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Julie Pruitt Barry and Nicole Cocozza
In a recent landmark decision, the Supreme Court of the United States significantly limited the authority of administrative agencies to interpret their
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own statutory powers, in a shift of authority from federal agencies to the courts. In Loper Bright Enterprises v. Raimondo, the Court discarded the standard of judicial deference to agencies that had been set forth in 1984 in Chevron v. Nat. Res. Def. Council, and held that courts must exercise their independent judgment in determining the scope of any grant of power by Congress to an agency.
For 40 years, the Chevron doctrine directed federal courts to defer to agencies' reasonable interpretations of ambiguous statutes. In Loper Bright, decided in June, the Court ruled that Chevron is incompatible with the Administrative Procedure Act (APA), which mandates that courts independently evaluate whether agencies act within their statutory bounds without deference to an agency's interpretation of its regulations due solely to statutory ambiguity.
The APA and Chevron
Enacted in 1946 during the New Deal era, the APA regulates administrative agencies' procedures and guides judicial review standards. Section 706 of the APA directs courts to resolve all legal questions, interpret constitutional and statutory provisions, and determine the meaning and applicability of agency actions' terms. 5 U.S.C. § 706.
The APA emerged after courts began adopting a posture of deference towards agencies. In the 1944 decision Skidmore v. Swift & Co., the Supreme Court established a framework for judicial review of agency actions that permitted courts to consider an agency’s expertise and judgment based on the thoroughness, reasoning, and consistency of the agency's position.
Until Chevron, courts applied inconsistent levels of deference to agencies in interpreting ambiguous statutes. Chevron introduced a two-step framework: first, courts would employ traditional tools of statutory interpretation to determine if Congress had addressed the issue directly. If ambiguous, courts deferred to the agency's interpretation, provided it was reasonable and aligned with statutory intent. This framework governed over 18,000 cases over four decades, becoming the cornerstone of administrative law. In her dissenting opinion, Justice Kagan noted that Chevron “has become part of the warp and woof of modern government.”
While lower courts consistently relied on Chevron for guidance, the Supreme Court had not applied the case since 2016. Instead, the Court progressively refined Chevron deference, carving out exceptions and applying the so-called “major questions doctrine” to limit its application to matters with significant economic or political ramifications.
New Standard Under Loper Bright
The Supreme Court granted certiorari in Loper Bright and its companion case, Relentless Inc. v. Department of Commerce, both of which addressed the question of whether to overturn Chevron. These cases arose from challenges to a National Marine Fisheries Service (NMFS) rule imposing costs on fishing companies for federal monitors accompanying their expeditions. The Magnuson-Stevens Fishery Conservation and Management Act authorizes the NMFS to regulate fishing in marine waters. Under the Act, NMFS requires federal monitors to accompany vessels to ensure compliance. The petitioners, commercial fishermen, contested the NMFS’ authority to require cost-sharing of the monitors.
The Circuit Courts, guided by Chevron, upheld NMFS's interpretation of its authority. However, the Supreme Court rejected Chevron, asserting it departed significantly from traditional judicial review principles and conflicted with the APA. The Court underscored the judiciary's duty to resolve statutory ambiguities through its own independent legal judgment, and that a court’s ability to use tools of statutory construction is the same regardless of whether or not the ambiguity concerns an agency’s authority, stating that “agencies lack any special competence in resolving statutory ambiguities,” a task better suited for the courts as reasoned by the Supreme Court.
While acknowledging that courts may consider agencies' perspectives, the Court nonetheless stressed that the APA precludes automatic deference to agency interpretations solely due to statutory ambiguity. Instead, the Court mandated that courts exercise their independent judgment in determining whether an agency’s actions fall within its statutory mandate. This shift significantly augments judicial oversight over administrative decisions. Given the lower courts' reliance on Chevron in Loper Bright, the Supreme Court vacated judgments and remanded the cases for further proceedings under this new judicial standard.
What Does This Mean for the Real Estate Industry?
The implications of Loper Bright on the real estate industry could be profound. Federal regulations governing contracting requirements, labor relations, workplace safety, the Fair Housing Act, the Equal Credit Opportunity Act, and air and water emissions just to name a few could all face significant additional scrutiny, with areas like the multifamily sector, real estate financing, and government contracting poised for substantial effects due to potential shifts in HUD’s discretion, fair-lending requirements, and other agency directives post-Chevron.
While some commentators have suggested that Loper Bright will bring about increased involvement in federal agency decision-making by federal judges who lack scientific or policy expertise, others believe that it could actually improve certainty by reining in arbitrary agency activities. As we await further decisions that rely on Loper Bright, it is essential for real estate professionals to stay informed and adapt their strategies to navigate potential challenges effectively. Prince Lobel’s attorneys are well-prepared to assist businesses in evaluating the potential impacts of Loper Bright on their operations and navigating any legal and regulatory obstacles that may arise.
The 2023 President of REBA and a partner at Prince Lobel Tye LLP, Julie Pruitt Barry is a trial and appellate attorney with more than 25 years of experience in state and federal courts including the Massachusetts Appeals Court, Superior Courts, Land Court, Probate Court, and the U.S. District Court, and First Circuit Court of Appeals. She represents developers, commercial and residential property owners, businesses, and individuals. Julie’s practice focuses on commercial and residential real estate and land use litigation and permitting, including zoning and planning, affordable housing, cannabis, renewable energy, historic districts, title and easements, construction, and insurance coverage. Julie’s email address is jbarry@princelobel.com.
Nicole J. Cocozza is a Senior Associate in Prince Lobel’s business litigation practice group. In her practice, Nicole defends companies and individuals in high-stake matters involving clients in commercial and business litigation, financial services matters, intellectual property, insurance defense, first amendment and media law, real estate and other areas of complex civil litigation and internal investigations. Nicole can be contacted at ncocozza@princelobel.com.
The authors are grateful to Jessica Perillo, Prince Lobel summer clerk, for her hard work and assistance with this article.
