Why a “Major Questions” Exception to Chevron Deference Is Inappropriate—and No Substitute for Regulatory Reform

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Why a “Major Questions” Exception to Chevron Deference Is Inappropriate—and No Substitute for Regulatory Reform

September 29, 2017 29 min read Download Report
Alden Abbott
Deputy Director of Edwin Meese III Centerfor Legal and Judicial Studies
Alden Abbott serves as Deputy Director of Edwin Meese III Center for Legal and Judicial Studies at The Heritage Foundation.

Summary

The Chevron doctrine that directs courts to defer to “reasonable” agency interpretations of the laws they administer is one factor in encouraging agency overregulation. An exception to Chevron deference that enables courts to ignore agency interpretations on “major questions” of policy is not, however, a good means to rein in regulatory excess. The “major-questions” exception promotes arbitrariness and uncertainty, undermines the rule of law, and would not necessarily reduce the burden of regulations. The Supreme Court should disavow this exception. The Chevron doctrine should be eliminated as well, in order to clarify that it is the courts that are empowered to “say what the law is” under our constitutional system. But the demise of Chevron would at best have only a very limited effect in curbing governmental bloat. Regulatory reform that encompasses both rules and statutes is necessary if the big government leviathan is to be brought to heel.

Key Takeaways

The Chevron “major-questions” exception grants judges a legal hook to interpose their personal policy preferences for those of the political branches.

The major-questions exception also undermines the separation of powers and needlessly complicates the congressional law-making process.

Additionally, the use of this exception to Chevron deference would not necessarily reduce regulatory overreach—and could even exacerbate it.

I. Regulatory Overreach and the Chevron Doctrine

A major concern raised by proponents of regulatory reform has been the degree of deference federal courts give to agencies’ interpretations of the statutes they administer.[REF] The Trump Administration has taken initial helpful steps to curb excessive regulation and thereby reinvigorate the American economy. These have included, for example, the establishment of regulatory reform task forces[REF] and the repeal of 15 rules under the Congressional Review Act,[REF] a law which allows a regulation—and certain existing regulations that were not property notified to Congress—to be rejected through a “fast track” bicameral resolution of disapproval, followed by a presidential signature.

Nevertheless, even the most reform-minded new President is limited in his ability to reduce excessive regulatory burdens, given the thousands of regulatory programs he inherits and the legal formalities (and inevitable delays) associated with changing or repealing existing rules and published interpretations of laws.[REF] A particular problem is that some of the most intrusive regulatory schemes have been based on outlandish agency interpretations of statutory language. For instance, under the “Waters of the United States” rule, the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers have interpreted the Clean Water Act to authorize federal regulation of homebuilding activities on dry land that is miles removed from navigable rivers.[REF]

Compounding the dilemma for regulatory reform advocates is the Chevron doctrine (named after a 1984 Supreme Court decision),[REF] which provides that reviewing courts should defer to an agency’s interpretation of ambiguous statutory language, as long as that interpretation is within the bounds of reason.[REF] In other words, the Chevron doctrine presumes that when Congress leaves “statutory blanks” in a law, it has delegated to administering agencies the power to make policy and fill in those blanks in a “reasonable” fashion.

The invocation of Chevron by reviewing courts has coincided with the growth of all-encompassing federal regulation.[REF] This reality, combined with the principled objection that our Constitution empowers the federal courts, not agencies, to say “what the law is,”[REF] has led some commentators to call for the elimination of Chevron deference—either by the Supreme Court,[REF] or by federal statute.[REF] As Heritage Foundation scholar Paul Larkin has explained:

Chevron…has the effect of transferring the final interpretive authority from the courts to the agencies in any case where Congress did not itself answer the precise dispute. The effect of Chevron was to transform agencies into common-law courts because only agencies can engage in the blank-filling necessary when Congress has failed to answer a question. Overturning Chevron would return that ultimate decision-making to the courts.[REF]

In short, elimination of the Chevron doctrine would strengthen the constitutional separation of powers by reducing the power of agency bureaucrats to act as judges and reemphasizing the role of the courts in statutory interpretation.

