A pair of U.S. Supreme Court rulings within the past week have opened the door to additional legal arguments that public companies and trade associations can use to challenge the regulatory decisions of federal administrative agencies.
In a landmark decision on June 28, the high court reversed its 1984 Chevron USA v. Natural Resources Defense Council precedent, which had required judges to defer to federal agencies' reasonable interpretations of statutes that were ambiguous or silent on a particular question. Writing for the court's six-justice conservative majority, Chief Justice John Roberts said that "[c]ourts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority." The majority concluded that the concept of Chevron deference was inconsistent with Administrative Procedure Act (APA), which authorizes courts to "decide all relevant questions of law" and "interpret . . . statutory provisions." The court also observed that statutory ambiguities should not be construed as implicit delegations of authority to agencies.
However, the majority limited the potential reach of its decision by noting that past rulings based on Chevron remain good law and that courts may continue to rely on federal agency expertise when it is persuasive.
The decision, in a fisheries case known as Loper Bright Enterprises v. Raimondo, prompted a flurry of law firm memos (including from Sidley, McDermott Will & Emery, Venable, Weil, and Foley Hoag) on the potential implications for federal agencies, particularly those that have interpreted statutory gaps to further environmental protection goals. The decision presumably will be cited by litigants that are challenging SEC rules that are based on unclear statutory language and likely will influence how the SEC and other federal agencies promulgate new rules.
It remains to be seen how the Loper Bright case might impact the legal challenges to the SEC's climate risk disclosure rule. Business groups, citing the Supreme Court's 2022 West Virginia v. EPA case, have argued that the SEC does not have the authority to mandate extensive new disclosures related to climate change because of the major questions doctrine, which requires clear Congressional authorization for an agency to address questions of "vast economic and political significance."
On July 1, the Supreme Court expanded the potential pool of companies and other parties that may challenge federal regulations when the justices concluded that the six-year statute of limitations under the APA starts to run when a company is first impacted by a final agency rule, not when the regulation was originally issued. In the case before the justices, Corner Post v. Board of Governors of the Federal Reserve, the Court ruled 6-3 that a North Dakota truck stop operator could challenge a 2011 debit-card regulation ten years later because it did not open for business until 2018.
Writing for the three dissenting justices, Justice Ketanji Brown Jackson warned that the majority's decision essentially means there will be no time limit to challenge federal regulations: "Allowing every new commercial entity to bring fresh facial challenges to long-existing regulations is profoundly destabilizing for both Government and businesses."