The U.S. Supreme Court’s ruling in Loper Bright Enterprises, Inc. v. Raimondo, 603 U.S. ___ (2024) altered a decades-long balance of interpretive authority between the federal judiciary and executive agencies. This decision will have far-reaching implications for federal agencies and regulations. Over time, it also may impact the work of North Carolina state and local government. This blog explains the significance of the Court’s decision in Loper Bright and focuses on potential impacts for North Carolina state and local government.

Background

The Supreme Court’s decision in Loper Bright overturned 40 years of legal precedent and is expected to have far-reaching impacts on the state of administrative law. As a reminder, administrative law deals with the rules and regulations handed down by administrative agencies in order to implement statutory law. Here is a quick (and very high-level) refresher on the relationship between statutes and regulations. At the federal level, statutes are laws that are enacted by Congress and codified in the United States Code (U.S.C.). When Congress passes laws, it can authorize a federal agency to promulgate regulations. Those regulations often set out the nitty-gritty, deep-in-the-weeds details of how the law will be implemented. Many of these details may be decided by federal agency staff with specialized training or niche expertise, who bring their knowledge and experience to bear as the agency works to carry out Congress’s intent for enacting the law. Federal agencies do not, however, have free reign when drafting regulations. Instead, they may only act within the scope of authority given to them by Congress.

The Loper Bright case started with the classic question of who pays the bill. The National Marine Fisheries Service (NMFS) required that observers be allowed onboard certain commercial fishing vessels and that the fishing companies cover the cost of these observers. Several of these companies sued the NMFS, claiming that NMFS did not have statutory authority to require these fishing companies to shoulder the burden of paying for observers on their ships.

The District Court ruled in favor of the NMFS. Upon appeal, a divided panel of the U.S. Court of Appeals for the D.C. Circuit affirmed the lower court’s decision. These courts relied upon the “Chevron doctrine,” or “Chevron deference,” which is named after the U.S. Supreme Court’s 1984 decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837. The Chevron doctrine applied where Congress’s instructions to a federal agency—and the scope of the action the agency may take—are unclear. In these scenarios, the Chevron doctrine required that courts defer to a federal agency’s interpretation of an ambiguous statute so long as that interpretation was “reasonable,” even if the court would have interpreted the law differently.  Over the last 40 years, thousands of court decisions have applied Chevron deference.

The Supreme Court’s Decision

With the Chevron deference doctrine having stymied the fishing companies at the first two levels of the judiciary, the companies then appealed to the U.S. Supreme Court. The Supreme Court agreed to hear the Loper Bright case solely to address the Chevron doctrine – specifically, whether it should stand, be clarified or limited, or be overruled entirely.

In an opinion authored by Chief Justice Roberts, a six-member majority of the Court made clear that “Chevron is overruled” and judges need not defer to any “permissible” agency reading of a statute. Instead, courts “must exercise their independent judgment in deciding whether an agency has acted within its statutory authority.” Loper Bright slip op. at 35. In other words, a federal court no longer has to accept a federal agency’s reasonable interpretation of a law the agency implements, even where the court would have reached a different result. Instead, going forward, courts are empowered to exercise their own discretion, and any technical expertise of the agency is to inform, not determine, a court’s read of a regulation’s enabling statute.

The full impact of Loper Bright remains to be seen. The decision clearly shifts authority to interpret statutory obligations and grants of authority from the executive branch to the judiciary, but it is unclear whether that will increase or decrease uncertainty. This was a point of contention for the Court: the majority suggested that the Court’s decision will reduce regulatory uncertainty by avoiding shifting agency interpretations, while the dissent (authored by Justice Kagan and joined by Justices Sotomayor and Jackson) argued that the decision will increase uncertainty by making it easier to challenge administrative agency action. Only time will tell how regulatory agencies and courts will respond to the end of Chevron deference.

Implications for State and Local Governments

Loper Bright was a case about federal regulations and was decided by a federal court–so what does the decision mean for North Carolina public officials serving in state and local government? For some, it could lead to notable changes. Principally, Loper Bright will make it easier to challenge existing federal regulations, including those that touch the work of state and local government. Below is a non-exhaustive list of just a sliver of the many federal regulations that inform and govern the daily activities of state and local government:

