The death of the Chevron Doctrine and its impact on Product Safety Law
How will these cases affect CPSC?
Chevron has not been a big factor to date in many cases involving CPSC action. However, Chevron was a factor in then Judge Gorsuch’s decision in the challenge to CPSC’s first attempt to regulate high powered magnets, in Zen Magnets, LLC v. CPSC. One of the questions in that case was whether the regulation was a “safety standard” or a “ban.” If a regulation is a ban, the CPSC is required to find that “no feasible consumer product safety standard…would adequately protect the public form the unreasonable risk of injury associated with such product.” 15 U.S.C. §2058(f)(3)(C). CPSC is not required to make this type of finding for a rule that sets a safety standard. Zen Magnets argued that CPSC’s regulation was effectively a product ban. Because the law does not clearly define “ban” vs. “safety standard” the Tenth Circuit court, based on Chevron, deferred to CPSC’s conclusion that the rule met the definition of “safety standard” and not “ban.” Gorsuch is now one of the Justices who overturned Chevron. In future rulemaking, CPSC may have a harder time convincing a court that its regulation is not, in effect, a product ban.
By contrast, the Court of Appeals in the Finnbin, LLC v. CPSC matter made its decision without reliance on Chevron, stating that because the “plain statutory language supports the CPSC’s reading, we need not assess questions of deference, citing to Ams. for Clean Energy v. EPA, 864 F.3d 691, 716 n.5 (D.C. Cir. 2017). See Finnbinn LLC v. Consumer Prod. Safety Comm'n, No. 21-1180 (Aug. 2, 2022). (slip op. at 9).
CPSC will also have a harder time defending its rare mandatory recall orders if they are appealed. However, the effect will be limited to questions relating to CPSC’s interpretation of the law, not CPSC’s underlying findings of fact. It will be interesting to see whether a court will see terms like “defect,” “substantial product hazard,” and “distributor” as ambiguous, and, if so, whether it will define them differently than how CPSC has. In fact, CPSC recently lost an administrative enforcement case in the Leachco matter. While much of the decision was based on CPSC’s lack of supporting data, the Administrative Law Judge (ALJ) used his own definition of “defect.” This case is being appealed to the Commission. If the Commission’s decision is appealed to a federal court, CPSC’s interpretation of that term will receive significantly less deference now that Chevron has been overruled.
Similarly, CPSC’s ongoing Amazon litigation may be affected. Last month, the Commission held that Amazon is a “distributor” of products sold through Fulfillment by Amazon (FBA). Amazon has stated that it intends to appeal. The federal court that will hear this appeal will also now be free to give CPSC’s interpretation of “distributor” significantly less deference, thereby making it easier to overturn the Commission’s decision on appeal. A lot will depend on the judge to whom the matter is assigned.
What about SEC v. Jarkesy and the use of ALJs?
In SEC v. Jarkesy, the Supreme Court held that the SEC cannot use its own in-house ALJs for cases involving civil fraud. The Court’s reasoning is that suits for financial penalties are similar to common law fraud cases, and therefore defendants have a right to a jury under the Seventh Amendment.
This case is unlikely to have an impact on CPSC. CPSC does not have any in-house ALJs. In addition, CPSC only uses ALJs for mandatory recall orders. These orders do not provide the right to a jury trial and are not punitive. Instead CPSC’s mandatory recall cases are remedial in nature, designed to get a dangerous product off the market and not to punish a company for selling the products. This type of remedy is not implicated by the Seventh Amendment, and not within the scope of the Court’s decision in SEC v. Jarkesy.
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The death of Chevron created a lot of excitement and speculation. But, in reality, the day-to-day workings of CPSC, and company’s interactions with the agency, will mostly stay unchanged.
Indeed, the vast majority of CPSC’s actions involving our clients are rarely actually “final agency action” which are legally reviewable by courts. Voluntary recalls, Notices of Violation (NOVs), agency and staff guidance, and similar actions all fall into a gray zone of agency activities that can’t be challenged in court. In fact, in this recent flurry of CPSC-related cases, this interpretation that an NOV is not “final agency action” was upheld by the Fourth Circuit in Jake’s Fireworks Incl, v. CPSC after that company spent nearly 10 years challenging the CPSC. In fact, if CPSC concludes that the death of the Chevron Doctrine will make rulemaking even harder, we may see even more attempts by the CPSC and its staff to set policy through unreviewable enforcement actions rather than formal rulemaking as CPSC seeks to evade judicial review for its actions, a practice often derided as “backdoor rulemaking.”
