Don’t Sweat Chevron’s End Either

So there I was, reading through the U.S. Supreme Court’s recent rulings, when the phone rang. On the other end was my friend the general counsel, who apparently had been doing the same. “Oh man,” he said, launching into a diatribe. “This ruling to overturn the Chevron doctrine is going to be a disaster for compliance!” 

Hmmm, I said, are you sure about that? Because yes, I agree that ending Chevron deference is a terrible idea — but exactly how does it lead to the ruin of corporate compliance efforts? 

“Think of all that Justice Department guidance on effective compliance programs!” the general counsel said. “It’s all worth nothing now!” 

That was the moment I knew I had to write a post about the Chevron ruling’s implications for corporate compliance, because I believe my friend the general counsel is wrong.

First, a bit of background on this general counsel. These days he heads up the legal team of a mid-sized, privately held manufacturing concern, and previously he ran ethics and compliance for a large publicly traded manufacturer; a fair number of you might know him or his employer by name. He’s one of ours, a true believer in the importance of corporate ethics and compliance programs. 

Second, let’s review what the Supreme Court just did. For the last 40 years, “Chevron doctrine” said that judges should defer to federal agencies when a law is ambiguous about rules and regulations adopted to put that law into effect. Then on June 28 the Supreme Court issued Loper Bright Enterprises v. Raimondo, overturning the Chevron doctrine. Federal district court judges can now use their own judgment to decide whether rules and regulations are proper — even when those judges have no special expertise in that field, while the regulators do.

A ruling that will create more uncertainty than it solves? Yes. An improper power grab by the Supreme Court? Absolutely. A tectonic shift in regulatory law and administrative procedure? For sure. 

But a gut punch to corporate compliance programs? I just don’t see it.

Remember What Really Matters

As we ponder the Loper ruling (and its fellow traveler the Snyder ruling, narrowing the scope of federal anti-corruption law), compliance officers need to keep two questions top of mind:

• Does this ruling reduce my organization’s compliance risks? 
• Does this ruling reduce the capabilities my compliance program needs to have? 

For both rulings, the answer to both questions is no. All the compliance risks, objectives, challenges, and burdens your company had before the rulings, it still has today. That state of affairs is not likely to change any time soon.

Go back to my friend the general counsel, and his statement that the Loper ruling means the Justice Department guidelines for effective compliance programs are no longer worth a hill of beans. That’s just flat-out wrong; the general counsel is confusing the procedure to adopt new regulations with the procedure to settle criminal investigations. The two are wholly different things. 

The Justice Department’s guidelines for effective compliance programs are just that: guidelines. They aren’t rules subject to the Administrative Procedures Act, and a company can’t challenge their validity in court. The Justice Department itself can ignore the guidelines whenever it wants, or revise them whenever it wants (which it does, on a regular basis).

The other sacred text for corporate compliance programs is the U.S. Sentencing Guidelines and its seven elements of an effective compliance program. Well, those seven elements aren’t going away any time soon either — and again, they’re just guidelines. Judges don’t have to follow them.

In other words, the two overriding authorities for corporate compliance programs — the U.S. Sentencing Guidelines, and the Justice Department’s guidelines to evaluate corporate compliance programs — are both outside the scope of Loper, and always have been. The new freedom federal judges have to discard agencies’ rules and regulations has no bearing on how federal prosecutors assess the strength of your compliance program. Those criteria remain unchanged.

Other Post-Chevron Chaos

My friend the general counsel did raise good points about regulatory uncertainty now that Loper has been thrust upon us. Judges will be able to invalidate rules more often, and regulatory agencies will be more cautious when adopting future regulation, he said. What might that mean for compliance programs? 

I’m sorry, but I don’t think any of that will matter much for corporate compliance programs either. 

First, let’s remember that Chevron deference was always more ephemeral than real anyway. Lots of judges have ignored Chevron deference over the years when assessing rules adopted by the Securities and Exchange Commission. Judges have ignored it when assessing rules from other agencies too. (Lookin’ at you, judge Matthew Kacsmaryk, who ignored decades of FDA evidence and rules to declare that the abortion drug mifepristone was improperly approved.) Through all that time, would you say your compliance risks have decreased? 

Second, the court battles that right-wing groups will mount to invalidate various regulations — while the prospect of those fights is very real, the consequences of them are likely to be years away. Are you really going to dismantle your compliance program today, betting that your regulatory burdens will cease to exist in 2027, 2029, or 2031? Of course not. 

Third, if regulators are more hesitant about adopting new rules, their default will be to enforce existing rules more vigorously — that is, “regulation by enforcement,” supported through speeches and guidelines and other administrative ephemera that fall just short of rules, rather than actual rules. 

We already see that in FCPA and SOX compliance today, where compliance pundits (me included) pore over every word of a settlement order or a speech somebody gives at a conference, to discern some greater meaning and applicability for other corporations. Then you take that advice and try to apply it to your compliance program as you best see fit.

None of that is going to change just because Chevron went away. The public likely will suffer from a hobbled executive branch, but that’s a problem above the compliance officer’s pay grade. Your job is to keep your company’s ethics and compliance act together as much as possible in today’s complicated world. That duty remains, same as it ever was.