Loper Bright Enterprises v. Raimondo¹ was initiated by multiple family-operated fishing companies who sued the U.S. Secretary of Commerce challenging a National Marine Fisheries Service (NMFS) regulation requiring them to pay the salaries of government-mandated observers on board their vessels.

More specifically, due to past unregulated overfishing of international waters, the federal government in 1976 enacted the Magnuson-Stevens Fishery Conservation and Management Act (MSA).² The MSA extended the U.S. territorial waters to 200 nautical miles and declared “exclusive fishery management authority over all fish” within that area.³ The NMFS was charged by the Secretary of Commerce with administering the MSA, which gives broad powers to eight regional councils to formulate plans for conservation of fishing resources.⁴

As is relevant in this case, an MSA plan may require that “one or more observers be carried on board” domestic vessels “for the purpose of collecting data necessary for the conservation and management of the fishery.”⁵ The MSA specifies three groups that must cover costs associated with observers, including vessels within the jurisdiction of the North Pacific Fishery Management Council, where many of the largest and most successful commercial fishing enterprises in the nation operate.⁶

The MSA does not carry a similar term for Atlantic herring fishermen to bear the costs of an observer; however, the Atlantic fisheries aimed to provide observers on 50% of vessels by requiring fishermen to declare they are fishing and indicating the species they intended to harvest prior to the trip.⁷ If the NMFS determined that an observer was required but declined to appoint one, the vessel must contract and pay for a government-certified observer which could cost the vessel up to 20% of the value of the harvest.⁸

Loper Bright Enterprises brought the case due to MSA silence requiring Atlantic fishermen to pay for an observer, especially given the great disparity in costs between the Atlantic and Pacific regents. Both the U.S. District Court for the District of Columbia and the U.S. Court of Appeals for the District of Columbia Circuit upheld the regulation after finding the statute’s silence on the issue of observers made it ambiguous, allowing courts to legally defer to the NMFS interpretation as reasonable based on the Chevron doctrine.⁹

Since the 1984 U.S. Supreme Court ruling in Chevron USA, Inc. v. Natural Resources Defense Council, Inc., a court asked to interpret an administrative law can defer to an agency’s interpretations so long as the interpretation is reasonable. This applies even when the reviewing court reads the statute differently. Chevron deference is based on the rationale that because agencies are staffed with experts in the field who can bring their training and knowledge to bear on open statutory questions, they are better positioned to interpret their own statutes than courts.

The Supreme Court granted certiorari in May 2023 to hear the case specifically to take up the issue of whether the Chevron doctrine should continue when a statute might be ambiguous.¹⁰

In this case, the Supreme Court disagreed with both lower courts and expressly overruled the long-standing Chevron doctrine on the basis that “[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.”¹¹ As such, the Supreme Court said the lower courts were wrong to defer to the agency and remanded the case back for further evaluation.

In reaching its conclusion, the Supreme Court found that when federal agency rulemaking goes beyond administering laws as passed by Congress, the agency instead engages in legislating. The majority opinion noted that under the separation of powers doctrine, the framers of the Constitution envisioned that courts would have the final interpretation of law — not the executive branch. The courts’ assessments should be informed by the executive branch, but not directed by the executive branch.

While eliminating Chevron doctrine deference, the Supreme Court’s decision did not instruct lower courts to ignore agency expertise, allowing courts to give substantial weight to an agency’s subject matter expertise and reasoned consideration of issues, particularly when the agency interpretation has been long-standing and consistent. When the reviewing court is engaged in statutory interpretation, the court may use the agency’s interpretation to “help inform that inquiry.”¹²

It will take years, if not decades, for the exact impact of Loper to become clear, but the case has already been felt in some industries. The same day as Loper’s publication, a New Jersey-based hospital system sued the federal Department of Health and Human Services (HHS) and the Center for Medicare and Medicaid Services (CMS) to challenge how the agencies calculate disproportionate share hospital (DSH) payments.¹³ According to the plaintiff, CMS has narrowly interpreted a key metric in the DSH formula — supplemental security income fraction — in an irrational and unlawful way. The hospital system alleges the calculation cost them $400,000 in 2016 alone. Loper will certainly play a prominent role when the Supreme Court looks at DSH payments next term in this case, which it has agreed to review next term.¹⁴

Elsewhere, a federal judge in Texas cited Loper when staying the effective date of a non-discrimination rule found in the Affordable Care Act.¹⁵ The Texas court cited Loper when it held that it was entitled to use its own methods of statutory construction to interpret the phrase “on the basis of sex” rather than defer to the agency’s interpretation. The court determined that the HHS interpretation was not persuasive and created contradictions and ambiguity.¹⁶

Outside of the healthcare industry, the day Loper was published, a federal district court in Texas held that the U.S. Department of Labor rule that raises the minimum salary at which executive, administrative, and professional employees are exempt from overtime pay exceeded its authority.¹⁷ A different federal district court in Texas¹⁸ cited Loper in setting aside the Federal Trade Commission’s new non-compete rule. The plaintiffs argued that while the FTC had authority to prosecute “unfair methods of competition,” it did not have authority to determine what constituted “unfair competition.” The court agreed, holding that the FTC lacks rulemaking authority with respect to unfair methods of competition.¹⁹

The impact of Loper will invariably extend far beyond employment and healthcare law. Heavily regulated areas such as finance law and patent law will also feel its effects. In the finance industry, Loper is expected to take center stage in challenges to the Security and Exchange Commission (SEC) climate disclosure rule. Earlier this year, nine lawsuits challenging the proposed rule were consolidated and will be heard by the U.S. Eighth Circuit Court of Appeals.²⁰ Similarly, Loper is expected play a role in Google’s challenge to Suprema v. International Trade Commission,²¹ in which the circuit court gave deference to the agency’s interpretation related to “articles that infringe.”

CONCLUSION

The general consensus is that Loper will lead to more conservative rulemaking from regulatory agencies. However, the impact on existing rules remains very unclear. This is particularly true in light of another Supreme Court decision in Corner Post v. Board of Governors.²² In Corner Post, the Court held that the six-year statute of limitations for challenging agency action begins when the challenger is harmed rather than when the regulation is adopted. As a result, new firms and companies may be able to challenge long-existing rules.

The uncertainty might not be appreciated by incumbents in these industries that have structured their operations around existing regulations and often value stability and predictability. How Congress responds is also unclear. Will new laws written by Congress include more specificity and clearer definitions, or will Congress simply include language making it clear that agencies have the authority to fill in any blanks or gaps in new and existing laws? While much remains to be determined, heavily regulated industries will no doubt continue to see changes as rules are challenged and agencies reevaluate their rulemaking and enforcement actions.