If, however, totally overturning Chevron is not practicable in the short term,[REF] one possible “second best” alternative would be to make it inapplicable to the most important federal regulatory questions. Such a “major-questions” exception, which has been specifically relied upon in two Supreme Court decisions, might seem at first blush to be a good means for limiting the harm generated by excessive federal agency overreach permitted under Chevron.

Careful legal analysis, however, reveals that a major-questions exception would generate uncertainty, lead to arbitrary decision making, intrude on congressional prerogatives, and not necessarily reduce regulatory burdens. Thus, the major-questions exception should be rejected. Chevron deference should also be eliminated (either by judicial action or, more likely, through legislation), in order to clarify that courts must carry out their constitutional duty to interpret the law. Overturning Chevron would not in itself, however, eliminate the role of agencies in interpreting the statutes they administer nor would it significantly tackle the problem of regulatory expansion. Regulatory reform—and more narrowly tailored statutes—are badly needed to rein in the regulatory state.

II. A “Major-Questions” Exception to Chevron Would Be Bad Jurisprudence and Bad Public Policy

A. The “Major-Questions” Exception: Two Big Supreme Court Decisions. The Supreme Court’s attempt to articulate a possible major-questions exception is derived from the majority decisions in two U.S. Supreme Court cases, one in 2000 and one in 2015.

1. FDA v. Brown & Williamson Tobacco (2000). In FDA v. Brown & Williamson Tobacco,[REF] the Court rejected the U.S. Food and Drug Administration’s (FDA’s) attempt to regulate tobacco products that were promoted, labeled, and made accessible to children and adolescents. The Court cited a provision of the United States Code stating that the “marketing of tobacco constitutes one of the greatest basic industries of the United States with ramifying activities which directly affect interstate and foreign commerce at every point, and stable conditions therein are necessary to the general welfare.”[REF] Therefore, the Court determined, it could not have been the intent of Congress to enable the FDA to ban the sale of tobacco products to minors and impose other restrictions on advertising and the like designed to further that goal.

The opinion reasoned that the application of Chevron deference depends upon the issue at hand:

Deference under Chevron to an agency’s construction of a statute that it administers is premised on the theory that a statute’s ambiguity constitutes an implicit delegation from Congress to the agency to fill in the statutory gaps…. In extraordinary cases, however, there may be reason to hesitate before concluding Congress has intended such an implicit delegation.[REF]

This was such an “extraordinary case.” Due to the unique character of the tobacco industry in the United States and the far-reaching nature of the FDA regulations under scrutiny, the Court concluded that it could not defer to the agency’s interpretation.

This articulation of the major-questions doctrine appears to rely primarily on perceived congressional intent, as evidenced by the opinion’s extensive review of legislative history. In a single sentence in the last paragraph, the Court mentions that the executive branch may be more likely to be in the public eye and thus be held politically accountable. However, the Court brushes this aside, emphasizing that “an administrative agency’s power to regulate in the public interest must always be grounded in a valid grant of authority from Congress,” the scope of which must not be exceeded.[REF]

2. King v. Burwell (2015). In King v. Burwell,[REF] the Supreme Court addressed the question of whether the phrase “[insurance] [e]xchange established by a state” in the Obamacare statute[REF] included an exchange established by the federal government. This issue was critically important because the statute made federal tax credits available for the purchase of health insurance policies offered through state exchanges. The Obamacare law also made the federal government responsible for creating and operating exchanges in states that refuse to do so, but did not state that tax credits would be available for insurance purchased through those federal exchanges.

