by Erich Paetsch, Chair, Financial Services Industry Group
A common theme expressed in the financial services industry is concern over the scope, extent and burden of regulatory action. The so called “administrative state” is a critical actor interpreting, implementing, and enforcing statutes against lending institutions and businesses generally. Congress has historically deferred to federal agencies and their presumed expertise by delegating authority to agencies to interpret and apply statutes. Federal agencies are left to interpret the statutes in a manner consistent with their perceptions of congressional intent. When an agencies interpretation is questionable, courts are asked to decide whether an agency has exceeded its authority from Congress.
Since the mid 1980’s, the U.S. Supreme Court case of Chevron U.S.A. Inc. v. Natural Resources Defense Counsel, Inc. has determined how much deference should be given to an agency’s interpretation of ambiguities in a statute by a court. Under the Chevron doctrine, the courts are primarily deferential to agency decisions. This has given agencies wide latitude to adopt, implement and enforce regulations with tenuous connection to an original statute. While the Chevron doctrine has been refined over the years, it is remains of the most cited and important cases in administrative law.
However, questions are growing about how much deference should be provided to federal agencies over major policy questions given recent U.S. Supreme Court decisions. In several decisions over time, the Supreme Court has declared that if an agency seeks to decide an issue of major national significance, a general delegation of authority from Congress may not be enough. Instead, agency actions must be supported by clear statutory authority from Congress. This concept, broadly known as the major questions doctrine, is identified more frequently by the Supreme Court, including, for the first time, a majority opinion earlier this year.
The major question doctrine arises when (1) the underlying claim of authority concerns an issue of “vast ‘economic and political significance,’” and (2) Congress has not clearly empowered the agency. This power has sometimes been justified based on the U.S. Supreme Court’s observation that Congress “does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions–it does not, one might say, hide elephants in mouseholes”. In cases where so called major questions arise, the deference provided to agencies applying the Chevron doctrine is not applied because the Chevron doctrine is inapplicable. However, the Supreme Court has not clearly defined the parameters of the so-called major questions doctrine to date.
In a trio of recent Supreme Court cases, the court has signaled it interest in applying the major questions doctrine to review agency action. In the first two cases, the Supreme Court used the doctrine to halt actions it considered to involve an issue of major national significance. In the third case, the Court in a majority opinion, used the major questions doctrine to strike down agency action significantly impacting a major industry.
The Supreme Court used the major questions doctrine to block enforcement of the Centers for Disease Control and Preventions’ (“CDC”) nationwide temporary eviction moratorium in August 2021. Without expressly citing the doctrine in the majority opinion, the Court determined that the CDC’s action was of major national significance because it covered 80% or more of the nation, had an estimated tens of billions of dollars economic impact and interfered with landlord-tenant relationships which are a traditionally handled under state law. Given that the agencies action raised major questions, the agency was required to show a clear statutory basis from Congress to the CDC to issue the moratorium. Because no such basis exists, the CDC’s moratorium was blocked.
Separately, the Supreme Court also halted the enforcement of the Occupational Safety and Health Administration’s (“OSHA”) COVID-19 vaccination and testing emergency temporary standard for employers with more than 100 employees. The Supreme Court, in identifying the scope and effect of this rule, concluded: “There can be little doubt that OSHA’s mandate qualifies as an exercise of powers of vast economic and political consequence.” Again, applying the major questions doctrine, the Supreme Court concluded that statutes cited by OSHA lacked a specific Congressional grant of authority to OSHA to adopt broad public health measures and blocked OSHA’s regulations.
Most recently, in a majority opinion, Chief Justice Roberts identified the major question doctrine explicitly for the first time in overturning the Environmental Protection Agency’s (“EPA”) rules regulating carbon emissions from power plants. The question before the Supreme Court in West Virginia v. Environmental Protection Agency, No. 20-1530, was whether the Clean Air Act allowed the EPA to issue regulations across the power sector. In a 6-3 opinion, the Court found that Congress had not clearly given the EPA sweeping authority to regulate the energy industry. Identifying that the impact of the EPA’s rules were intended to force a transition from coal to generate electricity, Justice Roberts noted that such actions were a major question that requires a specific delegation of authority from Congress. Because the EPA lacks such authority, the Supreme Court blocked enforcement of the EPA’s rules.
The trio of recent Supreme Court cases identify a growing use of the major questions doctrine to limit the scope of regulatory action and interpretation of statutes. When major questions arise, the traditional deference to agency interpretation is not provided under the Chevron doctrine. Whether an agency action constitutes a “major question” is not fully defined yet by the Supreme Court. However, the existence of the doctrine as it exists today and evolves in the future should limit traditional deference to agency action surrounding major issues and provide a limitation on the size and scope of regulatory activity in the absence of a clear Congressional mandate.
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. © 2022 Saalfeld Griggs PC