Deferential Expertise: Challenging Regulatory Decision Making

By Erich Paetsch, Chair, Financial Services Industry Group

On June 25, 1984, the United States Supreme Court issued one of the most frequently cited and commonly referenced opinions in its history. Unlike some judicial opinions, Chevron v. Natural Resources Defense Council (“Chevron”) failed to capture the wider public’s imagination.[1] A discussion dense on administrative law and the separation of powers is great material for law schools and government agency meetings but does not make a riveting podcast. Until now.

The Chevron decision establishes the standard for deciding when courts should defer to a government agency’s interpretation of ambiguous statutes. The thinking of a unanimous Supreme Court is that agencies have more expertise than judges and are better able to establish uniform national policies. “Judges are not experts in the field and are not part of either political branch of the government,” Justice John Paul Stevens wrote. The Supreme Court found that the Environmental Protection Agency’s interpretation of a statute was reasonable and entitled to deference. The head of the Environmental Protection Agency at that time: Anne Gorsuch. Mother of a notable critic of the so-called Chevron doctrine: Supreme Court Justice Neil Gorsuch.

As the number and scope of regulations increases, so has the impact of the Chevron decision since 1984. Lending institutions are familiar with the impact regulations create on a day-to-day basis. Oregon bankers are commonly tasked with reviewing, evaluating, implementing, and auditing compliance with new or proposed regulations. For example, the Oregon Banker’s Association holds regular training on regulations like the upcoming Regulatory Workshop for Community Bankers on February 27, 2024. Whenever challenged in court, if ambiguous, the agency’s interpretation and not that of a Judge decides what a law means if the correct circumstances exist.

The Chevron doctrine was recently the subject of a Supreme Court argument. In a case brought by a group of commercial fishermen, the Supreme Court was asked to decide whether rules issued by the National Marine Fisheries Service requiring the fishing industry to pay for the costs of observers monitoring compliance with fishery management plans was legal. Relying upon Chevron, the U.S. Court of Appeals for the District of Columbia found that the rules were reasonable, deferring to the agency.[2]  On Wednesday January 17, 2024, the Supreme Court heard oral arguments on whether to overturn Chevron or to limit its scope and application.

The potential impact of a Supreme Court opinion has pundits considering how changes in the Chevron doctrine may alter widely understood agency law principles relied upon daily. The ramifications are significant for almost everyone, including bankers. Administrative agencies impact each of us directly and indirectly; from the type of lightbulbs available to purchase to the underwriting requirements for every loan. The oral arguments centered around the concept of separation of powers: which branch of the government has the authority. Should courts defer to administrative agencies as an extension of the executive branch of government or instead interpret a law without deference to an agency’s interpretation? Administrative agencies and legislative bodies rely upon the Chevron doctrine when writing laws and interpreting and applying them through regulation. The commercial fishermen and their supporters believe judges and not administrative agencies should decide what a law means without deference to administrative agency interpretation. If the commercial fishermen are correct, more disputes will end up in court asking judges to interpret and apply the law. At the same time federal judges with lifetime appointments may make decisions without regard to the outcome of elections and subject to their own inherent perceptions and beliefs.

Whichever interpretation prevails, any significant change in the Chevron doctrine by the Supreme Court will be highly disruptive. Over 70 existing U.S. Supreme Court decisions and thousands of lower court decisions reference and rely upon Chevron as part of their decision making. Expect a decision from the U.S. Supreme Court sometime this summer to dominate headlines if a significant change occurs to the Chevron doctrine.

[1] 467 U.S. 837 (1994).

[2] Loper Bright Enterprises, Inc. v. Raimondo, 45 F.4th 359 (D.C. Cir. 2022)., Loper Bright Enterprises, Inc. v. Ross, 544 F.Supp.3d 82 (D.D.C. 2021).


Erich M. Paetsch - Lawyer at Saalfeld Griggs PC.

Erich Paetsch is a partner in the Creditor’s Rights and Bankruptcy Practice Group and chair of the Financial Services Industry Group. The information in this article is not intended to provide legal advice. For professional consultation, please contact Erich at Saalfeld Griggs PC.  503.399.1070.  © 2024 Saalfeld Griggs PC