An Internal Revenue Service (IRS) rule-setting eligibility criteria for health insurance tax credits required the purchase of coverage from an exchange established by either the state or the federal government. The IRS position was challenged by a group of Virginia residents. Chief Justice John Roberts’ majority opinion for the Supreme Court reached the same substantive conclusion as the IRS but rejected the application of Chevron deference. Rather, the opinion stated that this was one of those “extraordinary cases” in which it would be unreasonable to presume that Congress delegated interpretive authority to an agency instead of resolving the issue itself. The opinion emphasized that the phrase “[e]xchange established by a state” was critical to one of the Obamacare law’s “key reforms”; involved “billions of dollars in spending each year”; “affect[ed] the price of health insurance for millions of people”—and was therefore “a question of deep economic and political significance that was central to [the Obamacare] statutory scheme; and had Congress wished to assign that question to an agency, it surely would have done so expressly.”[REF]

The opinion did not offer any justification for why the judiciary should craft the policy instead. In its final paragraph, the opinion mentioned political accountability, emphasizing that the law must be made by democratically elected officials, and that the Court was merely interpreting the Act in a manner “consistent with what we see as Congress’s plan.”[REF] Dissenting, the late Justice Antonin Scalia, joined by Justices Clarence Thomas and Samuel Alito, dismissed the majority’s paean to political accountability as a flawed attempt “to make its judge-empowering approach seem respectful to congressional authority.”[REF]

B. Chevron Deference Problems and Limitations. The major-questions exception is seriously flawed.

First, it has introduced additional uncertainty into the application of Chevron deference. Since King v. Burwell was decided in 2015, eight federal courts of appeals decisions and four federal district court decisions have cited the “extraordinary case” portion of the opinion specifically, and there have been nearly 450 law review and journal articles written about the case.[REF] These decisions and articles have not developed a coherent theory as to the nature and limitations of the major- questions exception. While it appears that the major-questions exception gives courts (or at least the Supreme Court) “more room to maneuver” in deciding whether to apply Chevron,[REF] the circumstances under which Chevron may be ignored are unclear. In short, the exception effectively gives judges a blank check to follow their personal preferences in deciding whether or not to bow to an agency’s statutory interpretation. This leads to arbitrary judicial decision making and uncertainty regarding the stability of agency statutory constructions, thereby undermining the rule of law.[REF]

In other words, the major-questions exception grants judges a legal hook to interpose their personal policy preferences for those of the political branches. A judge may, for example, choose to invoke the exception by “discerning” a highly important and overriding congressional purpose (one that comports with the judge’s personal views) that is at odds with an agency’s reading of a statute. As renowned federal appeals court judge and former Deputy Attorney General Laurence Silberman has pointed out, “[S]triking down an agency interpretation by means of a general recourse to the purpose of the statute can all too often conceal judicial allegiance to one side of what was a congressional compromise or dislike for the policy implications of the executive’s actions. Either seems illegitimate.”[REF]

Second, the major-questions exception also undermines the separation of powers and needlessly complicates the congressional lawmaking process. In particular, by enabling judges to decide on an ad hoc, uncertain, policy-driven basis whether a court or an agency will determine the interpretation of particular statutory language, the exception could be conceived as an impermissible delegation of congressional power to the judiciary.[REF] Furthermore, the uncertainty that the major-questions exception introduces into the Chevron doctrine somewhat undermines Congress’ ability to draft legislation in the first place. As the late Justice Scalia pointed out, the major benefit of the Chevron doctrine is that it creates a “background principle of law.”[REF] A flexible, unpredictable, inconsistent application of Chevron deference does not create a stable principle on which legislators can rely when drafting statutes.

Third, and finally, use of the major-questions exception would not necessarily reduce regulatory overreach. While some judges might invoke the exception to curb regulatory overreach, others might apply it instead to raise regulatory burdens by displacing agency statutory interpretations that generated (in the judges’ eyes) “insufficient” regulation.[REF] Moreover, mere invocation of the exception would not necessarily lead courts to adopt a different substantive outcome than the one adopted by the agency being scrutinized. Take, for example, the Obamacare insurance exchanges case, King v. Burwell, discussed previously. Although the Court did not defer to the IRS’ interpretation authorizing tax credits for insurance purchased on “federal” insurance exchanges, it nevertheless upheld the Administration’s provision of such tax credits, based on the Court’s subjective understanding of what Congress intended when it enacted the broad Obamacare law.

In sum, the major-questions exception generates uncertainty, undermines the rule of law, and would not be an effective tool for reducing regulatory burdens (indeed, it might even increase them in some instances). The Supreme Court should disavow it when presented with the opportunity.

