The Supreme Court overruled a 40-year-old legal doctrine that gives federal agencies leeway to interpret laws, a move that could rein in the power regulators have to intervene in many industries.
The decision could strengthen the hand of businesses while reducing the sway of dozens of agencies, from the Environmental Protection Agency to the Food and Drug Administration and the National Labor Relations Board.
It is the second instance this week where justices rolled back the influence of regulators.
In another decision Thursday — SEC v. Jarkesy — the high court stripped the Securities and Exchange Commission of its ability to impose fines for civil violations while depriving a defendant of a jury trial.
Friday's ruling involved two cases where commercial fishing companies argued that the National Marine Fisheries Service went too far by requiring the firms to pay for onboard monitors to watch for the overfishing of herring off New England's coast.
Making companies foot the bill for agency-imposed monitors is unfair, the plaintiffs argued, because laws that regulate the fishing industry don't specify whether the government or companies should pay.
The two cases — Relentless, Inc. v. Department of Commerce and Loper Bright Enterprises v. Raimondo — were decided 6-3 and 6-2, respectively. Justice Ketanji Brown Jackson recused herself from the Loper Bright case.
Both cases challenged a four-decade-old legal precedent that had come to be known as "Chevron deference."
That precedent, stemming from a 1984 case involving the oil giant Chevron, stated that judges must defer to a US agency’s "reasonable" interpretations of ambiguously written laws.
Getting rid of Chevron, a rule created by a 6-0 majority, evolved into an important issue for conservatives.
Chief Justice John Roberts, writing for the majority, said the 1984 ruling was misguided "because agencies have no special competence in resolving statutory ambiguities." Courts, on the other hand, he wrote, are suited to sort out such questions.
The decision also settled divided views over the role of federal lawmakers. Chevron’s critics characterized the doctrine as a power grab for the executive branch that handed non-elected agency officials too much authority.
One of the fisheries’ lawyers argued that Chevron had for too long been providing cover to Congress, permitting lawmakers to avoid the hard work of drafting effective legislation.
Industries from technology to student loans to cryptocurrencies, he argued, still lack much-needed legislation.
"They don’t get addressed because Chevron makes it so easy for Congress to ignore," Loper attorney Paul Clement, a former Bush administration solicitor, argued.
In a dissenting opinion on Friday, Justice Elena Kagan criticized the majority for upending agency authority through multiple decisions this term.
Kagan said the majority disregarded Chevron precedence for "no special reasons." Chevron, Kagan added, is "yet another example of the Court's resolve to roll back agency authority, despite congressional direction to the contrary."
Given Chevron’s pervasiveness, Kagan added, the new decision "is likely to produce large-scale disruption.”
Jules Levenson, a labor and employment attorney with Seyfarth, said the Loper and Jarkesy decisions might not end the high court’s erosion of federal agency power.
But the Friday ruling in Loper, he said, did leave some room for courts to defer to an agency’s statutory interpretation, particularly where Congress has directly authorized an agency to do so.
And in the Jarkesy case, he explained, the court didn’t settle a question that could impact multiple administrative agencies — whether the SEC’s authority to function as investigator, prosecutor, and judge violates the 5th Amendment’s due process clause.
"These questions will almost certainly be revisited by SCOTUS in the next few terms," Levenson said.
A change was made to a prior version of this story to reflect that the court's 6-0 majority in Chevron was not a conservative majority.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
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