The Supreme Court's decision Friday morning to overturn the Chevron doctrine has the potential to weaken Securities and Exchange Commission, Department of Labor and Internal Revenue Service rules.
In Loper Bright Enterprises v. Raimondo, Chief Justice John Roberts wrote: "The Administrative Procedure Act requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the law simply because a statute is ambiguous; Chevron is overruled."
"Effectively, what this [ruling] is going to do is change the balance of power from the agencies to the courts in terms of determining the scope of what an agency is authorized to do by statute," Eric Purple, a partner at Stradley Ronon in Washington, told ThinkAdvisor Friday in an interview.
"With respect to any rule that is currently under challenge, the congressional authority to engage in that rulemaking will become very much a live issue if there is ambiguity around the agency's authority," for instance with the litigation surrounding the Labor Department's fiduciary rule, Purple said.
"Under the Chevron doctrine, courts often allowed agencies essentially to determine the extent of their own authority by asserting statutory ambiguity, even in ways that proved inconsistent over time," said Geoffrey Manne, president of the International Center for Law & Economics, in a statement Friday.
Impact Seen in Litigation
The Court's opinion "requires judges to be 'informed by' the views of agencies like the SEC while not permitting the SEC's views to supersede a judge's own judgment," Nicolas Morgan, co-founder and president of the Investors Choice Advocate Network and a former senior trial counsel at the SEC, said in an email.
"It remains to be seen how big of an impact this opinion will have once judges start applying it. At a minimum, judges will no longer need to defer to the SEC's own opinion about its jurisdiction and the application of the federal securities laws," Morgan said.
The impact of the Supreme Court's ruling "will only be seen in litigation where the SEC and DOL tell a judge to defer to the agencies' interpretation," Morgan continued.
For instance, "in the pending litigation challenging the SEC's short sale rules, the court may continue to take the SEC's view of the statutory authority for the rules, but the court will give those views less deference under this new Supreme Court opinion."
Added Morgan: "The great irony about the Chevron doctrine is that the original case involved environmental activists not wanting courts to defer to the Reagan administrations' EPA's interpretation of environmental laws. How strongly one thinks courts should defer to executive branch agencies may turn in part on which executive is presiding over the agencies."
Existing and Future Rules
"With regard to rules that have been previously interpreted by a court using Chevron deference, there won't be any effect. The court was clear this ruling will not overturn prior cases," Purple said.
As to future rulemakings, "the administrative agencies are going to be very mindful as to what Congress has authorized them to do and will be very careful in establishing their statutory authority to act," Purple added.
'Death-Knell' for SEC Climate Rule?
The court's decision "is very likely to be the death-knell for the SEC's climate disclosure rules, at least in its current form," added Michael Gold, partner and corporate practice co-chair at law firm Saul Ewing in an email.
