top of page
  • Writer's pictureMGMUS

The Supreme Court Takes on Chevron Deference: What That Means for Ocean Carriers, MTOs, and OTIs


Last month, the Supreme Court heard oral arguments in two fishing industry cases that seek to limit or overturn the Court’s long-standing ruling in Chevron v. Natural Resources Defense Council (467 U.S. 837 (1984)). While the cases challenge the regulatory authority of the National Marine Fisheries Service, the Supreme Court’s decision will almost certainly have significant implications for the regulatory authority of all federal agencies, including those that oversee ocean carriers, marine terminal operators, and ocean transportation intermediaries. 


What Is Chevron?


Legal commentators often talk about “the Chevron doctrine” or “Chevron deference” but, while the Chevron decision has impacted federal regulations for almost 40 years, few people outside the narrow world of administrative law understand its significance. Chevron is important because, in it, the Supreme Court held that where a statute is ambiguous or silent on a specific issue, the interpretation of that statute should generally be in the hands of the federal agency tasked with administering it, not with the courts. As long as the agency’s interpretation of the statutory gaps is reasonable, a court should uphold it and not impose its own statutory construction to fill those gaps. Such deference to the agency, which has been called Chevron deference, was rooted in the idea that Congress tasks agencies with implementing statutes and in the assumption that agencies are more expert than courts in the statutes they are charged with administering.


For decades, Chevron was largely uncontroversial. Criticism of the decision has mounted in recent years, however, largely from conservatives voicing concerns about the power of federal agencies relative to the courts. In 2015, the Supreme Court began chipping away at Chevron deference, creating exceptions to it, limiting its scope, and shifting deference away from agencies towards the courts. Indeed, since 2016, the Supreme Court has basically ignored Chevron in cases where it would normally be applicable.  


The National Marine Fisheries Service cases, which involve challenges by commercial fishermen to a regulation requiring industry to pay for at-sea fishing management monitors, were brought to challenge Chevron directly. While Congress authorized the government to require trained observers on regulated fishing vessels, it did not address the question of who had to pay the observers’ daily rates. The fishermen have contended that courts should not defer to the agency’s interpretation that industry must foot the bill and have asked the Supreme Court to overrule Chevron or at least clarify the definition of statutory ambiguity to limit the deference courts must give federal agencies under the decision. 


Oral Arguments in the National Marine Fisheries Service Cases

 

During lengthy oral arguments on January 17, 2024, three of the Court’s conservative justices appeared ready to limit or overturn Chevron, raising concerns about the way executive agencies’ interpretations can change with every new administration, and with the impact agency deference has on less powerful individuals who are impacted by agency regulations.  The four liberal justices defended the doctrine, suggesting that federal agencies deserve deference because their unique knowledge in specialized areas makes them best suited to resolve ambiguities in statutes they are authorized to administer. They contended that if Chevron is overturned, courts, not the agencies that Congress authorizes to make policy choices, will be left making policy decisions. Justices Roberts and Barrett were opaque in their questions, with Justice Barrett raising concerns about whether overturning Chevron would lead to a flood of re-litigation over regulations that were previously affirmed under the doctrine and Justice Roberts asking whether Chevron was even relevant any longer. 

 

The Supreme Court may issue its decision before its current term ends in late June or early July. Based on the oral arguments, it seems likely that the Court will at least narrow Chevron – perhaps limiting agency deference to instances where Congress has given an agency clear authority to resolve an ambiguity but not to situations where a statute is silent on a matter. But it is possible that it will overturn Chevron completely, handing courts the authority to interpret all statutory questions.


Impact on Ocean Carriers, MTOs, and OTIs

 

Overall, if the Supreme Court overturns or limits Chevron, it might benefit the regulated entities. Chevron detractors believe that giving agencies deference whenever Congress is silent or ambiguous in a statute has empowered them to run amok with regulations. Ending such deference will curb federal agencies’ ability to issue regulations that were not explicitly authorized by Congress. If the Supreme Court overturns Chevron, it will certainly increase industry’s chances of successfully challenging such regulations, including those promulgated by the Federal Maritime Commission. Agencies such as FMC may also be given less deference on review of quasi-judicial decisions that are not grounded in statutory provisions. Without Chevron, courts are more likely to overturn and revert such decisions to the agency, directing them to issue rulings that have firm statutory support. And an overturn of Chevron will slow down agency rulemaking, as many questions of statutory interpretation will be open to legal challenge and a de novo judicial review that gives no weight to the original agency interpretation. While proponents of Chevron justifiably contend that courts of appeals will likely be overwhelmed as they have to conduct their own independent review of every question of law that arises from a regulation, the argument is somewhat less potent with respect to Shipping Act matters, as the FMC is a relatively small agency which has historically not engaged in a great deal of rulemaking.


Importantly, in the absence of Chevron deference, statutory interpretation and regulatory policy will increasingly be in the hands of federal judges. In some industries, having a regulatory framework that depends on judges with varying levels of expertise in the relevant field could result in regulatory uncertainty, which is challenging for any business. Generally, however, federal judges – who are Senate-confirmed and have lifetime tenure – are well-qualified jurists who are less prone to political pressures and trained to respect stare decisis. This is particularly the case in the maritime transportation arena where federal judges have a history of respecting uniformity in the maritime law and following the well-established and long-standing body of precedent. As a result, having federal judges – not an agency – interpret statutory provisions may well prove positive for the regulated entities. FMC is an independent agency, not an executive branch agency, and is therefore technically not subject to the whims of a particular administration. But, as the federal agency responsible for “regulating the U.S. international ocean transportation system for the benefit of U.S. exporters, importers, and the U.S. consumer,” it is guided by an articulated mission that does not always support the regulated entities. Thinly staffed and with limited resources, it also does not have a deep expertise in some aspects of complex maritime operations. 


Where Congress has set bipartisan sights on an industry sector, as it has with the regulated entities in the Ocean Shipping Reform Act, courts may still find support for FMC’s regulatory actions in the statutory language and legislative history and may uphold those regulations even on an independent review. That said, without Chevron deference, courts will be more comfortable rejecting specific regulations that are unsupported by statutory mandate, especially those that run contrary to settled maritime law. For example, while OSRA specifically required a rulemaking on demurrage and detention billing practices, Congress did not authorize the agency to narrowly define a “billing party” to exclude the consignee named on a bill of lading, as it did in its October 2022 Notice of Proposed Rulemaking. That proposed definition would upend decades – if not centuries – of well-settled and extensive admiralty case law on contractual privity. Having a judge conduct a fresh and independent review of any final rule against that body of case law and well-established legal principles may provide the appropriate check on unreasonable regulations.  


Finally, if Chevron is overturned, it is unclear what will happen in previously decided cases that relied on that precedent. Counsel for the Biden administration asserts that thousands of prior rulings on regulations would be called into question and relitigated. Counsel for the fishing companies and many legal commentators contend that would not be the case. Unlike many federal agencies, the FMC has not promulgated many rules, so opening the door to re-litigation of prior rulings on FMC matters would have minimal impact. If courts do not shut the door on revisiting prior decisions, and the regulated entities are able to successfully challenge FMC regulations on the grounds that they were decided on a now discarded doctrine, it is possible that could lead to a reversal of fines and penalties. That is probably a long shot as the Supreme Court has already raised concerns about the regulatory upheaval that would result from a reopening of thousands of cases, but it is worth noting.

Comentários


bottom of page