We're breaking down the latest from the Supreme Court and what it all means for you
July 17, 2024
By Barrie Charapp Beaty
Charapp & Weiss, LLP
bbeaty@cwattorneys.com
In June’s wave of decisions issued by the U.S. Supreme Court, one stands out as extremely favorable for the dealers when it comes to FTC powers - Loper Bright Enterprises v. Raimondo.
The ruling in Loper Bright Enterprises v. Raimondo resulted in the Supreme Court departing from the Chevron Doctrine, ending the notion that judges must conform to agency interpretations of statutes rather than using their own judgment. Historically, courts abided by the Chevron Doctrine, which was derived from the 1984 decision Chevron v. Natural Resources Defense Council. The Chevron Doctrine consists of a 2-step framework that courts were previously required to utilize when interpreting ambiguous statutes administered by federal agencies.
Step 1 is for courts to determine whether Congress has made their intent “clear” regarding how the statute should apply to the specific issue the court is reviewing. Step 2 requires the court to use the agency’s interpretation of the statute as long as it “is based on a permissible construction.” In other words, if Congress didn’t specifically address how a statute should be interpreted in an ongoing case, courts were forced to abide by agency interpretation, essentially limiting the judicial system from making interpretations of their own. Supreme Court reversed Chevron and essentially took the power away from the agencies to interpret the law.
In Loper, the Supreme Court concluded that “courts need not and under the APA [Administrative Procedure Act] may not defer to an agency interpretation of the law simply because a statute is ambiguous.” This essentially transfers interpretive powers wholly to the courts, undermining a federal agency’s ability to freely manipulate statutory interpretation.
So, what does this mean? This is a big deal. For years, the FTC, and other federal agencies, have operated unfettered in interpreting the laws that applied to them. That has changed with the Loper decision. As you are aware, the Vehicle Shopping Rule or CARS Rule has been challenged by NADA and TADA in the Fifth Circuit. The Loper ruling will impact that legal challenge and likely in favor of NADA and TADA. Additionally, dealerships being sued by the FTC have a legal argument against FTC’s interpretations of laws when there is ambiguity surrounding the issue. This will level the playing field when dealerships are faced with litigation from agencies such as the Environmental Protection Agency (EPA) and FTC. Reining in federal agency interpretive powers allows for courts to make uninfluenced decisions. It is important to note that although Chevron was overruled, the Supreme Court explicitly stated that the holdings of prior cases that relied on the Chevron Doctrine are not being called into question.
The Supreme Court also issued a decision in June, Ohio v. Environmental Protection Agency, which was a blow to the EPA.
The Clean Air Act empowers the EPA to set standards for common air pollutants. Once the EPA creates a new standard, states have three years to create a plan to comply with the new standard. States must submit a State Implementation Plan (SIP) that encompasses the “implementation, maintenance, and enforcement” of these standards. The EPA will issue a Federal Implementation Plan (FIP) for noncompliant states that fail to correct deficiencies in their SIPs.
The Good Neighbor Provision, found within the Clean Air Act, requires states to design SIPs with neighboring states in mind since air currents can carry pollution across state borders. Specifically, the provision requires states to address interstate transport of air pollution that impacts neighboring state’s ability to maintain federal standards. The EPA has announced its intention to disapprove 23 state SIPs, including Ohio, because they determined that these states inadequately addressed their obligations under the Good Neighbor Provision. Subsequent to these disapprovals, the EPA issued a single proposed FIP to bind all 23 “noncompliant states”. The EPA’s FIP will tighten emissions standards that would otherwise be left to the discretion of the state, fiscally harming dealerships within FIP states and nationwide. Currently, litigation over the SIP disapprovals has resulted in courts ruling that the EPA cannot apply its FIP to some “noncompliant states” at the present moment.
In Ohio v. EPA, the Supreme Court stayed the EPA from applying its FIP to alleged noncompliant states, pending review in the United States Court of Appeals for the D.C. Circuit and any petition for writ of certiorari.
Essentially, the holding in Ohio v. EPA has restrained the EPA’s discretion in both rejecting state proposed SIPs and concurrently enforcing their own FIP to states the EPA deem noncompliant. Consequently, the EPA procedural standards have weakened, empowering state action for the moment. Rather than encouraging “flexibility” by utilizing different approaches to different states, the EPA has brought forth a “uniform framework” (the FIP), specifically focusing on decreasing nitrogen oxide emissions. When states are not able to control their own “emission limitations and other control measures,” they fall subject to a federal plan that does not account for individual state needs specifically, but rather a more restrictive plan meant to cover all states simultaneously. Although it specifically does not address electric vehicles, this blow to the EPA is another example of limiting federal power over the states, which is critical for the dealers’ being able to sell both electric vehicles and ICE vehicles in the future.