What In-House Counsel Need to Know About the Chevron Doctrine Reversal

In-house counsel are still grappling with the fallout from the U.S. Supreme Court’s landmark decision this summer to overturn a longstanding interpretation of federal agencies’ ability to interpret law and issue regulatory guidance.

In a 6-3 ruling, a majority of justices held in Loper Bright Enters. V. Raimondo that the high court’s test established in 1984’s Chevron v. Natural Resources Defense Council decision improperly prioritized the executive branch’s legal interpretations over the judicial branch’s interpretations. This decision overruled the Chevron doctrine that for four decades has required federal courts to defer to administrative agencies’ interpretations of ambiguous or broad statutes.

GCs Foresee Uncertainty

Tossing out the Chevron doctrine may not change an in-house legal department’s day-to-day business routines, but it does open corporations to the uncertainty and possible chaos from shifting interpretations of the law, according to reporting from Law360® Pulse.

“What companies need is to know, and to be able to count on, what the law is,” said Rich Baer, the recently retired general counsel of Airbnb Inc. “If the erasure of the Chevron doctrine causes there to be numerous and conflicting interpretations of the law, then that is bad for corporate America. Although I typically discount the hand-wringing of outside counsel, I think those who predict chaos … are probably closer to what will be the end result.”

Jim Collins, chief operating officer and general counsel of Republic Capital Group, added that he thinks the effect of the ruling will depend on the industry and the business itself. In the short term, however, he said the overturning of Chevron “creates uncertainty for businesses, and some companies may view that as an opportunity to be more aggressive” with regulators.

Chevron Reversal Brings Uncertainty and Potential Chaos for Businesses

The dramatic reversal of Chevron introduces significant uncertainty about how lower courts will weigh competing legal arguments in the large arena of administrative rulemaking and related litigation. It effectively deprives courts of a commonly used analytic tool and leaves a number of questions about what comes next in a wide range of practice areas, from commercial transactions and capital markets to corporate governance and healthcare law.

One specific area that is certain to be impacted by the Chevron reversal relates to how pending and future financial regulatory actions could be dialed back.

“In light of the ruling, financial regulators may have a harder time defending aggressive rules and guidance, and may lean more heavily on their supervisory and enforcement authorities,” writes Sarah Jarvis, Jon Hill and Aislinn Keely, in a special Law360® report, “6 Things To Know About the Post-Chevron Finreg Impact.”

The authors note a number of possible implications from the ruling with respect to financial regulation:

• Pending and future regulatory actions could be dialed back as litigation risk rises. The demise of Chevron deference could embolden more such challenges by making it clear that the agency interpretations of law underpinning a rule won’t be entitled to the benefit of the doubt in court.
• Be careful what you wish for. Bold rules and guidance may be trickier to defend without Chevron deference, but that doesn’t mean the federal financial regulators must pack up and go home. The Supreme Court’s decision may prompt hard-charging regulators to simply turn to other, less transparent alternatives.
• Some financial regulation will be more durable than others. The Supreme Court has not handed financial litigants a foolproof wrecking ball for rules they don’t like. The agencies will adapt over time to the new post-Chevron environment by adjusting how they write, justify and defend their rulemaking.
• Some SEC rule challengers may get a boost. Attorneys said the SEC will likely see a smaller effect from the high court’s ruling than other federal agencies, but the decision could be an additional arrow in the quiver of those challenging some specific agency rules.
• Early tests of the Loper Bright decision are already taking shape. These cases will provide some of the first opportunities to see how lower courts respond and, by extension, what the fallout might be.
• More work could fall on Congress. In an environment where administrative agency interpretations are easier to attack through litigation, Congress may face an added burden of delving into details previously delegated to agencies. That could complicate the legislative process for emerging areas such as digital assets.

Chevron Doctrine Reversal: Comprehensive Resources for In-House Legal Teams

The insightful report from Law360® is one of the many resources that LexisNexis® has assembled to help in-house counsel navigate the regulatory fallout from the Supreme Court’s reversal of the Chevron doctrine.

The Practical Guidance team at LexisNexis has just released the Chevron Reversal Impacts Resource Kit, a comprehensive collection of information resources that provide practical insights on the Supreme Court decision’s impact across key practice areas. Specific areas of practice covered by the resource kit include:

• Capital Markets
• Commercial Transactions
• Construction
• Corporate Governance
• Employee Benefits and Executive Compensation
• Energy and Utilities
• Federal Government
• Financial Services Regulation
• Healthcare
• Labor & Employment
• Life Sciences
• Real Estate
• Tax

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All of these resources are accessible to in-house legal teams via the Lexis+ General Counsel Suite, which provides a vast collection of legal resources, breaking business and legal news and Practical Guidance content.

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