On June 28, 2024, the Supreme Court issued its decision in Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024). It was a pretty notable news story as the case overturned the 1984 case of Chevron v. Natural Resources Defense Council, ending what has been called “Chevron deference.” This actually has many implications for federal contractors and how they interact with the federal government. Today, we’ll generally explore what this decision means for federal contractors.
Chevron Deference
It is important to note first that we are not constitutional law scholars or practitioners. We are not going to make any observation here on whether the Court’s decision was correct, nor are we going to go into any detail on the Court’s reasoning for the decision. With that said, the simplified concept of Chevron deference was as follows: If a federal statute was ambiguous or otherwise didn’t expressly address a certain issue, courts would defer to a federal agency’s interpretation of those statute provisions so long as those interpretations were reasonable (even if the court otherwise disagreed with that interpretation). As you might imagine, this gave federal agencies a good deal of power as no federal statute can touch on every single issue that might arise under it. In essence, unless the agency’s interpretation of a federal statute was completely contrary to the statute or was completely unreasonable, courts would use the agency’s interpretation of the statute.
With the issuance of Loper Bright, however, this Chevron deference is gone as a legal concept. What this means is that courts no longer defer to agency interpretations of federal statutes. Each court is free to apply the interpretation of a federal statute that it sees as most reasonable (provided a higher court hasn’t already decided what interpretation applies). This has transferred a great deal of power from the executive branch to the judicial branch as a result.
What This Means for Federal Contractors
“Ok, interesting legal discussion, but what does that matter for me?” You might ask. Well, consider the number of federal statutes that govern federal procurements, contracts, and interactions with the federal government: The Competition in Contracting Act (CICA), the Small Business Act, and the Federal Acquisition Streamlining Act of 1994, for starters. Historically, agency interpretations of those acts, and others, would be deferred to, something we noted in some of our older blog posts. That’s no longer the case, at least in federal courts. The result is that courts might disagree with agency interpretations of statutes, which could lead to completely different outcomes for government contract litigation than would have occurred under Chevron deference. Overall, this improves the chances a federal contractor will succeed in a dispute with the federal government (although of course, it’s still something that must be evaluated on a case-by-case basis).
Additionally, this should also give agencies a lot more pause when it comes to their own actions. Whereas before, they could rely on the fact that their interpretation of a statute would be deferred to and act accordingly, that is no longer the case. Agencies will likely approach matters more cautiously going forward. As to whether that will benefit federal contractors, it will really be a case-by-case thing. Sometimes it might mean agencies are more willing to acquiesce or negotiate in a dispute, but other times it might slow down procurement and award processing. This also could result in agencies trying to more closely adhere to statutes and not go beyond them when they promulgate regulations.
Caveats
Overall, federal agencies have lost a fair deal of power which has now gone to federal judges. But it is important to give a caveat here: Loper Bright does not mean courts will never side with an agency’s interpretation of a federal statute. The Court observed in this decision that there is an older case, Skidmore v. Swift & Co., that still stands:
Courts, after all, do not decide such questions blindly. The parties and amici in such cases are steeped in the subject matter, and reviewing courts have the benefit of their perspectives. In an agency case in particular, the court will go about its task with the agency’s “body of experience and informed judgment,” among other information, at its disposal. And although an agency’s interpretation of a statute “cannot bind a court,” it may be especially informative “to the extent it rests on factual premises within [the agency’s] expertise.” Such expertise has always been one of the factors which may give an Executive Branch interpretation particular “power to persuade, if lacking power to control.”
In other words, courts can still give extra weight to an agency’s interpretation of a statute, and side with it where it is otherwise unsure which interpretation applies. Loper Bright doesn’t flip the script and give deference to the non-government party in a court case, it just leaves the ultimate authority on which interpretation applies to the judge.
It’s also important to note that Chevron deference concerned agency interpretations of federal statutes, not regulations. There is a separate case, Auer v. Robbins, which holds that courts will defer to agency’s interpretations of their own regulations. That case remains in good standing, at least for the time being.
Finally, the Court noted in Loper Bright that while Chevron was overruled, that doesn’t mean cases that decided with Chevron deference in mind are overruled as well: “[W]e do not call into question prior cases that relied on the Chevron framework. The holdings of those cases that specific agency actions are lawful…” So, some old agency interpretations may still be controlling by virtue of being applied in a decision by a court.
Summary
Going forward, we think the Loper Bright decision may end up favoring federal contractors, particularly in the area of their own disputes with the federal government. As any lawyer can tell you, a court’s legal interpretation of a statute can completely change the outcome of a case. An agency may be less confident in its own interpretation of a statute, and that could in some cases make agencies more likely to settle disputes with contractors. That said, there remains a lot of mystery as to how things will look going forward, Chevron was on the books for 40 years after all. It will be interesting to see how things develop. But for now, it does appear that some power has been shifted from the agencies to contractors.
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