Published by: WCET | 7/18/2024
Tags: Distance Education, Managing Digital Learning, Regulation, SAN, State Authorization, U.S. Department Of Education
In the last month, you may have seen a flurry of articles indicating the demise of the Federal regulatory landscape as we know it. This is due to a recent U.S. Supreme Court decision in Loper Bright Enterprises vs. Raimondo and Relentless Inc. v. Department of Commerce. Many articles argue that the sky is falling on the development of federal regulations. The word “chaos” has been used by multiple colleagues with smart minds. Truthfully, it could be several years before we actually see the impact of the court’s decision on administrative rules due to eliminating the 40-year-old precedent colloquially called the “Chevron Deference.” As we will explain, you can anticipate that courts, Congress, and administrative agencies will react and forge a path forward in light of the new decision.
There are deep legal nuances addressed in the court’s opinions, but in this post, we will focus on the information you need to understand the case and its potential impact on recent and future Federal regulations, specifically those addressing distance education.
To further complicate matters, we urge readers to keep an eye on the impact of Corner Post, Inc. v Board of Governors of the Federal Reserve System). This recent opinion expands when the statute of limitations begins for a plaintiff to challenge existing regulations.
If you take nothing else away from today’s blog post, understand that no Federal regulations were immediately overturned by this ruling. There will be legal challenges to existing Federal regulations in the future, but rules are the rules until they aren’t. We will keep you posted on court challenges as these recent opinions will likely affect many areas of life in the United States, including our work to comply with U.S. Department of Education regulations.
Congress delegates regulatory functions through statute to administrative agencies. The agency must interpret its authority within the limits provided by Congress. On occasion, regulations are challenged via lawsuit as exceeding statutory authority.
In 1984, when reviewing Environmental Protection Agency regulations, the U.S. Supreme Court created a new doctrine for interpretation of statutory authority in its opinion in Chevron U.S.A. Inc. v. Natural Resources Defense Council.
Under this doctrine, courts would defer to an executive agency when the statute was either silent or ambiguous in its interpretation, or there could be multiple reasonable interpretations. After the 1984 ruling, the “Chevron Doctrine” (which spawns the Chevron Deference) became the standing case law used by the courts.
It was noted in the Loper Bright Enterprises majority opinion and in other recent articles that the Supreme Court, since 2016, has moved away from the Chevron Deference in favor of other interpretive principles. In other words, the Supreme Court has downplayed the impact of overturning this doctrine by maintaining that since 2016, the court has not been giving deference to an agency’s interpretation of a statute and has instead used other methods to determine Congress’ meaning of a statute.
If the issues around the Chevron Deference and Loper Bright Enterprises weren’t complicated enough, we must also consider the Administrative Procedure Act. The APA is a Federal statutory law created by Congress in 1946 that provides specific steps that Federal agencies must follow to develop and issue regulations. We often reference the APA when the U.S. Department of Education initiates negotiated rulemaking. In addition to directing that the agency must provide transparency through the release of notifications and opportunities for public comment, the APA also directs that federal courts decide all relevant questions of law arising from challenges to the agency’s regulations. In fact, the APA states that the courts should apply “independent judgment” to determine if an agency exceeded its authority.
The Loper Bright Enterprises vs. Raimondo and Relentless Inc. v. Department of Commerce concluded with a 6-3 decision. Chief Justice Roberts in writing for the majority opinion, indicated that the legal question was whether the Chevron Doctrine, the deference to agency interpretation established in a 1984 court opinion, should be overruled or clarified.
The court held that Chevron is overruled, ruling thatthe Chevron Doctrine conflicts with the APA. The opinion states that the APA was enacted by Congress as a check on administrators who may act beyond what was contemplated in legislation. Specifically, the opinion cites the applicable statute, 5 U.S.C. 706, stating that the APA specifies that the courts, not agencies, will decide “all relevant questions of law” arising from the review of an agency’s action.
It is important to note that the opinion states that in overruling Chevron the court does not call into question prior cases that relied upon Chevron. This means that decisions in previous cases that relied on the Chevron Deference are still lawful and in effect despite the court’s change in interpretive methodology.
Several days after the Looper Bright Enterprise ruling, the court issued a ruling in Corner Post, Inc. v Board of Governors of the Federal Reserve System that deals with how the statute of limitations for challenging regulations should be calculated. Federal Statute, 28 U. S. C. §2401(a), directs that there is a time limit for a plaintiff to bring a civil claim against the United States. The legal challenge must be filed “within six years after the right of action first accrues.”
So, does the clock start ticking for those six years? Corner Post states that the six-year clock starts when the party is injured rather than the long-time practice of starting the clock when a regulation becomes final.
The majority opinion explained that they applied a long-standing legal principle, the traditional accrual rule, to determine when the injury came into existence for the statute of limitations to start. The court will look to when a particular plaintiff has cause of action or injury. The court said they rejected a special definition for purposes of regulatory review for failing to follow the APA.
