Regulators Gone Wild — Is Relief Coming from the Courts?

74% of respondents cited “regulations and enforcement” as their top concern in the most recent Morrison Foerster General Counsel Up-at-Night Report.

Coming at regulatory burdens from a different direction, legal scholars Michael Bommarito II and Daniel Martin Katz found that regulatory references in 10-K filings had increased 4X between 1994 and 2014 (after analyzing more than 160,000 10-K filings with the SEC).

To those (like me) who believe that regulators impose excessive burdens on American businesses large and small — U.S. Supreme Court Justice Anthony Kennedy may have offered a ray of hope yesterday.

EPA, IRS, FCC, and other agencies — whom the High Court has called “the administrative state” — “wield vast power and touch almost every aspect of daily life”. And for the past three decades a judicial doctrine called “Chevron deference” has afforded these agencies considerable insulation from legal challenges.

In Chevron, U.S.A. v. Natural Resources Defense Counsel, Inc. the U.S. Supreme Court established the harmless-sounding principle that a federal court should defer to interpretations of statutes made by those government agencies charged with enforcing them, unless such interpretations are unreasonable.

However innocuous in theory — many view “Chevron deference” as more akin to a blank check for bureaucrats than a careful delineation of delegated congressional authority. As Chief Justice Roberts put it in a case where he dissented from Chevron‘s application:

“We do not leave it to the agency to decide when it is in charge.”

What’s the ray of hope (at least for those of us who view the regulatory climate as too harsh on business)?

Justice Kennedy offered a message yesterday that — some say — telegraphed an intention to curb the judicial doctrine of “Chevron deference”.

Justice Kennedy — widely viewed as a swing vote between the four liberals and the four conservatives on the High Court — wrote the following in his solo concurring opinion to a decision issued yesterday:

” … It seems necessary and appropriate to reconsider, in an appropriate case, the premises that underlie Chevron and how courts have implemented that decision. The proper rules for interpreting statutes and determining agency jurisdiction and substantive agency powers should accord with constitutional separation-of-powers principles and the function and province of the Judiciary.”

If the current Chevron principle is really in play — and if longstanding deference to agencies is to be replaced with a requirement of clear, explicit statutory authority for the regulations that an agency adopts — this could be a disciplined judicial counterweight to decades of agency excesses.

Consistent with this, progressive, or liberal, commentators seem concerned — even alarmed — about yesterday’s development:

ThinkProgress:

“Justice Kennedy just gave Steve Bannon a big reason to smile / We’re going to miss the ‘administrative state’ when it is gone.”

E&E [Energy & Environment] News:

“Justice Anthony Kennedy today added his voice to a growing chorus in the judicial branch and among the legal community expressing worries over the so-called Chevron doctrine ….

“There’s been a vigorous debate among legal scholars over the last few years over the doctrine …. Critics say that it gives too much power to the executive branch, as federal agencies often win court challenges to regulations — including environmental rules — by invoking the doctrine. Republican lawmakers introduced bills to limit its use.”

Joshua Matz:

“The Imminent Demise of Chevron Deference?

” … Without Chevron, agencies would act in the shadow of far greater uncertainty about whether federal courts will obliterate their handiwork.”

Anyone who suggests that they can definitively predict the future is unwise. But it makes sense to track which way the wind is blowing.

Those (like me) who feel that businesses have been over-regulated enjoy substantial reason for optimism in light of yesterday’s news.