Earlier this summer at the terrific Rethinking Judicial Deference Conference sponsored by George Mason’s Center for the Study of the Administrative State, Cathy Sharkey presented a provocative paper entitled In the Wake of Chevron’s Retreat.

In this paper, Professor Sharkey notes that last year the Supreme Court engaged in two types of narrowing of Chevron deference — the judicial doctrine that instructs courts to defer to an agency’s reasonable interpretation of an ambiguous statute that the agency administers. The first type of narrowing appeared in King v. Burwell via Chief Justice Roberts’s introduction of a more robust major questions exception to Chevron deference. The King v. Burwell narrowing of Chevron deference has received extensive attention in law and policy circles (for instance, I’ve argued that this context-specific approach is Chevron‘s future after Justice Scalia’s death).

Professor Sharkey, however, argues that this type of narrowing is an inferior approach. Instead, she turns to a second type of narrowing — one that has received far less scholarly attention — that emerged in the Court’s decision in Michigan v. EPA. There, the Court rejected the EPA’s regulation at Chevron Step Two, holding that the agency’s interpretation of the statutory language “appropriate and necessary” to not include consideration of costs was unreasonable. In so doing, the Court cited State Farm’s hard-look review standard. Professor Sharkey argues (at 5) that this State Farm narrowing of Chevron deference is a much better future than one that embraces King v. Burwell’s major questions doctrine:

This second form of Chevron retreat—widening the space for the application of State Farm—is fundamentally distinct from setting Chevron aside. It acknowledges that the realms of discretionary agency action like rulemaking and agency statutory interpretation can be inextricably linked—as is well illustrated by questions pertaining to the role of cost-benefit analysis in agency regulation. Moreover, prospects for improved regulations, with agencies responding to the specter of heightened judicial scrutiny by taking actions to improve internal decision-making processes, lie in the wake of this type of Chevron retreat.

In re-reading the paper to write up this AdLaw Bridge Series post, I was struck with the similarities between Professor Sharkey’s argument and the approach Justice Kennedy, writing for the Court this Term, adopted in Encino Motorcars, LLC v. Navarro.  In particular, the Encino Court held (slip. op. at 8) that “Chevron deference is not warranted where the regulation is ‘procedurally defective’—that is, where the agency errs by failing to follow the correct procedures in issuing the regulation.” Others on this blog have debated the impact of Encino on Chevron deference at length here, here, and here. So I won’t repeat those arguments here. But Professor Sharkey’s paper provides an important theoretical and doctrinal foundation for the type of State Farm-infused Chevron deference regime that Justice Kennedy perhaps began to articulate in Encino.

Definitely give the full paper a read. The current draft isn’t on SSRN yet, but the conference draft is here.

This post is part of the Administrative Law Bridge Series, which highlights terrific scholarship in administrative law and regulation to help bridge the gap between theory and practice in the regulatory state. The Series is further explained here, and all posts in the Series can be found here.