What might this mean for higher education? Now that the statute of limitations has effectively been expanded to the time of injury rather than the time the regulation was released as final, we believe we will see court challenges increase in the years to come. In the Corner Post case, the business did not even exist when the six-year limit was reached. In this ruling, the Court declared that they can still claim injury and challenge the rule.
It is only logical that expanding the view of the start time for the statute of limitations to be the time of injury will cause court challenges to regulations to increase in the years to come. Long-standing higher education regulations may come under review. This could have massive implications and we are not sure why it has not received more attention from the general and higher education press.
Concurring opinions (when the justice(s) agree with the majority but add different legal principles) and dissenting opinions (when justice(s) disagree and have different interpretations of the law) are sometimes useful for understanding additional context and implications of the majority opinion. For more on the concurring and dissenting opinions for Loper Bright Enterprises and Corner Post, you may go to the “Postscript” section at the end of this post.
That is a good question! The Loper Bright Enterprises case has been sent back to the lower courts to re-litigate and review the statutory authority of the agency, but without the use of the Chevron Deference. How the courts will interpret the agency’s authority remains to be seen.
Additionally, the Corner Post case appears to offer an opportunity for significant expansion of eligible plaintiffs to challenge regulations. These challenges could include regulations that are decades old if there is a particular plaintiff who did not encounter an injury until many years later and is within the statute of limitations.
Congress sits in a prime position to mitigate the negative outcomes of these decisions. The concern about the influx of court challenges to regulations may pressure Congress to act. It is within Congress’ authority to amend the APA.
Relying on Congress indeed feels largely unlikely given its slow movement over the last many years. Policy analysts, including our colleagues at the American Council on Education (ACE), have long shared that the failure of Congress to act in a timely manner has caused the U.S. Department of Education to fill the gap with regulations. Some have described the Department’s heavy hand in regulation development as “legislating by agency action.” Jon Fansmith, Senior Vice President for Government and National Engagement at ACE wrote in his opinion essay in Inside Higher Ed, that it is laughable that Congress “will become models of efficient, detail-oriented legislative action.” The regulation developments may seem like a Band-Aid approach, but they have arguably been necessary considering the evolution of higher education since the last reauthorization of the Higher Education Act in 2008.
In amendments to or in the development of new statutes, Congress should consider that they have been placed on notice to develop less ambiguous statutory language, update outdated statutes, and/or, more specifically, address the subject matter expertise of the administrative agencies. Congress could even amend the existing federal statutes to specifically address the statute of limitations and agency authority in developing regulations. Is that a Pollyanna thought? Maybe, but one can hope.
We will need to watch future federal court decisions to see how the courts interpret and analyze statutory authority. We will need to be prepared for the likelihood that the different circuit courts may apply different interpretations of statutory authority. This would mean that we might not have uniform application of Federal regulations across states, which gets very exciting for institutions operating across state lines. It’s possible that the courts might still take into account an agency’s expertise in the interpretation of statute. If that happens, perhaps the expertise of the agency could still influence the interpretation of statute and the development of regulations.
What we are likely not to see, however, is any variation in the interpretation and application of Corner Post. The interpretation of that ruling is very clear, and, as a result, there will be the possibility that regulations that we believed to be beyond the statute of limitations and set in stone could be litigated.
It’s also important to note that legal challenges to regulations are not likely to be specific to only certain administrative agencies. Expect challenges to regulations developed by a wide range of agencies and not just the Department of Education.
It is worth noting that some policy analysts do not believe that these two decisions will create chaos or generate any great significant changes to the regulatory landscape. As shared by Inside Higher Ed,referring to the opinion of Jason Delisle, a nonresident senior policy fellow at the Urban Institute’s Center on Education Data and Policy, the Chevron Deference has not been consistently applied in the courts and the Supreme Court has not relied on it since 2016. As a result, there may be less significance to this decision.
An additional complication involves the invitation for massive growth in court challenges that these decisions (and several others by this Court) invite to be filed. If the rush to sue becomes real, the Federal Courts could become equally as bogged down as Congress.
Generally speaking, there are two areas in which agencies are affected. First, agency regulations could be subject to review if there is a plaintiff with a cause of action that has not exceeded the statute of limitations. Moving forward, the agency also will not have a thumb on the interpretation scale since courts will not be required to defer to the agency’s interpretation of its statutory authority to create regulations. It will still be important for the agency to continue to prepare its interpretation for consideration by the court, but the court will not be required to accept it. Second, when developing new regulations, agencies should be abundantly clear in expressing their statutory authority lest they find their regulations overturned by the courts.
