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'Heavy Thumb'

Chevron Decision Has Significance for 6th Circuit Net Neutrality Case

Industry lawyers continue to assess the potentially seismic implications of Loper Bright Enterprises v. Raimondo and the other Chevron case decided last week (see 2406280043). Yet the after-effects are being seen already. The 6th U.S. Circuit Court of Appeals on Friday directed parties in the net neutrality challenge to file not later than July 8 supplemental briefing material addressing the effect of the Chevron decision “on our analysis” of a motion to stay the order (see 2406280060).

Everything some in industry want from the FCC will take longer and will be less sustainable,” New Street’s Blair Levin said in a Monday note to investors. Spectrum reform is one example, Levin said. “There are many issues related to spectrum that the FCC has routinely acted upon that we see new grounds for challenging,” he said. USF changes offer a similar dynamic, he said. The net effect on the review of the FCC's net neutrality order isn’t clear, Levin said: “While the end of Chevron may also end the battle over Title I and Title II, it may do so in [a] way industry will not like.”

The doctrine “operated as a heavy thumb on the scale in favor of administrative agencies -- regardless of whether those agencies were adopting new regulatory requirements or eliminating existing ones,” FCC Commissioner Brendan Carr said about Chevron in a lengthy X posting Saturday. The evolving “major questions doctrine” applied in these latest cases, not Chevron, and “the major questions doctrine does not require (indeed, it does not allow) courts to defer to agencies the way Chevron did.”

Agencies “will still win significant cases after Loper, but the Supreme Court’s decision puts regular people and businesses on a more level playing field with the government when they challenge a regulatory overreach,” Carr said. The major questions doctrine was laid out in SCOTUS's 2022 decision in West Virginia v. EPA as a test for when an agency's actions may be subject to judicial review (see 2206300066).

Rising from an environmental case, Chevron “had broad and sweeping application to all federal agencies,” K&L Gates’ Varu Chilakamarri said on a webinar Monday by lawyers at the firm. “It’s really not an understatement to say that Chevron was the cornerstone of administrative law for the last 40 years,” she said. It’s the most cited regulatory case in history, she added. In a survey, 80% of officials who draft agency rules said they were more likely to take an aggressive approach because of Chevron, Chilakamarri said.

Administrative law professors told us they believe the demise of Chevron deference won’t be as shattering as some might expect. Chevron “had gotten whittled back a lot” in recent years owing to developments such as the major questions doctrine, Jeff Lubbers, American University administrative law professor, said. The majority opinion says that old rulings dependent on Chevron deference remain valid and [it] also tells the courts to respect the interpretation of agencies, so the end of Chevron deference won’t reshape how courts treat agency rules, University of Idaho administrative law professor Linda Jellum said. The courts “are not going to do anything hugely different,” said Jellum, who has argued previously that Chevron deference didn’t fit in with the Administrative Procedure Act.

It is true the government might lose some cases on the margins that it otherwise might have won, and some litigants might feel emboldened,” Lubbers said. “But litigants were already emboldened” by the recent direction of SCOTUS and lower courts such as the 5th Circuit U.S. Court of Appeals, he said. Jellum said any increase in litigation from the Loper ruling likely will focus on the lower courts, which tend to rule based on Chevron more frequently. Both professors said they saw Thursday’s ruling in SEC v. Jarkesy (see 2406270063) as being a bigger shake up for federal agencies. Loper is “not, in and of itself, a big deal, but it's part of an overall effort by the court majority to limit the power of administrative agencies, and that's a big deal because it keeps the government from protecting citizens from health, safety and environmental harms,” Lubbers said.

Regulatory agencies win roughly 75% of the time when challenged in court, but that win-loss ratio will likely change, said Isaiah McKinney, litigation fellow with small-government public interest law firm Pacific Legal Foundation. Loper could prompt an uptick in litigation challenging regulatory agency actions because plaintiffs won’t be deterred by having to overcome Chevron deference, McKinney said. Congress might strive to remove ambiguity when crafting legislation. SCOTUS assumed Congress understood it was somewhat delegating authority to agencies under Chevron via ambiguous language in statutes, he added. Now lawmakers will have to be more explicit with agencies when directing them about what they want done, he said.

McKinney said courts might continue giving weight to agency interpretations as long as they were long-held and remained consistent across administrations.

Expect “a flood of new challenges” to long-established regulatory agency policies by parties subject to those regulations, appellate lawyer Sean Donahue of Donahue Goldberg said. Loper preserves the point that deference is important when Congress has delegated authority to an agency, he said, as long as the agency stays within the bounds of that delegated authority. But it’s unclear how the court will define delegation, he noted.

On its face, the SCOTUS decision doesn’t read as deregulatory, but the “profoundly conservative” Supreme Court interprets statutes as narrowly as possible, making Loper highly deregulatory by default, said Sam Sankar, senior vice president-programs at Earthjustice, an environmental public interest law nonprofit. He also predicted seeing settled decisions reopened. Moreover, he anticipated the federal government and regulatory advocates trying to preserve the status quo facing “a huge asymmetry in resources” from industry challengers.

State Implications

The ruling could have implications for state authority. South Dakota Public Utilities Commissioner Chris Nelson (R) expects “removing this antiquated judicially created authority in a federal agency will rightfully strengthen the position of States and the private sector,” he said. Overturning Chevron “reestablishes the role of the branches of government the founders intended -- Congress passes law and courts interpret law that is not clear,” the NARUC Telecom Committee ex-chair said. The decision “rightly stops federal agencies seeking to manifest a judicial role by nuancing an interpretation of federal law to their advantage.” It’s hard to say exactly how it will play out in future telecom cases because many may also involve the major questions doctrine, noted Nelson.

Republican governors said Chevron would help protect their states’ industries from federal overreach. Nebraska Gov. Jim Pillen (R) applauded Supreme Court conservatives “for restoring lawmaking power to our democratically accountable branch of government, instead of unelected bureaucrats.” Nebraska is “reining in excessive government regulations … and I am happy to see deregulatory progress at the federal level,” he said. Wyoming Gov. Mark Gordon (R) said, “For years, unelected bureaucrats running federal agencies in Washington D.C. have used ‘deference’ as an excuse to target certain industries based on politics. Wyoming has experienced that firsthand.”

Connecticut Attorney General William Tong (D) disagreed. “This decision will inject a new level of uncertainty across all levels of federal agency actions,” undermining “the ability of government agencies to protect public health and safety. Functional government loses today,” said Tong.

Regulatory power will shift to the states, “something that may prove problematic for all sectors,” Levin said.

Arguments that the FCC isn’t entitled to judicial deference are almost certainly going to appear in current FCC court cases, said Cheryl Leanza, attorney for the United Church of Christ Media Justice Office. That includes ongoing litigation against the equal employment opportunity order and the 2018 quadrennial review order. “It is clear that industry will use every single argument coming out of the court to attack decisions they don’t like,” Leanza said; however, it’s not certain how effective those arguments will be, she said. Loper, Jarkesy, and other recent SCOTUS administrative law decisions have created an unprecedented situation for regulators and the courts, she said. It’s difficult to know how lower courts will respond. Chevron's existence didn’t prevent many FCC rules from being overturned while it was the law, Leanza said. “We’re gonna have to see what the courts do with it."