The Supreme Court’s decision in Loper Bright Enterprises v. Raimondo overturned “Chevron deference”, which required courts to defer to “permissible” executive agency interpretations of ambiguous statutes. But judicial review of agency action remains subject to the deferential review standards of the Administrative Procedures Act (“APA”). What remains, post-Chevron, is the APA’s mandate that courts must exercise their independent judgment and decision-making function in construing ambiguous statutes administered by executive agencies. That is, courts must “decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action.”
With the courts’ duty to “decide whether the law means what the agency says” reinstated under the APA, the death of Chevron deference may remove an analytical hurdle without much practical difference to regulated industries. In practical terms, the gap between outcomes based on Chevron and those based on APA standards of statutory interpretation should be rather narrow. As the Supreme Court found, “[i]t therefore makes no sense to speak of a ‘permissible’ interpretation that is not the one the court, after applying all relevant interpretive tools, concludes is best.” But, between the Chevron framework and the enduring constraints of the APA, at the end of the day, there shouldn’t be much light between what is “permissible” and what is “best.”
Post-Chevron, when reviewing agency action under the APA, courts “must exercise independent judgment in determining the meaning of statutory provisions.” But courts may not suddenly disregard agency interpretations. Courts have a “limited role” in reviewing an administrative record and final agency actions. Reviewing courts must “hold unlawful and set aside agency action, findings, and conclusions found to be”—
(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
(B) contrary to constitutional right, power, privilege, or immunity;
(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;
(D) without observance of procedure required by law;
(E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or
(F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court.
In the absence of any binding authority on the issues before them, courts may and still should use every tool at their disposal, including the “informed judgment of the Executive Branch,” as information and guidance from subject matter experts for interpreting the meanings of statutes and their applications to issues before the courts. In Skidmore v. Swift & Co., the Court observed that “[t]he weight of such a judgment in a particular case” would “depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.”
As judicial precedent develops post-Chevron, predictability of outcomes should increase because judicial deference and stare decisis should yield more stable and consistent outcomes than federal agency interpretations, which are fundamentally political. But outcomes should only change where an agency’s “permissible” interpretation of an ambiguous statute under Chevron is something different from its “best” meaning – the reading the court would have reached had it exercised its independent judgment under the APA.
The Supreme Court recognized in Loper Bright that Chevron analysis had become so complex that courts misapplied it or simply bypassed it altogether and “often declined to engage with it, saying it makes no difference.” But whether courts engaged in Chevron analysis or not, they could not wholly abdicate their duty of statutory interpretation. Chevron itself required the courts to analyze the statute in question and implementing regulations before deciding whether to defer to the administering agency’s interpretation. To ensure that deference was warranted in the first place and that the result was reasonable, courts had to decide a myriad of complex issues - whether Congress had delegated authority to the agency, whether the agency had promulgated a rule in the exercise of that authority, whether the regulation was procedurally defective, whether Chevron deference even applied to the substance of the rule at issue, whether the statute was silent or ambiguous on the precise question before the court, and whether the agency had directly addressed the question at issue. Only then could a court finally reach the issue of whether the agency’s interpretation of the statute was reasonable. Chevron deference was only due to executive agencies’ decisions if the courts concluded that they were.
Illustrating this analytical framework are the two lower court decisions that Loper Bright overturned – Loper Bright Enters. v. Raimondo, and Relentless, Inc. v. United States DOC. In both cases, fishermen challenged a National Marine Fisheries Service (“NMFS”) rule interpreting the Magnuson-Stevens Fishery Conservation and Management Act (“MSA”) that required them to pay for federally mandated observers onboard their vessels. Congress had delegated authority to the Department of Commerce to implement the MSA. The Secretary of Commerce, in turn, delegated this responsibility to the NMFS, a federal agency within the Department of Commerce’s National Oceanic and Atmospheric Administration (“NOAA”).
In these cases, the D.C. Circuit and the First Circuit each analyzed the MSA directly, and the First Circuit relied almost exclusively on its own statutory analysis to affirm the district court’s decision. Courts review agency decisions under the MSA pursuant to Section 706(2) of the APA. Under Section 706(2), courts may set aside agency action only if it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. The D.C. District Court analyzed the administrative record and concluded that the Department of Commerce (including NOAA and the NMFS) acted within its statutory authority. The District Court stated “even if Plaintiffs’ arguments were enough to raise an ambiguity in the statutory text” (which, apparently they did not), the Court “would conclude that Defendants’ interpretation is a reasonable reading of the MSA.” The D.C. Circuit affirmed, finding the rule not “wholly unambiguous” under Chevron step one and the NMFS interpretation “reasonable” and, therefore, entitled to deference under Chevron step two. Similarly, in Relentless, Inc., the Rhode Island District Court concluded that “Congress has not spoken unambiguously” and the Department of Commerce’s interpretation “satisfies Chevron’s deferential review.” On appeal from the Rhode Island District Court, the First Circuit conducted its own statutory analysis and found that Congress had expressly authorized NMFS to require vessels to carry monitors and “at the very least, it is certainly reasonable for the Agency to conclude that its exercise of that authority is not contingent on its payment of the costs of compliance.”
