U.S. Supreme Court Overrules Chevron Deference to Agency Interpretations

The U.S. Supreme Court recently overruled a 1984 Supreme Court decision that had required courts to defer to permissible agency interpretations when analyzing ambiguous statutes.  The Supreme Court held that under the Administrative Procedures Act (APA), courts are required to use independent judgment when interpreting statutes that are ambiguous, even if the agency responsible for administering that statute has offered a permissible interpretation otherwise.

Under Chevron, the Supreme Court had held that agency interpretations of federal statutes are entitled to respect and deference, applying a two-step analysis.  The first step was to determine if Congress had addressed the issue at hand in the statute.  If so, the court was to apply a traditional statutory construction analysis to determine the outcome.  If the statute was ambiguous or silent with respect to an issue, the second step was to defer to the relevant agency if it had “a permissible construction of the statute,” even if the court would have reached a different conclusion if analyzing the question for the first time.

The Supreme Court, in overturning Chevron, noted that the APA directs courts to decide questions of law and to set aside agency actions or findings that are not in accordance with the law.  The Supreme Court concluded that the plain text of the APA therefore requires courts to come to their own conclusions regarding ambiguous statutory provisions.  Since the plain language of the APA contradicts Chevron, and the APA does not contain any mandate to defer to agency interpretations, the Supreme Court held that Chevron must therefore be overruled.

As a practical matter, the Supreme Court’s ruling will likely lead to increased litigation and disputes over how agencies interpret and implement vague statutory requirements throughout various industries, including the consumer financial sector.