III. Chevron Reform and Regulatory Reform: What Comes Next?

Although the major-questions exception to Chevron should be rejected, the question of how to deal with Chevron—and, in particular, its affront to the separation of powers[REF]—remains. The simplest and fastest approach is simply to eliminate it by statute (thereby also eliminating the major-questions exception, of course). Various bills introduced in the current Congress would do this by directing courts not to defer to agency interpretations of statutes. For example, the Separation of Powers Restoration Act of 2017, S. 1577, would require federal courts, in reviewing agency decisions, to decide “de novo all relevant questions of law, including the interpretation of constitutional and statutory provisions and rules.”[REF] “De novo review” is a legal term of art that means a reviewing judge must independently take a fresh look at the meaning of a law, and not defer to what an agency claimed the law meant. Thus, this language would “legislatively overrule” Chevron.

Nevertheless, as a practical matter, the elimination of Chevron would not (and could not) preclude courts from examining agency interpretations of statutes as part of their judicial responsibility in construing legal provisions. Heritage Foundation scholar Paul Larkin Jr. explains:

Overturning Chevron by statute might prevent the Supreme Court from delegating responsibility for statutory interpretation to an agency, but no act of Congress could force the Court to completely disregard what an agency says a law means. At a minimum, the Court would likely place an agency’s construction of a statute on a par with the interpretation adopted by a learned member of the bar or a scholar in the academy. A persuasive agency position would carry the same weight as an opinion by…highly regarded [legal] expert[s] in…[their] fields…whose opinions are valued and sought throughout the legal community. Of course, each of those experts could be wrong about a particular point…and the courts would have the responsibility to accept or reject their opinions. But it would be irrational to disregard a persuasive argument of theirs just because their views are not final. It would be equally irrational to reject an otherwise persuasive argument just because an agency made it, not a law professor…. A persuasive agency argument is no less persuasive just because the court has the final say.[REF]

It follows that eliminating Chevron deference is not a fast and easy cure for regulatory bloat, let alone big government in general. In “a world without Chevron,” overly expansive regulatory interpretations of laws on the books that inappropriately expand government authorities (and usurp the proper role of the courts) should be largely curtailed, when subject to court review—at least in theory.[REF] But that would only slightly chip away at the tip of the big-government iceberg. Some laws, fairly read, promote big government. The many statutes that by their very language impose onerous regulatory burdens, under the most reasonable and faithful judicial interpretations, would remain unaffected. And since regulations have grown like Topsy in recent decades,[REF] many overly expansive regulatory interpretations might never be subjected to judicial review. Substantive legal reforms, then, are called for, if the regulatory leviathan is to be tamed. Both Congress and the executive branch have roles to play in reforming federal regulation.

A. The Role of Congress. As a matter of general principle, Congress should seek to write clear and narrowly focused legislative language to cabin agency discretion and reduce uncertainty in judicial statutory construction. But that general advice ignores the political incentives of Members of Congress to craft sweeping and vague legislative language to cater to interest groups that support them.[REF] Thus, while better written, narrower legislation remains a desirable aspirational goal, specific attention should be focused on legislative measures dealing with the regulatory process and regulations’ economic impact. In this regard, two regulatory reform bills introduced in the current Congress merit close examination.

First, the Regulatory Accountability Act (Title I of the Regulatory Accountability Act of 2017, which passed the House of Representatives last January), would require federal agencies to base all proposed rules on best evidence and to consider: (1) the legal authority under which a rule may be proposed; (2) the specific nature and significance of the problem the agency may address with a rule; (3) whether existing rules have created or contributed to the problem the agency is attempting to address with a rule—and whether such rules may be amended or rescinded; (4) any reasonable alternatives for a new rule; and (5) the expected costs and benefits associated with proposed alternative rules, including impacts on low-income populations.[REF] This bill would also promote the use of public hearings for economically significant rules. Furthermore, it would preclude courts from deferring to an agency’s determination of costs and benefits unless it has conformed to the guidance of the White House’s regulatory evaluation unit, the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA). This measure would have a potentially constraining effect on new regulatory endeavors. It limits agencies’ ability to concoct expansive regulatory “solutions” to perceived problems, directs rule-makers’ attention toward considering less intrusive regulatory alternatives, and points toward the possible rescission of some burdensome existing regulations.