Now, on remand, it would be surprising for the district courts to arrive at different outcomes, having already performed the analysis to find that NMFS’ interpretation of the statute was reasonable (and, therefore, permissible) in the first instance. Post-Chevron, courts will still look to relevant agencies for information and guidance in deciding what the law is. Any practical difference post-Chevron must necessarily be based on the courts’ re-interpretation of the same statute, informed by the same agency’s guidance, to find that “permissible” agency interpretations under Chevron are not the “best” interpretations – that is, the courts’ own – under the APA’s mandate.
Though some commentators expect the demise of Chevron to lead to chaos, with courts interpreting statutes they don’t understand, the more realistic and less remarkable outcome is likely to be that courts will continue to base their decisions on the same responsibility of informed analysis that they have historically used, even under Chevron. As the Supreme Court said in Loper Bright, judges continue to be experts at deciding.
Moving forward, the more interesting development will be whether certain agency interpretations will become more politicized and, consequently, subject to greater judicial scrutiny under an APA analysis. Noting that Loper Bright predates the current tensions between the executive and judicial branches, the concern underlying separation of powers has existed since this nation’s founding. Loper Bright reinstates and reinforces judicial independence from the political branches. As the law develops post-Chevron, one dynamic that may emerge is the judiciary’s more cautious weighing of executive agencies’ interpretations of statutes they administer. What may appear on its face to be the courts’ increasing disregard of executive agency interpretations, may correspond to an increasing politicization of the agencies. Hand in hand with the end of Chevron deference, which on its own would have been less remarkable, judicial skepticism of agency interpretations could lead to courts affording those interpretations less weight in proportion to the political goals at play.
Of particular interest to the maritime industry is whether the Federal Maritime Commission may become a proving ground for this dynamic between the federal courts and executive agencies. The Commission has become more active in recent years, beginning with the FMC’s Fact Finding 29, which led to regulations promulgated pursuant to the Oceans Shipping Reform Act of 2022 (“OSRA 2022”), and most recently with the Order of Investigation Into Transit Constraints at International Maritime Chokepoints. The Commission’s interpretations of the Shipping Act, as amended by OSRA 2022, and its primary jurisdiction over Shipping Act violations may face stricter scrutiny in the federal courts if it becomes more politicized.
Flexing its duty to decide, on July 5, 2024, one week after the Supreme Court handed down Loper Bright, the D.C. Circuit Court of Appeals in Evergreen Shipping Agency (Am.) Corp. v. FMC vacated the Commission’s Order that Evergreen’s assessment of detention charges was “unjust and unreasonable.” With no reference to Loper Bright, the D.C. Circuit reviewed the FMC’s decision under the APA’s deferential “arbitrary and capricious” standard, and required the Commission “to articulate ‘a satisfactory explanation for its action including a rational connection between the facts found and the choice made,” which the Court found the Commission had utterly failed to do.
A related issue is whether Loper Bright will affect primary jurisdiction analysis and federal courts’ deference to the Commission to decide whether certain allegations implicate the Shipping Act or simply amount to contract claims. The Shipping Act provides, “[u]nless the parties agree otherwise, the exclusive remedy for a breach of a service contract is an action in an appropriate court.” But the Commission claims broad exclusive jurisdiction, pursuant to 46 U.S.C. § 41301(a), over complaints “alleging that a respondent committed an act prohibited by the Shipping Act.” According to the Commission, its obligation to hear Shipping Act claims “extends even to cases where the relevant facts may give rise to other claims between the parties, and even where the parties have already obtained relief for those claims in another forum.”
Though not based on Chevron, federal courts have found that the primary jurisdiction doctrine similarly applies when “enforcement of the claim[s] require[] the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body.” The doctrine has a “relatively narrow scope” and applies only “when the issue involves technical questions of fact uniquely within the expertise and experience of an agency.” The doctrine does not apply when claims involve matters within the “traditional realm of judicial competence.” “The doctrine of primary jurisdiction seeks to simplify proceedings by (1) having ‘desirable uniformity’ in decisions concerning an area in which an agency has expertise and (2) allowing an agency with subject-matter expertise to assess the complicated facts of a case.”
When deciding whether to defer to an administrative agency’s primary jurisdiction, federal courts have considered the following factors:
There has been scant judicial review of the Commission’s claims of primary jurisdiction and whether the allegations pled in complaints constituted a Shipping Act violation or a contract dispute. Despite a statutory limitation on the Commission’s authority to decide breach of service contract claims, the Commission has recently declared its authority to determine contract claims alleged as Shipping Act violations. In one example, Containership Co. (TCC) A/S, the U.S. Bankruptcy Court for the Southern District of New York considered the FMC’s decision in Cargo One, stating: “The FMC has noted that ‘allegations essentially comprising contract law claims should be dismissed unless the party alleging the violation successfully rebuts the presumption that the claim is no more than a simple contract breach claim. In contrast, where the alleged violation raises issues beyond contractual obligations, the [FMC] will likely presume, unless the facts as proven do not support such a claim, that the matter is appropriately before the agency.” The Containership Co. court quoted the FMC’s conclusion in Cargo One that allegations premised on contractual commitments are not properly before the FMC absent evidence “that some extraordinary aspect of the allegation[s] distinguish it substantially from a breach [of contract] claim.” The court further found that “interpretation of leases or contracts does not fall within the realm of the agency's expertise.”
There is potential that, in the wake of Loper Bright combined with the current political climate, federal district courts may become more critical of agencies’ interpretations granting themselves authority and receptive to arguments that agencies have overstepped.
