While the Supreme Court has certainly garnered some attention with several decisions it has handed down this term, none will have as significant an impact on business, including commercial real estate, as its decision in Loper Bright Enterprises v. Raimondo, handed down on June 28. In that case, the Supreme Court overturned a 40-year-old legal standard first established in 1984 in Chevron USA, Inc. v. Natural Resources Defense Council, Inc., which stated that courts will defer to federal agency decisions on policy issues when the relevant statutory language is ambiguous.
The so-called “Chevron principle,” or “Chevron deference,” as it came to be known, began as a practical means of empowering federal regulatory agencies tasked with enforcing aspects of the law that required scientific or highly technical judgment. The principle gave effect to agencies that determined that an area or matter not expressly authorized by law was within their regulatory authority, so long as their judgment was reasonable. Thus, when Congress passed a law requiring the Environmental Protection Agency (EPA) to regulate a wide range of certain chemicals, the EPA could not be challenged for including in its regulations substances that it said it reasonably believed were covered by the law.
But what may have begun as a common-sense response to the difficulty of developing regulations that may involve technical, scientific, or other decisions (nominally to achieve Congressional intent) has become for many critics a means for executive agencies to exercise regulatory reach beyond that authorized by Congress. According to critics of Chevron deference, this allows the party that controls the White House to write (and rewrite) regulations to advance a political regulatory agenda, while giving executive agencies an unfair advantage in court if challenged. Supporters of Chevron deference point out that in many areas, Congress simply does not have the technical expertise to enumerate in statutory language everything that Congress is trying to cover, and so it relies on executive agencies to make these decisions.
In the Loper Bright case, a 2020 federal regulation requires vessel owners in the Atlantic herring fishery to pay for observers who monitor operations at sea and collect related data. The National Marine Fisheries Service implemented the rule under a 1976 law, but companies in New Jersey and Rhode Island challenged the regulation, arguing that the service lacks the authority to mandate industry-funded observers.
In a 6-3 opinion written by Chief Justice John Roberts, the Supreme Court rejected Chevron and the requirement that courts defer to federal agency decisions when statutes are ambiguous. Per Roberts' opinion, “Chevron is overruled. Courts must use their own discretion in determining whether an agency acted within the scope of its statutory authority.”
In his majority opinion, Roberts stated that chevron deference is “a judicial invention that requires judges to ignore statutory obligations” and that when a statute is ambiguous, the judiciary, not the agency, determines the limits of that agency's discretion.
The ruling was supported by many members of Congress who have criticized federal agencies for interpreting the law in ways that differ from Congress's intent. Rep. Mark Green (R-Tenn.) said, “Congress can no longer shift the blame for its legislative duties. It must stay committed to writing clear law.” House Oversight Committee Chairman James Comer (R-Ky.) said in a statement that the ruling “rightfully returns the power to make the nation's laws to the elected representatives of the American people in Congress, and the power to interpret them to the courts.”
But critics of the ruling argued that Congress needs to rely on agency expertise on policy issues in certain circumstances. Overturning the Chevron decision would increase legal disputes and undermine federal agencies' ability to craft regulations that best achieve Congress' intended goals.
For advocates of regulatory reform, the Roper decision is a welcome development, particularly in commercial real estate, where there has been a longstanding problem of frustration with regulators asserting jurisdiction in areas where the law is unclear (such as swampland determinations). However, the Roper decision could be a double-edged sword if it actually leads to increased litigation and stifles the development of sound regulatory frameworks in tax law.