In big win for business, Supreme Court dramatically limits rulemaking power of federal agencies

In a major victory for business, the Supreme Court on Friday gave judges more power to block new regulations if they are not explicitly authorized by federal law.

The court’s conservative majority overturned a 40-year-old rule that said judges should defer to agencies and their regulations if the law is not clear.

The vote was 6 to 3, with the liberal justices dissenting.

The decision signals a power shift in Washington away from agencies and in favor of the businesses and industries they regulate. It will give business lawyers a stronger hand in challenging new regulations.

At the same time, it deals a sharp setback to environmentalists, consumer advocates, unions and healthcare regulators. Along with the Biden administration, they argued that judges should defer to agency officials who are experts in their fields and have a duty to enforce the law.

This deference rule, known as the Chevron doctrine, had taken on extraordinary importance in recent decades because Congress has been divided and unable to pass new laws on pressing matters such as climate change, online commerce, hospitals and nursing care and workplace conditions.

Instead, new administrations, and in particular Democratic ones, sought to make change by adopting new regulations based on old laws. For example, the climate change regulations proposed by the Obama and Biden administrations were based on provisions of the Clean Air Act of 1970.

But that strategy depended on judges being willing to defer to the agencies and to reject challenges from businesses and others who maintained the regulations went beyond the law.

The court’s Republican appointees came to the case skeptical of the Chevron doctrine. They fretted about the “administrative state” and argued that unelected federal officials should not be afforded powers typically reserved for lawmakers.

“Chevron is overruled,” Chief Justice John G. Roberts Jr. wrote Friday for the majority. “Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority.” Judges “may not defer to an agency interpretation of the law simply because a statute is ambiguous,” he added.

In dissent, Justice Elena Kagan said the Chevron rule was crucial “in supporting regulatory efforts of all kinds — to name a few, keeping air and water clean, food and drugs safe, and financial markets honest. And the rule is right,” she said. It now “falls victim to a bald assertion of judicial authority. The majority disdains restraint, and grasps for power.” Justices Sonia Sotomayor and Ketanji Brown Jackson agreed.

Senate Majority Leader Charles E. Schumer (D-N.Y.) voiced outrage. “In overruling Chevron, the Trump MAGA Supreme Court has once again sided with powerful special interests and giant corporations against the middle class and American families. Their headlong rush to overturn 40 years of precedent and impose their own radical views is appalling.”

Experts said the impact of the ruling may not be clear for some time.

Washington attorney Varu Chilakamarri said the ruling means “industry’s interpretation of the law will be viewed as just as valid as the agency’s. It will be some time before we see the effects of this decision on the lawmaking process, but going forward, agency action will be under even greater scrutiny and there will likely be more opportunities for the regulated community to challenge agency rules and adjudications.”

In decades past, the Chevron doctrine was supported by prominent conservatives, including the late Justice Antonin Scalia. In the 1980s, he believed it was better to entrust decisions about regulations to agency officials who worked for the president rather than to unelected judges. He was also reflecting an era when Republicans, from Richard Nixon and Gerald Ford to Ronald Reagan and George H.W. Bush, controlled the White House.

But since the 1990s, when Democrat Bill Clinton was president, conservatives have increasingly complained that judges were rubber-stamping new federal regulations.

Business lawyers went in search of an attractive case to challenge the Chevron doctrine, and they found it in the plight of four family-owned fishing boats in New Jersey.

Their case began with a 1976 law that seeks to conserve the stocks of fish. A regulation adopted by the National Marine Fishery Service in 2020 would have required some herring boats to not only carry a federal monitor on board, but also pay the salary of the monitor. Doing so was predicted to cost more than $700 a day, or about 20% of what the fishing boats earned on average.

The regulation had not taken effect, but it was upheld by a federal judge and the D.C. Circuit Court’s appellate judges who deferred to the agency’s interpretation of the law.