On June 28, in a highly anticipated ruling, the U.S. Supreme Court overturned Chevron USA Inc. v. Natural Resources Defense Council Inc., finding that Chevron deference, the 40-year-old precedent deferring to reasonable agency interpretation of ambiguous statutes, is no longer valid. This decision, in addition to other recent Supreme Court rulings, represents a significant shift in administrative law.

In Loper Bright Enterprises v. Raimondo, the Supreme Court specifies three roles for the courts in administrative action cases: (1) interpret statutory ambiguities; (2) consider, but not necessarily accept, agency interpretations; and (3) ensure that agencies, when delegated authority by statute, act within the bounds of their constitutional and statutory limits.

Loper Bright holds that courts, not federal agencies, are the appropriate arbiters of statutory ambiguities. In rejecting Chevron’s highly deferential approach to statutory interpretation, Loper Bright places statutory interpretation in administrative actions squarely within the purview of the courts. Writing for the majority, Chief Justice Roberts reasoned that Chevron deference was inconsistent with both the Administrative Procedures Act (APA), which requires courts to review all “relevant questions of law,” and the fundamental role of the judiciary, which is to interpret statutes: “Perhaps most fundamentally, Chevron’s presumption is misguided because agencies have no special competence in resolving statutory ambiguities. Courts do.”

Justice Roberts goes on to explain how Chevron became an unworkable framework, since “[a]t best, our intricate Chevron doctrine has been a distraction from the question that matters: Does the statute authorize the challenged agency action? And at worst, it has required courts to violate the APA by yielding to an agency the express responsibility, vested in ‘the reviewing court,’ to ‘decide all relevant questions of law’ and ‘interpret … statutory provisions.'”

Courts are free to consider and accept agency interpretations but are not bound to do so. Under Loper Bright, when faced with an ambiguous statute, courts must “independently interpret the statute” using traditional tools of statutory construction. In doing so, courts may (and should) consider an agency’s interpretation, just as courts would have done under Chevron. Loper Bright acknowledges that an agency’s interpretation may be informative “to the extent it rests on factual premises within [the agency’s] expertise.” However, Loper Bright makes clear that, unlike under Chevron, an agency’s interpretation will no longer be the default interpretation, and the courts are not bound to accept it.

When agencies are delegated authority by statute, the courts’ role is to ensure the agency has acted within the scope of its delegated authority. Loper Bright recognizes that Congress can (and will) confer discretionary authority to agencies in statutes. In such instances, a court’s role is not to substitute its own statutory interpretation, but rather to (1) recognize the constitutional delegations Congress has bestowed; (2) fix the boundaries of the delegated authority; and (3) ensure the agency has engaged in “reasoned decisionmaking” within those boundaries. In this context, the courts must determine if Congress’ delegation of authority to an agency is constitutional and whether the agency is acting within the scope of its congressional delegation.

This term, the Court signals a shift in administrative law with a string of decisions. Loper Bright represents a significant shift in the balance of power in cases involving administrative actions. Now that courts are no longer bound to an agency’s reasonable interpretation of an ambiguous statute, litigants challenging an agencies’ interpretations will stand on equal footing with an agency before the courts. We expect such challenges will be met with varying success, as courts will undoubtedly grapple with how much deference to afford to an agency’s interpretation, absent Chevron’s principles. The absence of deference could cut both ways, depending on the court and administration.

Interestingly, Justice Roberts writes that Loper Bright does “not call into question prior cases that relied on the Chevron framework. The holdings of those cases that specific agency actions are lawful … are still subject to statutory stare decisis despite our change in interpretive methodology.” That theory may be tested with the July 1 Supreme Court ruling in Corner Post Inc. v. Board of Governors of the Federal Reserve System, where the Court expanded the amount of allowable time a challenge may be brought under the APA from six years after the rule is final, to six years after any individual is aggrieved by the rule. Administrative rules once considered settled may now be newly litigated. This impact is significant, especially in light of Loper Bright, since rules previously upheld under Chevron may be ripe to overturn.

Also, Loper Bright comes on the heels of a ruling handed down just the day before that reigns in the powers of the Executive Branch. In SEC v. Jarkesy, the Court held that when the Securities and Exchange Commission (SEC) seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial because the rights under the Seventh Amendment extend to actions that are “legal in nature.” Whether something is legal in nature turns on “whether the cause of action resembles common law causes of action, and whether the remedy is the sort that was traditionally obtained in the court of law.” Further, the Court opined that civil penalties are legal in nature where they are designed to punish or deter, rather than restore the status quo.

The Supreme Court noted that the Seventh Amendment does not preclude all matters from being heard by administrative law judges by pointing to the public rights exception in Atlas Roofing Co. v. Occupational Safety and Health Review Commission. The public rights exception applies where federal law creates new statutory public rights rather than codifying legal principles that can be traced to common law. For example, regarding the OSH Act, the Court found it more resembled a building code rather than “reiterate common law terms of art.” The Court found that Atlas Roofing was still good law.

It is unknown whether Jarkesy will largely change civil enforcement under environmental statutes. While environmental statutory schemes seem more akin to newly created public rights in Atlas Roofing than common law principles in Jarkesy, there is no doubt that the civil penalties are designed to punish or deter.

Collectively, these rulings indicate the Court is skeptical of the administrative state and intends to more carefully scrutinize agency actions — a shift the conservative majority on the Court has hinted at moving toward over the last several terms. However, a new administration and/or new appointments to the federal bench (including the Supreme Court) could significantly affect how these rulings are ultimately carried out and applied in future administrative action cases.