• Social services: Indian Child Welfare Act (ICWA) regulations at 25 CFR 23 (state child custody proceedings that involve Indian children); child support enforcement regulations at 45 CFR 301-310 (administration of the federal/state Title IV-D program).
• Public health: Health Insurance Portability and Accountability Act (HIPAA) regulations at 45 CFR 160, 162, and 164 (protection of certain health information); Title X regulations at 42 CFR 59 (administration of federally funded programs providing low- or no-cost family planning services); the Confidentiality of Substance Use Disorder Patient Records regulations at 42 CFR 2 (protection of certain substance use disorder treatment records).
• Public education: Family Educational Rights and Privacy Act (FERPA) regulations at 34 CFR 99 (governing access to student education records); Individuals with Disabilities Education Act (IDEA) regulations at 34 CFR 300 and 34 CFR 303 (governing education access for children with disabilities); Title IX regulations at 34 CFR 106 (prohibiting sex-based discrimination in education and other programs receiving federal funds).
• Juvenile justice: Juvenile Justice and Delinquency Prevention Act formula grant program regulations at 28 CFR 31 (eligibility requirements for funding).
• Procurement and grants: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards regulations at 2 CFR 200 (requirements for non-federal entities receiving federal awards).
• Economic and community development: Community Development Block Grant regulations at 24 CFR 570 (use of federal funds by municipal and county governments to support access to housing and economic opportunities for low- to moderate-income individuals).
• Environmental: Water quality classification regulations at 40 CFR 131, definition of “waters of the United States” at 40 CFR 120, state water quality certifications at 40 CFR 121, stormwater and other National Pollutant Discharge Elimination System permit (including sedimentation and erosion control regulations) under 40 CFR 122 and 123, national primary drinking water regulations at 40 CFR 141, and consistency with approved coastal management programs at 15 CFR 930.
• Other: Americans with Disabilities Act Title II regulations at 28 CFR 35 (nondiscrimination on the basis of disability in state and local government services); Family Medical Leave Act regulations at 29 CFR 825 (requiring employers, including many government employers, to ensure job-protected leave for employees in certain situations).

Another recent Supreme Court decision, Corner Post, Inc. v. Board of Governors Federal Reserve System, 603 U.S.__(2024), may also make it easier for plaintiffs to challenge federal agency regulations. The Court held in that case that the statute of limitations for a claim under the federal APA begins to run when the plaintiff is injured by the federal agency’s action, not when the agency takes its action. Since it can be some time between when an agency takes action and that action impacts a particular party, this decision expands the opportunity for individuals who believe they were harmed by the implementation or enforcement of a federal regulation to bring a lawsuit against the agency.

One key point to remember: although the decisions in Loper Bright and Corner Post may result in an uptick in challenges to federal regulations, including those that impact state and local government work, all federal regulations are still good law unless a court says otherwise, or until the regulations are amended or repealed by the agency that promulgated them.

Impacts on North Carolina Rules

So, Loper Bright could result in changes to how North Carolina state and local government bodies apply federal regulations. But what about the implications for how state agencies, local governments, and courts apply state regulations (called “rules”)? North Carolina courts have their own test for evaluating an agency’s interpretation of the laws it applies, so Loper Bright will likely have less of an impact on state administrative rules than it does on federal regulations.

North Carolina state law, like federal law, allows administrative agencies to enforce rules about how certain statutes are to be implemented, but the two systems are separate. Federal “regulations,” promulgated by agencies, operate differently and usually in parallel to state “rules,” which are often adopted by appointed rulemaking commissions that are supported by the state executive agency staff. Because state and federal administrative law systems are separate, state courts can apply (and in fact have applied) their own standard for reviewing state agency decisions regarding enforcement of rules.

Under North Carolina law, a court should give a state agency’s interpretation of a statute that it administers “great weight,” but these interpretations are not binding. N.C. Acupuncture Licensing Bd. v. N.C. Bd. of Physical Therapy Exam’rs, 371 N.C. 697, 700 (2018). This “great weight” deference to an agency’s interpretation is arguably greater than the “informed by” standard that must be applied at the federal level following Loper Bright. See also WASCO LLC v. N.C. Dep’t of Env’t & Nat. Res., 253 N.C. App. 222, 227 (2017) (“an agency’s interpretation of its own regulations will be enforced unless clearly erroneous or inconsistent with the regulation’s plain language”) (internal quotations omitted).

The method by which an agency action gets to judicial review also differs between the North Carolina system and the federal system. In the federal system, a party typically challenges agency action by going straight to federal district court. On the other hand, North Carolina administrative decisions are typically appealed to administrative law judges (ALJs) with the Office of Administrative Hearings (OAH) through a contested case hearing under G.S. Chapter 150B, Article 3. By statute, the ALJ must “giv[e] due regard to the demonstrated knowledge and expertise of the agency with respect to facts and inferences within the specialized knowledge of the agency.” G.S. 150B-34(a). The ALJ’s decision can be appealed to superior court, where in most cases it will be reviewed under a two-part approach: questions of law get de novo review (where the judge considers the issue anew) and questions of fact are addressed with deference to the ALJ’s findings using the “whole record” test. See G.S. Chapter 150B, Article 4.

What does that all mean for Loper Bright’s impact on North Carolina agencies and rulemaking commissions implementing state statutes? Because North Carolina courts have not followed the Chevron deference concept used by federal courts, Loper Bright will have less of a direct impact on the implementation of North Carolina administrative rules than it will on federal regulations. Nevertheless, it is possible that in the future state courts may follow the trend of the U.S. Supreme Court in giving less weight to state agency interpretations.

Key Takeaways

The U.S. Supreme Court’s recent decision in Loper Bright makes it easier to challenge federal agency interpretations of the laws they implement. It will likely have a significant impact on administrative law, including some of the federal regulations that apply to the day-to-day work of state and local government. The Loper Bright decision also has the potential to inform the direction that our state courts take as they weigh how much deference to give to North Carolina agencies in cases contesting state administrative rules.

For now, public officials should pay close attention to new legal challenges to the federal regulations that may apply to their areas of work. Public officials should also remember that all federal regulations that apply to them will remain good law unless a court determines otherwise, or until the regulations are amended or repealed by the agency that created them.