January 13, 2025

By Walker Livingston, Capstone Energy and Industrials Analyst

It can be tempting to think of the ruling in Loper Bright Enterprises v. Raimondo — which consolidated the Supreme Court’s erosion of four decades of deference to federal agencies — as the end of a regulatory era. But at Capstone, we believe it is just the latest inning in a game that will play out across courts, agencies, and industry for years to come. With the Supreme Court’s decision striking down Chevron deference, the political left and right have entered a high-stakes match where winning will be determined by the speed of regulatory shifts and the venues where lawsuits are filed. That legal volatility will leave industry caught in the crossfire.

Legal volatility will leave industry caught in the crossfire.

Conservative, progressive, and industry groups are already looking for ways to utilize the decision in Loper Bright Enterprises v. Raimondo (Loper Bright) to their advantage, such as an effort by Oklahoma to reinstate federal funding in a fight over abortion referrals. Understanding and implementing an effective response to Loper Bright in the federal Circuit Courts of Appeal will be essential as those appeals court decisions will serve as the backbone for a post-Chevron legal landscape in the United States. We expect a cavalcade of looming litigation over the Loper Bright doctrine, and how courts should interpret statutes and agency authority.

The Development of Administrative Law Post-Chevron

Loper Bright, decided in June 2024, was a long-expected coup de grace to Chevron deference, forty years after the original case was decided. In Loper Bright, Chief Justice Roberts stated that court deference to agency interpretations of their own enabling statutes was dead. However, the Chief Justice left open the door for some level of deference to agencies, where the agency is “authorized to exercise a degree of discretion or when a statute leaves agencies with flexibility in making decisions.

Agencies, foreseeing the change, mostly dispensed with using Chevron as a justification in their rules and regulations several years ago. During Trump’s first term, the EPA referenced Chevron in 30 significant proposed and final rules, compared to just five references during Biden’s term. The reduction in reliance on Chevron in recent years by agencies may also provide them with a certain level of cover to defend their interpretations of their enabling laws going forward.

One of the main ambitions of the conservative legal movement in the run-up to and wake of Loper Bright was to return to the plain meaning of statutes and restrict agencies from expanding the regulated areas without Congress. The flip side of the issue is that many of these statutes, including the Clean Water and Clean Air Acts, have not been meaningfully updated in decades to address new issues. After 1984 and the Chevron decision, the deference afforded to agencies allowed Congress to further abdicate its role in being the arbiter of statutory meaning, incentivizing the creation of shorter, vague statutes that would hand more and more power over to agencies to set policies. On one hand, this allows agencies to react faster to novel policy issues than Congress would, but on the other it leads to agency policy platforms becoming far more susceptible to President-to-President shifts in ideology.  The inter-Presidential policy shifts can upend both agencies working on rules for years and the businesses relying on those rules.

Although the impact of Loper Bright is likely to be felt across the federal government, the tip of the spear of the doctrine will target politically- fractious agencies.

Although the impact of Loper Bright is likely to be felt across the federal government, the tip of the spear of the doctrine will target politically- fractious agencies. Almost equally important to the law, however, is where the parties file a lawsuit. Although some statutes require that certain courts overhear petitions over certain rulemaking, parties challenging an agency action or policy may bring cases in any U.S. judicial district where “in which a substantial part of the events or omissions giving rise to the claim occurred.” Litigants seeking to force an agency to issue or roll back a rule have recognized the importance of choosing the right venue (and, in some cases, specific judge) to hear a case, especially if the litigant is seeking to stymie a rule from coming into effect during litigation, which can take years. For conservative and business-friendly interests, this generally means filing in a District Court within the Fifth Circuit, where depending on which District Court division a litigant files in, they are almost guaranteed to have their case heard by a certain judge.

The Conservative Path for Loper Bright

The conservative implementation of Loper Bright focuses heavily on rolling back regulations and addressing “regulatory overreach” from the agencies. Here, the conservative implementation of Loper Bright will focus on the plain language interpretations of the statutes, and refusing agency attempts to read new authorities into the statutes.  Conservatives could use the decision to target areas where agencies, potentially for decades, have “read in” authority to act when there is no direct grant of that authority in the statute. This will be particularly felt in aging statutes that have been construed by agencies as solutions to modern problems, but currently do not directly grant agencies the authority to regulate in a specific area. Agencies like the EPA and National Labor Relations Board, which have traditionally faced sweeping lawsuits from progressive and conservative causes, will likely be the ones that face consistent Loper Bright-based challenges in the next few years.

The Progressive Path for Loper Bright

Just as conservative causes will use Loper Bright to try to stymie the expansion of agency responsibilities when not directly defined in the statute, so too can progressive causes use strict deadlines and direction in statutes to argue that agencies are duty-bound to issue certain rules and regulations. In a notice of intent to sue against the FDA recently filed by the AVA Law Group over per- and polyfluoroalkyl substance (PFAS) tolerances in food, the litigants used Loper Bright to their own advantage, arguing that the statute made clear that the FDA “shall promulgate regulations” in the statute “in a timely manner,” the FDA was required to set tolerances for PFAS in food. Progressive groups could similarly use statutory language that uses “shall” or similar language to argue that an agency does not have the discretion to not take an action and is required to issue a regulation. Although forcing an agency to issue a regulation takes longer than getting a court to rescind a decision, having a court be able to enforce a regulatory process and timeline will be key for progressive causes to force agencies to act, especially in the deregulatory environment expected during a second Trump administration.

The next few years at the federal Circuit courts will be key to how the impact of Loper Bright will be felt.

What’s Next

The next few years at the federal Circuit courts will be key to how the impact of Loper Bright will be felt, with the Circuits establishing the on-the-ground application of the decision going forward. These decisions will cover questions of how agency authority should be interpreted broadly and how much authority judges will have over agency decisions not necessarily covered by Loper Bright. The D.C. Circuit recently addressed one part of this in the first major decision tackling agency authority post-Loper in Huntsman Petrochemical LLC v. EPA. In the case, the court tackled how it viewed agency authority over areas of its subject matter expertise, finding that the agency’s evaluation of scientific data within its area of expertise was accorded an “extreme degree of deference.” Additional Circuits will likely grapple with what agencies have the authority to do under their statutes in the coming years, especially with the incoming Trump administration looking to roll back potentially thousands of agency regulations, states like California, and environmental groups getting ready to fight those policy plans. These initial cases and resulting jurisprudence, primarily fought at the Circuit Court level, will set the legal footing for the next few decades of agency authority and litigation. As rules of agency power are being rewritten, the plays made will echo through the corridors of Washington and boardrooms across the country—something Capstone will be closely following for our investor and corporate clients. We believe the game has just begun.

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