Repeal Of Chevron Doctrine Bodes Well For Captive Insurance
The Supreme Court of the United States (SCOTUS) recently issued a very important ruling overturning the Chevron Doctrine. This ruling reins in the out-of-control administrative state and restores Constitutional balance between the Executive and Judicial branches of government. To understand why this is so, a little background is necessary:
With limited exception, our Constitution gives Congress, and only Congress, the right and power to make laws. Among other things, this ensures that laws are promulgated by *elected* officials. However, effective regulation simply isn’t possible were Congress the sole regulator because Congress isn’t, and can’t realistically be expected to become, a subject matter expert in all the various domains necessary for effective regulation. For example, Congress can’t be expected to effectively regulate the specifications of airplane parts or the appropriate ratio of beans to water in a can of soup.
For this reason Congress long ago passed the Administrative Procedure Act (APA). This act allows Congress to pass broad, vague laws (“enabling statutes”) while delegating authority to agencies of the executive branch to issue detailed regulations thereunder. In other words, via statute, Congress lays out the broad purpose of the law and then delegates to administrative agencies the details of implementing them. For example Congress might delegate to the Food and Drug Administration authority to pass regulations that schedule drugs or foods into various categories, placing particular restrictions on each, so as to help ensure the safety of the nation’s food and drug supply.
However, this delegation of law-making power to the executive branch is arguably unconstitutional because, again, only Congress generally has Constitutional authority to make law. Nonetheless, the Supreme Court long ago found that the requirements of the Administrative Procedure Act—such as that regulations be announced in advance (“notice”), be subject to public feedback (“comment”) before becoming effective, not be “arbitrary and capricious” and be subject to judicial review—were sufficient to make such delegations of lawmaking authority by Congress to the Executive Branch Constitutionally acceptable.
Among other things, the Administrative Procedure Act says explicitly that, when a regulation (aka an “agency action”) is challenged in court:
“[T]he reviewing court shall decide *all* relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action.” [emphasis added]
In other words, under the Administrative Procedure Act (and also under the Consitution), only *courts* can decide relevant questions of law or of statutory or regulatory interpretation and, in fact, *shall* do so.
Nonetheless, in the 1980s, and long after the APA became law, SCOTUS issued a now infamous opinion in a case involving the EPA and the oil company Chevron. That opinion held that, when reviewing challenged agency actions (regulations), federal courts *must* defer to any interpretation by the issuing agency that is “permissible”, even if the court itself thinks it’s not the best or most legally accurate interpretation. In other words, the Chevron case held that, when a given regulation or enabling statute isn’t entirely clear in its meaning, federal courts *must* defer to interpretations by federal agencies so long as those interpretations aren’t clearly beyond the pale. This requirement that courts defer to any reasonable agency interpretation of the law has become known as “Chevron deference”.
Since the Chevron decision was issued, administrative agencies have grown immensely in power because, not surprisingly, they always interpret enabling statutes, and their own regulations, in ways that expand the agency’s power and reach. This has caused all sorts of challanges.
For one, as agencies have expanded their power by interpreting laws in the most expansive way possible, free of any real concern that courts may overturn their interpretation, the jurisdictions of the various agencies have started to rub up against each other and to conflict. To give one simple example, the Commodity Futures Trading Commission (CFTC) long ago determined that the cryptocurrency Ether is a commodity while the Securities and Exchange Commission (SEC) has more recently determined that it’s a security. Legally and logically speaking, it *cannot* be both.
And so we have two different agencies of the federal government at war with each other, casting a veil of uncertainty over the legal status of an entire industry, and causing business to flee overseas to more sane jurisdictions, as each agency here tries to interpret the law in the broadest way possible so as to expand its respective power and jurisdiction. The result is that the Chevron deference has often lead to greater, rather than less, uncertainty in the law, something that is anathema to both the courts and to the very purpose of the APA.
Second, because of Chevron deference, agency actions in recent years have become *much* more political. Democratic administrations interpret their own regulations and the statutes that enable them in the broadest way possible to advance Democratic objectives, and they enforce their politically motivated interpretations viciously. Then a Republican administration comes in and interprets the *same* exact language entirely differently and in ways that advance Republican objectives, and enforces its politically motivated interpretation quite viciously. The result has been that the meaning of the law is whipsawed back and forth by unelected bureaucrats.
As a result, the meaning and application of the law in any particular instance has become highly politicized, extremely unstable and somewhat unpredictable over even relatively short periods of time (four to eight years). Because of Chevron, the *meaning* of any given law can suddenly change, sometimes from one interpretation to its very opposite, without the actual *wording* of the law ever changing. That’s both crazy and undemocratic.
In yesterday’s case, SCOTUS decided 6 to 3 that it has had enough of Chevron. Holding (rightfully) that the plain language of the APA itself requires *courts* (and only courts) to “decide *all* relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action” [emphasis added], SCOTUS concluded that Chevron deference is legally improper and should never have been granted.
What does this mean? It means that proper Constitutional checks and balances have been restored. The executive branch can now no longer interpret laws, and change the interpretation of laws, in politically motivated ways while remaining confident that courts won’t intervene.
But aren’t courts themselves “politically motivated”? Sure, though to a lessor degree. Among other things, the political composition of federal courts (due to lifetime appointments) changes *much* more slowly than the political composition of Congress, leading to less frequent and extreme whipsawing or, stated positively, more stability in the law over longer periods of time. Second, courts literally exist for the purpose of, and are experts at, interpreting law. Administrative agencies are not. Third, unlike with administrative agency interpretations of law (which under Chevron deference weren’t really subject to meaningful appellate review), court opinions *are* subject to appellate review, leading to another check and balance on the system.
The liberal left (that holds *strong* institutional influence over administrative agencies even during Republican administrations) contends that yesterday’s decision benefits mainly “rich people.” This is patently absurd. Undoubtedly it is the *poor* or are most adversely impacted by overreaching, power hungry agencies whipsawing interpretations of the law back and forth for political purposes. The rich can always find workarounds to any regs, bribe Congress to override regulators, bribe regulators to look the other way (I’m looking at you Sam Bankman-Fried) and can afford to fight even low-odds court battles to vindicate their rights. The poor, by contrast, have none of these opportunities.
The liberal left also argues that the courts will be flooded with lawsuits and won’t be able to handle them all. Well, perhaps. We shall see. But in any event, Congress is perfectly capable of expanding the size of the federal judiciary to resolve these sort of cases.
But regardless of such practicalities, it’s very clear legally speaking that both the APA and the Constitution demand that courts, and not federal agencies, exercise exclusive province over interpreting the law. That is, after all, the very purpose of the third branch of government, the judiciary. The fundamental principle of separation of powers, one of our key protections against tyranny, demands it.
