Supreme Court Rulings Boost Odds to Win Chemical Rule Challenges

Three recent Supreme Court decisions increase industries’ chances of winning regulatory challenges, but only after a period of divergent lower court rulings on what the nation’s primary commercial chemical law requires.

The high court’s decision in Loper Bright Enters. v. Raimondo overturned the 40-year-old Chevron doctrine that had directed federal courts to defer to reasonable agency interpretations of ambiguous or silent statutory provisions. Under the US Constitution, the final interpretation of laws is the “province of the courts,” the Supreme Court said.

The Supreme Court “didn’t say ‘ignore what the agency said,’” according to Robert Sussman, an attorney in private practice who previously worked at the Environmental Protection Agency and Latham & Watkins LLP. But when a court disagrees with an agency’s interpretation, “the final word on the statute rests with the court.”

“The court is obligated to reach its own conclusion,” he said. “That’s significant.”

If the Loper Bright ruling is the most significant, two other rulings at the end of the term still stand to have some affect on the agency’s chemical rulemakings.

A ruling in Corner Post Inc. v. Bd. of Governors of the Fed. Rsrv. Sys. said parties have six years after being injured to challenge a federal rule under the Administrative Procedure Act, meaning some chemical regulations could be challenged years after they’re in effect. And a third ruling, SEC v. Jarkesy, gave companies the option of having juries resolve some enforcement disputes.

Post-Chevron litigation will be interesting, said Lynn Bergeson, managing partner for Bergeson & Campbell PC, which helps companies navigate chemical regulations. “Challengers have a higher potential success on the merits of their arguments.”

Unpredictability and TSCA

“We might get favorable rulings” in some circuits, “but not others,” Bergeson said.

“We’ll have unpredictable outcomes depending on who’s reviewing,” she said. “It will be a mess in the foreseeable future” as different judges and circuit courts are likely to interpret the Toxic Substances Control Act’s (TSCA) requirements in divergent ways, she said.

A wave of TSCA rules that already are or are expected to be litigated may demonstrate that, said Daniel Rosenberg, a senior attorney with the Natural Resources Defense Council.

These cases won’t stem from Loper Bright, as they’re “pretty much cases of first impression” raising questions of statutory interpretation that no court has addressed, he said. They result from new requirements the 2016 TSCA amendments created.

“There are some courts out there that are running roughshod over the EPA,” said Sussman, who now counsels nonprofit groups as the principal attorney with Sussman & Associates in Washington, D.C. “I worry that more courts will think they can give the agency back of the hand treatment, but that’s not what the Supreme Court said.”

Separate lawsuits over TSCA rules that restrict different chemicals will raise some of the same issues and varied decisions could result, said Keller & Heckman LLP partner James Votaw. Loper Bright doesn’t mean you’re “eliminating the possibility of split circuits and different decisions,” he said.

“But the likelihood is less. The judges have to do their own work instead of just deferring to agency,” and they’ll rely on the law’s plain language, Votaw said.

Over time, “regulatory whiplash” will be reduced, said Eric Gotting, also a partner at Keller & Heckman. A judicial ruling will constrain subsequent administrations from adopting new, possibly reasonable interpretations of a law that Chevron would have directed courts to defer to, he said.

“Loper Bright is important, because it hopefully will cause agencies to be less extreme in statutory interpretations,” said Daryl Joseffer, executive vice president and chief counsel for the US Chamber of Commerce’s Litigation Center.

It will be much harder for agencies to flip flop every time there’s a change in administration, he said. “Businesses need stability” for their investment, hiring, operational and other decisions, Joseffer said.

One TSCA rule that the EPA issued in May illustrates different administrations’ changing statutory interpretations, he said.

The rule, which describes chemical risk evaluation procedures the EPA uses to determine whether a substance must be regulated, revised a 2017 regulation issued during President Donald Trump’s administration.

The May regulation changed the EPA’s interpretations of analytic mandates imposed by TSCA amendments that became law in 2016. It also eliminated definitions of terms like “best available science” and “weight of scientific evidence” that the statute doesn’t define, but the 2017 rule had.

“Loper Bright makes the 2024 rule much more vulnerable to challenge,” Votaw said.

Other Rulings

The Supreme Court’s decision July 1 in Corner Post clarified that the Administrative Procedure Act’s six-year statute of limitations for litigation begins when a party is injured, and a remedy can be vacatur of rule issued more than six years ago.

The opinion’s impacts on TSCA and other environmental rules are limited, said Sussman and Joseffer. Most environmental laws give litigants a designated time period—typically 60 or 90 days—after a rule is published in the Federal Register to file petitions to challenge it, they said.

“If you haven’t gone to court, you lose your ability to do so,” Sussman said.

If a challenged rule is upheld and the agency later orders a cleanup or other specific action based on it, an affected party could contest the EPA’s order, Joseffer said.

That challenge, however, wouldn’t impact the final regulation, he said. The rationale is: “If the government sues me, then I can defend myself, by saying the rule is unlawful. But that already was the case.”

It’s possible that such existing legal options could result in an older rule being overturned due to Corner Post, but the circumstances leading to that would be rare, said Joseffer and Gotting.

The June 27 Jarkesy ruling, which gave companies the chance of a jury trial for some situations including an agency’s allegation of fraud, applies to certain EPA enforcement cases, said Gotting and Votaw.

For example, the EPA can seek penalties from pesticide manufacturers it accuses of making false or misleading product claims. The EPA’s administrative law judges rule on these types of fraud cases. Ultimately a company can appeal an administrative decision to which it objects.

The Supreme Court’s ruling means the accused company could avoid the administrative step and go straight to court if it thinks it’s entitled to a jury, Gotting said.

Overall, however, those two Supreme Court opinions aren’t expected to upend environmental rulemaking, most attorneys said.

Sky ‘Isn’t Falling’

Even Loper Bright won’t be a significant factor in many cases, Joseffer said. Of the 15 lawsuits the Chamber is working on that challenge rules various agencies have issued during President Joe Biden’s administration, only one—involving a labor regulation—may be affected, he said.

“I’m not in a camp that believes the sky is falling, because the Supreme Court has reversed Chevron,” Sussman said.

“From the court’s opinion, you can conclude there are a number of areas where courts can continue to give way to the agency’s decisions and rely on agency expertise and the agency’s understanding of its own program and its statute,” he said.

When agencies explain their expertise and knowledge well, courts often will listen, Sussman said.