The Fall of Chevron and its Impact on ESG Factors

Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S. Ct. 2778 (1984) gave the executive branch a seat at the bench when courts were ruling on administrative law. However, after decades of deference, last month in June, the Supreme Court overturned Chevron in the recent cases Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce, ––– U.S. ––––, 144 S. Ct. 2244, (2024). Loper Bright took back the judicial branch’s ability to independently apply their judgment when interpreting administrative law.  Id. at 2273 (“[C]ourts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.”).

The Fifth Circuit quickly weighed in on their opinion of Loper Bright. See Utah v. Su, No. 23-11097, 2024 WL 3451820 (5th Cir. July 18, 2024). Pun intended. In Utah v. Su, parties contested whether the Department of Labor’s final rule permitting fiduciaries to consider Environment, Social, and Governance (ESG) factors as a “tie-breaker” was consistent with the Employee Retirement Income Security Act of 1974 (ERISA) and the Administrative Procedure Act (APA). Id. at *1. Echoing the Supreme Court’s call for “independent judgment,” the Fifth Circuit declined to examine the economic effects of ESG factors and issued a limited remand to the district court to decide. Id. at *4.

Although the appellate courts have been inundated with objections in light of Loper Bright, some courts remain unmoved. See Bridgeport Hosp., Doing Bus. As Yale New Haven Health, et al., Appellees v. Xavier Becerra, Sec'y, United States Dep't of Health & Hum. Servs., Appellant, No. 22-5249, 2024 WL 3504407, at *5 n. 4 (D.C. Cir. July 23, 2024) (“But even before the Supreme Court overruled Chevron, see Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244, 2273 (2024), Chevron would not have applied to this case.”); ROBERT CARL SHARP, Petitioner, v. WARDEN BROWN, Respondent., No. 3:23-CV-138, 2024 WL 3493792, at *2 (N.D.W. Va. July 22, 2024) (“[T]his Court finds Loper Bright inapposite.”); THE STATE OF GEORGIA, & GEORGIA DEPARTMENT OF COMMUNITY HEALTH, Plaintiffs, v. CHIQUITA BROOKS-LASURE, in her official capacity as Adm'r of the Centers for Medicare & Medicaid Servs., et al., Defendants., No. 2:24-CV-16, 2024 WL 3416278, at *7 (S.D. Ga. July 15, 2024) (“This conclusion is the same, Chevron or not.”). Regardless, the fall of Chevron will at least give local courts the ability to have a separate voice on the controversial ESG factors in administrative law.