run out and that it's proper to defer to a reasonable agency interpretation. But you also need to compare the Chevron doctrine to what is the real-world practical alternative to Chevron. And the practical alternative may not be Congress being super clear about what it wants, and there not being gridlock, and you have kind of more congressional legislation that carefully resolves these policy issues. Instead, what you might have is unelected and politically unaccountable courts being tasked with deciding all kinds of questions that are nominally presented as questions of statutory interpretation. But for all practical purposes, they're just kind of straight up questions of policy to which Congress has not clearly spoken. And, you know, I think that's one of the things that the court is going to have to take a careful look at, is what are the real-world practical alternatives that, specifically in the context of here we're dealing with statutory story sizes, because this is not a constitutional holding that the court is revisiting, it's really a question of statutory interpretation.

Rich Gold: So Dimitri, let me go to you now as somebody who, as a committee counsel, has a lot of words and a lot of statutes that have gone through the process at this point. As you're sort of hearing what Amit is saying, in terms of what Chevron versus Skidmore could mean — and again, we're just using that as a stalking horse as a potential for change, I'm not saying that's where the court is going — how does that change how you operate in terms of drafting, if you're on the Hill right now? And how do you think the process changes for the daily sausage making in the House and the Senate?

Dimitri Karakitsos: Yeah, I think Amit did a great job of laying out this on the forefront. But I think you have to change both how you're thinking about advocating, you know, for Congress as well as federal agencies. Oftentimes, you know, what you see in Congress is, for a number of reasons, often you've got a very difficult negotiation going on that you kick some issues down the road, and you let agencies make some of the tough calls, through that kind of legislative ambiguity. You know, I think under Chevron, Congress could rely on the agency's reasonable interpretation to hold up in court. And, of course, as we're discussing, depending on what happens, you know, maybe incumbent on Congress to draft statutory language that is just much more specific and explicit. You know, I think from an advocacy perspective, you know, when you're lobbying the Hill on specific policy issues in a post-Chevron world, you're probably going to have to be much more explicit in working with offices to ensure the language, kind of, clearly states what the intention is. And then I think one other aspect of it, you know, we used to kind of chuckle at or ignore congressional findings, or things like committee reports and floor speeches from bill managers. I think in a post-Chevron role, those things can become much more relevant and important in guiding agencies and really in a way that a court reviews a statute or agency decision making.

Rich Gold: On the agency front, it seems to me, or at least I think, we often feel sometimes agencies know the result they want and pick and choose from, you know, comments in a proposed rule, in terms of what supports that result at the end of the day. It seems to me where you're in a lesser degree of deference, whether it's Skidmore or something else, that all of a sudden comments become this, sort of like golden level of, of intent, both congressional intent, where you can cite that as a commenter, but also, sort of impact of regulations and what agencies need to consider, the judges when they're reviewing the regulation can kind of seize on and say, you know, agency, this makes more sense to me than what you said.

Dimitri Karakitsos: Yeah, I would think from an internal agency perspective, you have to look at every decision you make on a totally different lens because it's not necessarily about what is a reasonable interpretation. You know, I think one thing we didn't talk about is some of the discussions within the court now about there could be multiple reasonable interpretations, right? And having this, kind of, Chevron level of review means the agency could have one, but I could have one and you could have one, and maybe ours are better or more closely track some of the congressional intent and language around it. But because the agency was also reasonable, it stands. I mean, I think they will have to be much more cognizant and careful to track the legislative language and the legislative attempts surrounding and not be able to just say, well, this, you know, is, is fairly reasonable of a decision so we'll be OK here.

Rich Gold: You know, one of the things we've seen in the Biden Administration has been somewhat short shrift of stakeholder engagement process before proposed and final rules were put out in order to get a lot of their major rules done so that they couldn't be subject to Congressional Review Act consideration, if the presidency changes in the election in November. And what that has meant is that the agency is doing, kind of, more of what it wants with less impact from stakeholders here. And yet, at the same time, while the agencies may have, you know, avoided claw back under the Congressional Review Act, if they are operating under a new standard of deference, where there were really good arguments in the record, you know, commenting on the proposed rules that they didn't consider in finalizing the rules, a judge looking at that with Skidmore, or some lesser degree of deference, can say, well, agency you didn't even, you know, in your final rule, you didn't even mention these comments that are critical to me. I'm remanding to you and telling you explain to me why those aren't persuasive. So it seems to me that the Biden Administration has chosen to elevate the Congressional Review Act timeline as a very important thing here, not taking into consideration the potential of less deference in review of these rules, and the fact that judges may look at the record and disagree with the agency conclusion and say, agency, have it back again and, you know, explain to me what you did here, why you didn't agree with this commenter and whether you should have done it differently, given that we're no longer under Chevron deference. So it's going to be very interesting to kind of watch how this all plays out with the elections coming up in the fall. We have, I don't know, a dozen significant rule makings, you know, from the SEC rule out there on climate disclosure, to the EPA rules on the auto industry and the electric utility industry, to a number of others that are going to all be, you know, going through judicial review here after the court's decision. So we're going to see in real time, you know, how agencies engage in the court system here, how judges take whatever new authority they get here into consideration in reviewing those rules. And, at least I think this, you know, this is going to take a decade to settle out. I don't know what you to think in that space.

Dimitri Karakitsos: Well, I was going to say don't forget too that Congress can weigh in the judicial review process, right? I mean, they can file briefs, and how impactful is that? If you have the top name on the drafter of the legislation as the top name on the, you know, the draft for filing a brief too.

Amit Agarwal: Yeah. Rich, I think you hit the nail on the head. There's a lot that's packed into this, and we just don't know how it's all going to play out. And it could very well take 10 years, maybe even longer, to figure out what are the real-world practical impacts, especially if the court goes with the nuclear option and abolishes Chevron altogether. The Solicitor General, at argument, made a pretty dramatic statement in her introduction when she said this would introduce just a veritable shock to the legal system. So, you know, I think everyone is well aware that this is a pretty foundational doctrine in administrative law, and that we need to take a careful look at this case, whatever the decision is, to figure out the practical impacts for litigation, for legislation and for the regulatory process.

Rich Gold: Well, there's probably no better place to end than right there, at least for now. And I shouldn't say "end," I should say "pause," because we will be back with you when we all have a decision to talk about in the next, you know, three to four to five weeks or so. So thanks very much for joining us today. This is Rich Gold at Holland & Knight with your Eyes on Washington update.