Following the recent Supreme Court ruling, I have received numerous questions and requests for comment on the Chevron Deference Doctrine. Many of these inquiries have come from my clients, who are either financial institutions or professionals in the financial services industry. This blog post is an opportunity to share my thoughts on this significant policy change and its potential impact on our industry.
The End of Chevron Deference: A Landmark Decision
The U.S. Supreme Court’s ruling in Loper Bright Enterprises v. Raimondo will significantly impact the reach and enforcement capabilities of federal agencies by ending the 40-year-old precedent of “Chevron Deference.” Instead of deferring to the expertise of agencies on how to interpret ambiguous language in laws pertaining to their work, federal judges now have the power to decide what a law means for themselves.
What Was Chevron Deference?
The Chevron Deference policy was established in the case of Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., and it required courts to defer to an administrative agency’s interpretation of a statute when the statutory provision was ambiguous. The policy was based on the principle that Congress delegated authority to the agency to make rules carrying the force of law.
The Path to Overturning Chevron
Prior to being overturned, the Chevron Deference doctrine faced significant criticism and saw a reduction in its application by the United States Supreme Court. In King v. Burwell, the Court did not apply Chevron Deference to a matter of “economic and political significance.” Similarly, in Michigan v. Environmental Protection Agency, the Court found the agency’s interpretation to exceed Chevron’s standard. State courts have also reconsidered their deference doctrines, with Wisconsin and Mississippi retreating from such practices.
The Implications for Financial Services Professionals
The overturning of Chevron’s Deference means that courts are no longer required to defer to an administrative agency’s interpretation of a statute. Instead, the interpretation is entitled to respect only to the extent it has the power to persuade. This change could have significant implications for professionals in the financial services industry. Previously, under Chevron Deference, federal regulations could be given the force and effect of law. With the overturning of this policy, the weight given to such regulations may be reduced, potentially leading to increased legal uncertainty and risk for financial services professionals in Ohio.
Increased Legal Uncertainty and Risk
The overturning of Chevron Deference could lead to increased legal uncertainty and risk for financial services professionals in several ways:
- Variety of Interpretations: The Chevron Deference policy previously allowed for a level of predictability in the interpretation of ambiguous statutes. Courts were required to defer to the administrative agency’s interpretation, which often had specialized knowledge and expertise in the area. Without this policy, courts are no longer required to defer to these interpretations. This could lead to a variety of interpretations by different courts, creating legal uncertainty.
- Loss of Protection: The Chevron Deference policy provided a certain level of protection for financial services professionals. If they were following the interpretation of an administrative agency, they could be reasonably assured that they were in compliance with the law. Now, without this assurance, even if a financial services professional is following the interpretation of an administrative agency, a court could potentially interpret the statute differently, leading to potential legal risk.
- Increased Litigation: The overturning of Chevron Deference could lead to increased litigation. With more room for interpretation of statutes, there may be more disputes over the correct interpretation, leading to more litigation. This could increase the legal risk for financial services professionals, as they could be involved in these disputes.
And Finally
The overturning of Chevron Deference marks a significant shift in the legal landscape, particularly for financial institutions and professionals. The potential for varied interpretations of statutes, the loss of protection provided by following administrative agency interpretations, and the potential for increased litigation all contribute to a more uncertain and risky environment. It is crucial for professionals in our industry to stay informed about these changes and to seek legal counsel to navigate this evolving landscape effectively.
As a business attorney who focuses on assisting the needs of financial institutions, real estate investors, and business owners, Nolan James is committed to providing guidance and support as we adapt to these changes. Please feel free to reach out to him at 216-621-7860 with any questions or concerns.