The world of administrative law is, admittedly, a sexy one and we know you share our excitement over the impact of these recent rulings. It is also rare to have so many CPSC cases being decided recently after many years of limited CPSC caselaw. We will continue to follow CPSC’s recall cases against Leachco and Amazon, and other matters as the CPSC continues its aggressive enforcement activity in this administration. Stay tuned for future client alerts.
What is the Chevron Doctrine?
The Chevron Doctrine was the longstanding doctrine regarding the level of deference a court would give an executive agency’s interpretation of the law, when the underlying statute is “silent or ambiguous with respect to the specific issue.” Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc., 467 U.S. 837 (1984).
Chevron established that in these cases, courts should defer to the agency’s interpretation of the law, as long as that interpretation was based on a “permissible construction of the statute,” even if the court would have arrived at a different interpretation. The premise was that agencies are made up of experts in the area they regulate and the laws that govern them, and therefore their interpretation of the laws should carry great weight. Chevron only applied to agency actions that resulted from robust deliberative processes, like rulemaking and adjudications. This doctrine made it significantly harder, though not impossible, to challenge regulations and agency orders.
What has replaced the Chevron Doctrine
That’s not entirely clear yet. The Court, in overturning Chevron, reclaimed the power to interpret the statutes that agencies rely on to pass regulations or take other actions.
The opinion concedes that agency’s interpretations carry some persuasive weight. But the agency’s interpretation is no longer automatically entitled to “deference”.
The question then is, how much weight will various courts actually give agencies’ interpretations? This will certainly vary greatly on a court by court and judge by judge basis. If the standards that district and circuit courts apply vary across the country – as they seem almost certain to – then the Supreme Court may have to step in again and provide some clearer guidance. With the current majority in place on the Supreme Court, we can expect that agency interpretations will probably be given minimal weight.
Does the death of the Chevron Doctrine mean that previous cases that relied on Chevron can be reopened?
Not on its own. The Court was clear that previous agency actions that prevailed at court based on Chevron are not subject to reexamination. The previous decisions relying on Chevron still stand, but the doctrine cannot be used in pending or future challenges to agency actions.
However, the Supreme Court, in another major decision this term, Corner Post, expanded the time period for a company to challenge existing agency actions under the Administrative Procedure Act (APA). The Court ruled that the 6-year limitations period does not begin to run until the party “suffers an injury from final agency action, so the statute of limitations does not begin to run until she is injured [financially]”. This means that if, for example, a company that did not exist at the time a rule was enacted might be able to challenge the rule (in a post-Chevron world) even if the rule survived a previous legal challenge.
Corner Post, therefore, is a major ruling that significantly expands opportunities to challenge agency rules. So, while the death of Chevron does not automatically change existing regulations and laws, the Court has allowed new challenges to existing, older regulations to be brought by new entities. Justice Jackson in her dissent states that the result may be “profoundly destabilizing for both Government and businesses”, effectively allowing new challenges all the time. The case is Corner Post, Inc. v. Board of Governors of the Federal Reserve System, No. 22-1008, 603 U.S. ___ (2024).
In late June, the U.S. Supreme Court issued its decision in Loper Bright Enterprises v. Raimondo, in which the Court officially declared the Chevron Doctrine dead.
Administrative law geeks (us included) wonder what this might mean in the larger context of this Court’s general antipathy towards the administrative state. But for consumer product companies just trying to go about their business, the question is more practical: How will this ruling impact CPSC?
In short, this ruling might make it harder for CPSC to defend product safety rules and mandatory recall orders in court. It might also push CPSC, and other agencies, to increase its reliance on its other tools like enforcement, over rulemaking, to achieve policy goals in a way that is less subject to judicial oversight. Other than that, this ruling, on its own, won’t greatly impact CPSC’s current authority or work. That said, let’s dig in a bit more.
