On June 28, the Supreme Court ruled in the case of Loper Bright Enterprises v. Raimondo, which overturned the well-known precedent called the Chevron Doctrine. The Chevron Doctrine came from a 1984 Supreme Court ruling that allowed federal courts to be deferential to federal agency’s interpretation of ambiguous provisions within federal statutes.
With the removal of the Chevron doctrine, now “courts may not defer to an agency interpretation of the law simply because the statute is ambiguous.” This decision is expected to significantly reduce the authority of federal agencies while simultaneously expanding the federal judiciary's power. This will unquestionably impact agencies like the IRS and DOL responsible for interpreting and enforcing retirement plan statutes.
This ruling will likely be used to challenge two recent Department of Labor (DOL) rules related to retirement plans: the new fiduciary rule and the ESG rule. Both rules have experienced legal challenges, with complaints filed against the DOL to vacate them. This Supreme Court ruling is welcome news to the plaintiffs in these cases.
If there is no longer deference to Federal Agencies, courts will likely follow what is known as the Skidmore deference doctrine. Under Skidmore, “courts may - as they have from the start - seek aid from the interpretation of those responsible for implementing particular statutes. Such interpretations constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance consistent with the APA (Administrative Procedure Act).”
This means the agency’s interpretation is “entitled to respect” only to the extent that those interpretations have the “power to persuade.” The level of deference given to an agency under the Skidmore deference doctrine is decided by looking at numerous factors enumerated by the Supreme Court that “depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it the power to persuade if lacking the power to control.” While the overturn of the Chevron Doctrine may make it easier for courts to vacate the fiduciary and ESG rules, they should still consider agency interpretations of ambiguous provisions.
Going forward, lawmakers may need to anticipate potential ambiguities in statutes and reduce them when enacting laws. Federal agencies will also need to take more care in defining their reasoning when interpreting ambiguous provisions in anticipation of defending their interpretation when challenged in court.
Multnomah Group will continue monitoring the impact this could have on the DOL’s fiduciary and ESG rules.
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