US Supreme Court ruling impacting the future of federal regulations

Tags: Advocacy

Full disclosure…this post probably isn’t going to be super exciting for most of our members.  But for my fellow uber-legal nerds out there dying to discuss the recent Supreme Court of the United States (SCOTUS) case impacting federal administrative law, then this post is for you.

By now I’m sure you have read the opinion in Loper Bright (the case that overturned Chevron) and all the legal commentary that has followed. But for those few who maybe haven’t gotten around to it, this is my post on the opinion and possible impacts we might see.

Some very quick background, in 1984 there was a case – Chevron v. Natural Resources Defense Council – which created for the last 40 years the “Chevron doctrine.”  Basically, the idea was that when a federal law wasn’t clear or “ambiguous” the courts had to defer to the federal agency’s interpretation of the federal law so long as the bureaucracies’ interpretations were reasonable. 

Full disclosure, Chevron deference hasn’t really been used in recent years, but historically over the 40-year span, has been cited in federal courts case more than 18,000 times.  So, while it might have been falling out of favor recently, and barely hanging on, it was quite consequential.

But that has officially and forever been changed with the June 28th decision by the justices (6-3 vote) to overturn Chevron.  Chief Justice Roberts wrote the opinion and called Chevron “misguided.”

What does that mean now? 

Well, like any pivotal opinion from the highest court in the land, it will take some time and more cases to follow to fully understand the impact.  But fundamentally what it means is that the federal judges will decide what a law means based on the court’s “own judgment.” 

No more tie-goes-to-the-federal-agency.

To answer the million-dollar question of, “Ok, so what?” I can give you the legally astute answer of, “We’ll see.” 

But from the cheap seats it appears that the decision opens the doors to more court challenges of federal agencies’ rules and interpretations.  I think we will see a lot more lawsuits in the coming years.  If this materializes, federal court dockets will become even more strained, and litigation will take even longer.

Perhaps not as visible as formal court challenges, there will be a real impact caused by a “chilling effect” going forward for agencies now reticent to make legal interpretations, especially bold ones.  The mere threat of a legal challenge without the safety net of Chevron will cause federal regulators to think twice before issuing regulations.

This can cut both ways.  I think mostly this will have an industry benefit, but if there are interpretations by regulators you like but others don’t, well, then you might not like this change.  Recall that Chevron originally came out of efforts from the conservative President Regan Administration with his appointees and agency heads running the EPA, who interpreted the Clean Air Act to ease regulations from the previous President Carter Administration. 

For our manufactured housing industry, one of the many thoughts that came to mind was the limited interpretation, certainly hesitancy in practice, of HUD’s interpretation of the 2000 Act’s:

 “Federal preemption under this subsection shall be broadly and liberally construed to ensure that disparate State or local requirements or standards do not affect the uniformity and comprehensiveness of the standards promulgated under this section nor the Federal superintendence of the manufactured housing industry as established by this title.”

For years, people in our industry have been asking for a HUD interpretation of federal preemption under the “broadly and liberally” mandate to encompass some degree of state and local zoning preemption.  HUD has not done so, sticking only to elements of home construction preemption.  In an alternative universe where HUD had interpreted the law to include local zoning preemption, then overturning Chevron would be a bad thing for us.  But since that isn’t the case, perhaps a court can now more freely take on that role to decide the lengths of Congress’ intent nearly a quarter-century ago on just how far “broadly and liberally” should go.

It would be logical to think that ambiguities in federal laws will greatly diminish.  That Congress will have to start drafting, as the Supreme Court indicated, with greater specificity and clarity.  Maybe. 

But ambiguity is sometimes what is needed for a bill to have a shot at ever passing to become a law in the first place.  The more detailed, the lengthier, and the more specific provisions in a bill, the more targets the opposition can attack.  This will make passing bills even more difficult. It will also create greater necessity to pass more bills if the first versions turn out to not be specific enough and a court decision is perceived to take longer than writing and passing a new bill in Congress.

Clearly the importance of crystal-clear bill drafting now comes at an even higher premium.  And if the length and detail in bills explodes, then it becomes critical to have accomplished, skilled, and highly experienced people at the helm careful reading every word and dissecting every angle.   And probably time to beef up everyone’s expectations and budgets for litigation in the future.

The trickle-down impact of overturning Chevron at the state level will be another area to watch with focused interest.  Granted the particulars of the case technically only apply to federal laws and agencies, I think some states, like Texas, will take queues from the U.S. Supreme Court.  And if we don’t overtly see a run of state litigation in this space, again, I expect there to be a chilling effect on a go forward basis from state regulators when they consider issuing interpretations of state laws.

Challenging agencies (federal or state) in court has always been a tool in the toolbox.  Case in point the current litigation TMHA is involved in with MHI in federal court over the DOE energy standards.  And going forward in a more crowded court docket, I think this will be a slow-moving tool.  But that said, when needed I think the result of the recent SCOTUS decision is that perhaps it is slow moving, but it is now a much sharper tool when used.