WASHINGTON—The Supreme Court decision turning back the 40-year precedent known as the Chevron doctrine has led to enormous uncertainty over its implications, with one lawyer not ruling out bank challenges to portions of the Federal Credit Union Act, including around some fundamental issues.
As CUToday.info reported in late June, the Supreme Court rejected the Chevron doctrine, which had essentially held that when a legislative delegation to an administrative agency on a particular issue or question is not explicit but rather implicit, a court may not substitute its own interpretation of the statute for a reasonable interpretation made by the administrative agency.
Now, predictions are that Congress or the courts will need to be involved in many more rulemakings, which is expected to create significant gridlock.
“I don't want to sound like Chicken Little, but you know the bankers love to put pressure on credit unions. So, maybe we would see the bank trades looking at this (SCOTUS decision) and saying, ‘We want to challenge field of membership,’” said Brandy Bruyere, a partner at Honigman, LLP.
Bruyere also believes the ruling will affect federal regulators’ decision making.
Getting More Cautious
“It's possible we see more cautious rulemaking coming from some of our federal regulators, and that could be beneficial to credit unions,” she suggested. “We may, in the short-term, see litigation pushing back on the CFPB, which could even slow down some of these rules, such as the ones focusing on fees.”
As CUToday.info reported, America’s Credit Unions Chief Advocacy Officer Carrie Hunt has previously said she believes banks and credit unions will see the federal rulemaking process slow. “I think that process could be much longer and agencies will use all…mechanisms to try to make sure they do as much as possible to protect themselves from litigation,” Hunt said.
Administrative Procedure Act Cited
In its decision in the case Loper Bright Enterprises et al v. Raimondo, Secretary of Commerce, the majority cited the Administrative Procedure Act (APA), which governs how federal agencies handle regulations, writing that it “requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the law simply because a statute is ambiguous; Chevron is overruled.”
Bruyere said not only will this Supreme Court decision have an effect on rulemaking, but so will another high court ruling.
On July 1, the U.S. Supreme Court issued a decision in Corner Post, Inc. v. Board of Governors of the Federal Reserve System, holding that an APA claim does not accrue for purposes of the APA's six-year statute of limitations until the plaintiff is injured by final agency action.
“We have actually two cases here that when we read them together are really going to open the door to both challenging future and past federal rulemaking, depending on what parties are willing to pay to litigate,” Bruyere said.
State Rules Could be Affected
She added that new rules coming from state regulators may also be slowed.
“The first case (Loper Bright Enterprises et al v. Raimondo) has gotten a lot of conversation, but it really needs to be considered in juxtaposition with this second case (Corner Post, Inc. v. Board of Governors of the Federal Reserve System),” Bruyere said.
Brandy Bruyere
Bruyere explained the July 1 ruling allows parties to challenge regulatory rulings in court based on the date they have been harmed, not from the date the rule was finalized. The result, Bruyere added, is that the APA’s six-year statute of limitations and allow parties to challenge even old rulemaking.
As CUToday.info reported, the case was brought by Corner Post, a North Dakota truck stop that challenged a Federal Reserve regulation issued in 2011 that set a cap on debit card swipe fees
The Supreme Court reversed a lower court decision that had earlier dismissed the complaint as outside the statute of limitations.
In the case Corner Post argued the Fed set the cap higher than the “reasonable” limit directed by the 2010 Dodd-Frank Act. But the truck stop didn’t open its doors until 2018 — seven years after the Fed’s regulation — yet it argued it should still be able to file suit.
“Again, this would allow parties to challenge even old regulations if the harm is new to them,” she said.
The CFPB Could be Prime Target
Bruyere said she expects the CFPB's current, “aggressive” regulatory agenda to be a prime target.
“They could be facing many court challenges, such as on credit card late fees, overdraft…,” she said, adding the Bureau could begin to find itself tied up by not only defending current court challenges to its rulemaking, but also by an onslaught of new cases.
“I think something people need to understand here is while the Chevron deference is over, it doesn't mean any ambiguous regulation is now dead, or any rule that got upheld under the Chevron deference is now up for up for debate,” continued Bruyere. “Rather, it means that if we go to court the federal government is no longer getting the same deference that they used to get.”
‘Opening the Floodgates’
Bruyere said data show that to date approximately 70% of the time the federal government wins in legal cases.
“Now, maybe that goes down to 50%,” she said. “But it will all depend on how good of a case the government puts forth and whether a court agrees that with that interpretation…Remember, too, litigation is expensive. So, to the extent we see the opening of floodgates for litigating both old and new rules, it's going to have to be where someone sees the likelihood of succeeding.”