ANALYSIS: Four Post-Chevron Review Scenarios for Regulators

What, if not Chevron, will courts apply when reviewing bank regulators’ statutory interpretations?

As I and others have written, the Supreme Court will almost certainly ax its Chevron deference standard in the upcoming term when it hears Loper Bright Enterprises, et al. v. Raimondo. There are several paths the Supreme Court could take that lead away from the deference it granted in Chevron U.S.A., Inc. v. NRDC, Inc., which for decades has provided bank regulators with administrative autonomy.

All of the likely options outlined here weaken agency power, but they do so in different ways and to varying extents. Regulators and financial institutions alike should be familiar with these possible outcomes to prepare for whatever regime takes Chevron’s place.

1. Major Questions Doctrine

In 2022, the Supreme Court decided West Virginia v. EPA, where it adopted the major questions doctrine. Under the doctrine, courts must presume that Congress does not give agencies the power to address political or economic issues that are significant enough to be considered “major.”

Agency challengers didn’t consider the doctrine an avenue to victory until about five years ago. Since then, we’ve seen an upsurge of filings citing it, and we are likely to see more, carrying the potential to block federal agencies’ most aggressive enforcement efforts.

Loper Bright Enterprises, however, is not a major questions case. The petitioners do not raise a major questions argument in their petition for certiorari. They focus on Chevron alone, arguing both that the D.C. Circuit improperly applied the Chevron test and that, even if it had been properly applied, Chevron itself should be overruled.

Beyond the arguments, the facts themselves do not support a major questions challenge. The economic and political effects of the challenged regulation in Loper Bright Enterprises are minuscule compared to those in West Virginia v. EPA (or, for that matter, in Biden v. Nebraska, the student loan case decided by the Supreme Court to close out its previous term).

The fact that the court chose to hear a case without a major question at issue may suggest that the major questions doctrine will not be a wholesale replacement of Chevron but rather a component of its replacement.

2. Nondelegation Doctrine Changes

Another component of Chevron’s replacement could be a narrowing of the longstanding test for whether a statute violates the nondelegation doctrine, which currently requires Congress simply to provide an “intelligible principle” to which the agency must conform.

In the Chevron opinion, Justice John Paul Stevens wrote that “if Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation.” As commentators have since noted, Chevron deference and the nondelegation doctrine—which holds that Congress cannot vest another branch with its legislative powers—are two sides of the same coin. In other words, Congress must define outer limits to the power delegated to an agency in its enabling statutes, and, under Chevron, courts must defer to the agency’s reasonable interpretation of ambiguities in those delegations.

In 2019, the Supreme Court decided Gundy v. United States, applying the intelligible principle test to a nondelegation challenge. In a dissent, Justice Neil Gorsuch rejected the test, writing that its application has grown to be unconstitutional. Justice Gorsuch argued that delegations are permissible only in three circumstances: when agencies are tasked (1) to “fill in details” unspecified by a statute; (2) to engage in factfinding; and (3) to perform nonlegislative responsibilities.

Chief Justice John Roberts and Justice Clarence Thomas joined the dissent, and Justice Samuel Alito concurred, stating that he would support an effort by the court to reconsider the intelligible principle test when there was a majority to do so. Justice Brett Kavanaugh did not participate in the decision, and Justice Amy Coney Barrett was not yet on the Court. If either were to join in Justice Gorsuch’s sentiment in some future case, there would be a majority to supplant the test with a stricter one.

Such a test, combined with a fortified major questions doctrine in the absence of Chevron, could be devastating to bank regulators.

In the short term, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve, and the Federal Deposit Insurance Corporation would be subject to a litany of lawsuits challenging their enabling statutes as impermissibly broad delegations of legislative power. Any regulation that aims to do more than “fill in the details” would be unlawful, as would any “details” that have too large of an effect. In response, courts would be required to interpret away and invalidate countless statutory provisions, forcing Congress to revisit old statutes and draft new language. While this process drags on, bank regulators’ authority would remain unclear, further weakening their enforcement legitimacy.

3. Skidmore Deference

Some observers have posited that agencies also might receive Skidmore deference in the absence of Chevron deference. Unlike the piecemeal approach of the major questions and nondelegation doctrines, Skidmore would serve as a neater, one-for-one replacement of Chevron.

Under the Skidmore v. Swift & Co. standard—which currently applies to agency guidance, not full regulations—courts follow agency interpretations only to the extent that they are “persuasive and consistent” with earlier agency constructions. These requirements are much less forgiving than the Chevron standard, which only requires the agency’s construction to be reasonable and consistent with the organic statute.

This approach would mainly weaken bank regulators like the OCC and FRB, which currently receive Chevron deference, providing plaintiffs with new bases to challenge their efforts. Regulators like the FDIC, which do not receive Chevron deference, would be mostly unaffected.

4. A Focus on Jurisdiction

Agencies may hope for something less simplistic—and potentially less drastic—than swapping Chevron for Skidmore.

In a 2013 case, City of Arlington v. FCC, the court afforded Chevron deference to agencies that interpreted ambiguities concerning the scope of their own authority or jurisdiction. But in dissent, Chief Justice Roberts argued that issues of jurisdiction should be decided by courts, not agencies. Justice Alito joined the dissent, along with then-Justice Anthony Kennedy.

The dissent’s approach to the issue of agency authority in City of Arlington provides insight into what could be a more measured approach to rolling back Chevron: Courts must afford deference unless it is a question of the agency’s jurisdiction.

Compared to an outright overturning of Chevron, this approach—should it be adopted by the court—could be considered a win for bank regulators and other agencies. However, judicial review takes time, curtailing regulators’ ability to quickly address emerging issues. And the negative effects could be broader than they appear. Justice Antonin Scalia, in the City of Arlington majority opinion, said “the distinction between ‘jurisdictional’ and ‘nonjurisdictional’ is a mirage.” Challengers could plausibly argue that numerous crucial bank regulations concern agency jurisdiction, further prolonging the judicial review procedures.

Which Outcome Would Be Most Disruptive?

All of these outcomes would meaningfully disrupt administrative law and, in turn, the banking industry.

Replacing Chevron deference with the Skidmore standard would be clear-cut and and far-reaching; essentially, agencies would have the final say about nothing.

A combination of the major questions doctrine and the nondelegation doctrine serving as a Chevron replacement also would strengthen judicial oversight, likely stripping any significant agency deference away in the process.

Adopting the approach taken in the City of Arlington dissent would be less drastic, and would still afford agencies some deference, but reviewing courts would have flexibility around when to afford it.

Regardless, all options are a step down from the Chevron deference that bank regulators currently enjoy.

—With assistance from Bloomberg Law legal analyst Erin Webb.

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