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If you own a business or work in any industry regulated by the federal government – think food, drugs, tobacco, cosmetics, air travel, commercial fishing, imports/exports, oil and gas… you get the picture – you have probably heard that the United States Supreme Court recently “overturned Chevron”. And yes, while is case is a very big deal, we caution that this does not signal the end of federal regulation.
“Chevron” refers to the 1984 Supreme Court case which recognized the ability of federal regulatory agencies to interpret and apply United States laws containing gaps or vague provisions. Basically, in 1984 the Supreme Court acknowledged that in order for federal agencies to do their jobs, they would be required from time to time to interpret and apply laws which Congress had not made completely clear – and – that lower courts should defer to the expertise of the federal agencies when doing so (thus, the rule created by the Supreme Court in 1984 became known as “Chevron deference”).
For a classic example, consider the United States Food and Drug Administration’s (FDA) interpretation of what Congress meant in the Tobacco Control Act by the term “appropriate for the protection of the public health” (APPH). Anyone in the tobacco and vape industry knows that the frustrating Premarket Tobacco Product review process (PMTA) is entirely dependent on FDA finding that marketing a new tobacco product would be “appropriate for the protection of the public health” – but what did Congress mean when they created this term in the Tobacco Control Act? – No one is entirely sure because Congress did not make it completely clear. But FDA interpreted the term, and the agency puts its own understanding of the term to use every day when reviewing vape and tobacco products.
Until June 28, 2024, when the Supreme Court overturned Chevron, courts were required to largely defer to FDA’s interpretation of the term “appropriate for the protection of the public health”. What the Supreme Court decided in the 1984 Chevron decision was that 1) federal agencies could not operate without this degree of freedom, and 2) federal agencies, such as FDA, employ experts in their fields who were believed to be in a better position than judges to interpret and apply laws that relate to the complex public health, environmental, scientific, and technological industries they regulate.
It was not that Chevron was considered a perfect solution; rather it was a practical solution to a difficult problem that all regulatory states face. Practical solution or not, Chevron has been under attack for years by industry who felt that the decision led to government overreach – a problem common to all bureaucracies, who by their very nature tend expand their own missions – and power – over time.
Fast forward to January 2024, and along came Loper Bright Enterprises v. Raimondo, Secretary of Commerce, an unassuming case about obscure commercial fishing laws enforced by the federal National Marine Fisheries Service – commercial fishing laws which, as interpreted by this federal regulatory agency, were costing commercial fishing vessels up to 20 percent of their revenues. In challenging the agency’s interpretation, the petitioners outright requested that the Supreme Court overrule the 1984 Chevron decision.
In throwing out Chevron, the Supreme Court’s new rule states simply that lower courts may no longer “defer” to the federal administrative agencies and their interpretations of law, but rather courts must now “exercise their independent judgement in deciding whether any agency has acted within its statutory authority, as the [Administrative Procedure Act] requires” (from Chief Justice John Roberts’ opinion).
So what does this mean for the hundreds (if not thousands) of federally regulated industries across the United States? Well, apart from the commercial fishing vessels at issue in Loper Bright Enterprises v. Raimondo, Secretary of Commerce, whose active case has been sent back to the lower courts for reconsideration, nothing happens automatically. All existing regulations – and agency approaches to interpreting and enforcing those regulations, will stay the same (for the time being). However, there is widely expected to be a flood of new litigation challenging federal agencies across the board on the various ways these agencies have interpreted and applied the laws they work under. In industries ranging from oil and gas, vape and tobacco products, aviation, and import/export, to name only a handful, courts will be asked to take a fresh look at how these agencies have exercised their power, and whether they have overstepped.
Broadly speaking, the recent Supreme Court decision is expected to reign in federal regulatory agencies and their power – but this does not mean that their ability to regulate goes out the window. Rather, it means that lower courts will now take a different (albeit stricter) approach, relying on the Administrative Procedure Act, and any changes to individual agency regulation will take time to work their way through the courts as cases begin to move forward. Going back to FDA regulation of vape and tobacco products as an example, the question is not whether Congress intended that FDA regulate these products – it certainly did – the question is to what extent, and whether FDA has at times overstepped or misapplied the authority granted by Congress. In individual challenges, courts could dismantle some regulations entirely, while leaving others intact; every case will depend on the particular circumstances – and the new rule created by the Supreme Court on June 28, 2024.
Regulated industries should monitor the ways in which their regulators may voluntarily change their approach to some regulations, as well as the litigation coming from their sector which is sure to follow this Supreme Court decision. In the case of our FDA examples from above, the Supreme Court had already agreed to hear a challenge to FDA’s vape and tobacco marketing application review process; now that Supreme Court case will be heard post-Chevron – and we fully expect to have important regulatory updates for our readers in the vape and tobacco sector following this case.
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