Second, the Regulations from the Executive in Need of Scrutiny Act of 2017 (REINS Act), which passed the House of Representatives on January 3, 2017,[REF] would require that Congress vote on “major” rules (those that have an annual economic cost of over $100 million or certain other significant adverse economic effects) before the rules go into effect. If a joint resolution approving a major rule were not passed within 70 legislative or calendar days of its submission to Congress (subject to certain narrow exceptions), the rule would not be enacted. Furthermore, before any new rule (not just a major rule) took effect, the promulgating agency would have to amend or repeal other rules to offset any annual costs of the new rule to the U.S. economy. The REINS Act thus could have a major effect in limiting the output of new rules and in “reining in” overall federal regulatory costs.

Finally, Congress has the authority to curb certain inappropriate rules under existing law. It can and should disapprove overly burdensome new regulations through the enactment of joint resolutions under the Congressional Review Act (CRA).[REF] The CRA has two added deregulatory benefits: (1) it bars an agency from adopting a regulation that is substantially similar to the one overturned, absent a new act of Congress; and (2) it allows Congress to reach back and review agency regulations that were never properly submitted to Congress under the CRA. In its first few months, the Trump Administration has cooperated closely with the current Congress in identifying problematic regulations ripe for disapproval under the Act, leading to the rejection of 15 rules at the latest count.[REF]

B. The Role of the Executive Branch. The executive branch can and should take its own initiatives to spur regulatory reform.

During his first few months in office, President Donald Trump issued various executive orders to implement his campaign promise to improve the nation’s economy by rescinding needless administrative regulations.[REF] Particularly noteworthy are the Administration’s executive orders that require agencies to: (1) identify existing regulations for elimination to offset the regulatory costs of new rules, and (2) operate agency-specific task forces charged with identifying inappropriate existing rules that are ripe for repeal, replacement, or modification.[REF]

Reinvigorated economic review of proposed rules by the White House regulatory review watchdog, OIRA, is also crucial. Heritage Foundation Senior Research Fellow Diane Katz recently recommended that OIRA regulatory review be stiffened (i.e., made applicable to guidance documents, not just formal rules) and extended to independent federal agencies to render it a more effective tool for reining in the regulatory state.[REF]

Finally, establishment of a White House–led task force charged with examining and proposing fundamental reforms to major statute-based regulatory regimes that distort competition—aided perhaps by PhD economists from the Justice Department and the Federal Trade Commission who are competition experts—could prove quite beneficial in the longer term.[REF] Reducing the drag on the economy from overly regulatory federal statutory schemes (and, where appropriate, pruning them back and eliminating them) is vital to the long-term health of the economy. However, this will require major statutory surgery, not tinkering at the edges.

IV. Conclusion

The Chevron doctrine that directs courts to defer broadly to “reasonable” agency interpretations of the laws they administer has been seen as a factor in encouraging agency overregulation. Applying an exception to Chevron deference that enables courts to ignore agency interpretations on major questions of policy is not, however, a good means to rein in regulatory excess. The major-questions exception promotes arbitrariness and uncertainty, undermines the rule of law, and would not necessarily reduce the burden of regulations. The Supreme Court should therefore disavow this exception. The Chevron doctrine should be eliminated as well, in order to clarify that it is the courts that are empowered to “say what the law is” under our constitutional system. But the demise of Chevron would at best have only a very limited effect in curbing governmental bloat. Regulatory reform that encompasses both rules and statutes is necessary if the big government leviathan is to be brought to heel.

Alden F. Abbott is Deputy Director of, and John, Barbara, and Victoria Rumpel Senior Legal Fellow in, the Edwin Meese III Center for Legal and Judicial Studies, of the Institute for Constitutional Government, at The Heritage Foundation.

Authors

Alden Abbott
Alden Abbott

Deputy Director of Edwin Meese III Centerfor Legal and Judicial Studies