U.S. Department of Education regulations are ripe for legal challenges. The ranking member of the U.S. Senate Committee on Health, Education, Labor, and Pensions (HELP), Bill Cassidy, prepared a letter to Secretary Cardona seeking answers from the Secretary by Friday, July 19, as to the possible impact of the overturned Chevron Deference on the Department. The letter expresses that the Loper Bright Enterprise decision is an opportunity for agencies to re-examine their roles relative to Congress.
The letter expressed concern about whether the Department would adopt and faithfully implement the new decision and provided a list of examples for which he maintains that the Department acted without authorization from Congress and “has flagrantly and repeatedly violated the law.” The questions submitted to Secretary Cardona very pointedly ask how the Department will change its processes and obtain greater involvement from Congress to address policy issues.
Several policy analysts have predicted regulatory areas that are ripe for a legal challenge.
The Center for American Progress (CAP) predicts that in addition to Student Debt Relief, Financial Value Transparency and Gainful Employment as well as Borrower Defense to Repayment may also be challenged. Our colleague Phil Hill with the On EdTech Newsletter shared his perspective that it is less likely that the Department can produce rules or guidance addressing Third Party Servicers and other distance education-related rules from this year’s negotiated rulemaking. And Jon Fansmith of ACE shared similar predictions of ripe issue areas, adding Title IX and pending regulations on state authorization and website accessibility that he believes “will face new, heightened scrutiny.”
These viewpoints signal the appetite for legal challenges to the Department’s actions.
The best thing for institutions to do is this: not jump to conclusions.
As previously stated, rules remain the rules until they are no longer rules. Compliance with existing rules is critical. We will notify you as changes occur.
The process of legal challenges to existing regulations will take time. It will take time for courts, agencies, and attorneys to determine a path to successfully challenge regulations, and at this time, that path is not entirely clear. There is potential for legal challenges, but it is unclear the influence the Department will have in expressing its statutory authority. We can expect that the development of new regulations “should” include a stronger emphasis on the Department’s authority to develop regulations.
This is just the first review from SAN and WCET on the impact of the court decisions. We will likely be following the aftermath of these new decisions for the next several years. Stay tuned as we share the next steps by courts, Congress, administrative agencies, and attorneys to untangle the short and long-term effects of Loper Bright Enterprises and Corner Post.
~ Cheryl, Russ, and Van
Senior Director, State Authorization Network
& WCET Policy Innovations
Executive Director, WCET
Vice President for Technology-Enhanced Education, WICHE
Chief Strategy Officer,
WCET
Concurring opinions were provided by Justice Thomas and Justice Gorsuch to support the majority opinion while further addressing the issues of the Constitution’s separation of powers and the understanding of the common law principle of stare decisis (legal precedent).
The dissenting opinion, written by Justice Kagan also on behalf of Justice Sotomayor and Justice Jackson, indicated the belief that Congress understands that there could be ambiguities and would prefer interpretation by the responsible agency and not the court. The primary concern raised in the dissenting opinion is that agencies have expertise in these administrative areas, courts do not. The agencies were charged by Congress with administering the statute and therefore best positioned to address an ambiguity or gap if after all normal interpretive tools, the court cannot determine Congress’ intent.
Justice Kagan maintains that the statutory conflict with the APA is “generally indeterminate” indicating that the APA did not prescribe any standard of review for construing statutes. Additionally, the court maintains its authority by a determination of whether the agency “construed (the statute it administers) reasonably.”
The dissenting opinion states that Congress often passes statutes that contain ambiguities and gaps that could be considered intentional by Congress, believing that the regulatory experts are in a better position to fill the gaps. The argument was made that when considering the role of the administrative agency Congress deems them expert, experienced, and politically accountable. Congress confers on the agency the authority to develop rules that implement the statute that is subject to ambiguity or gap.
The concurring opinions provided by Justice Barrett and Justice Kavanaugh support the majority opinion that a claim brought under the Administrative Procedures Act “accrues” (i.e. starts) when the plaintiff is injured by the agency rule. Justice Barrett’s argument relies on previous case law to indicate that a litigant cannot bring an APA claim unless and until they suffer an injury. She argues that if the current statute is a poor fit for modern APA litigation, then Congress must create the solution to enact a specific statute of limitations for claims brought based upon the APA. Justice Kavanaugh argues that he believes it is a critical point that the plaintiff can obtain relief from the case only because the APA in federal statute, 5 U.S. Code 706, authorizes the court to hold unlawful and set aside regulations.
The dissenting opinion, provided by Justice Jackson, who wrote the dissenting opinion to include Justice Sotomayor and Justice Kagan, maintained that there is a hazard when the court determines for all purposes when the cause of action first accrues. Additionally, the dissenting opinion raised their concern of manipulation by decades-old trade groups finding a plaintiff new to the regulations to achieve the requirement of the particular plaintiff with a cause of action filing a challenge within the six-year statute of limitations.