Loper Bright instructed courts to rework how they review challenges to agency decision making and no longer defer to agency construction of statutes. But one critical question remains—how and when courts should engage in a different type of review: the deferential “arbitrary and capricious” standard. In applying this standard post-Loper Bright, courts face a dual risk. First, they may be too hard on government agencies and end up substituting the policy judgments of the court for those of agency experts; State Farm arbitrariness review should be highly deferential. But second, if they engage in this deferential review too early in the process—merging it together with de novo legal review—they may be committing the sin of Chevron and deferring to agencies on legal questions of statutory construction. To avoid this pitfall, this paper lays out a simple formula for courts, combining a decades-long review of statutory and judicial history with an application of the Supreme Court’s most recent decisions.

This article makes two arguments. First, leaning on cases from before the enactment of the Administrative Procedure Act to the present, this paper argues that State Farm arbitrariness review should be extremely deferential to agency decision making. So long as the agency’s action is “reasonable and reasonably explained,” then courts have no role in substituting their own judgment for that of the agency’s. Second, the Supreme Court was clear in both Loper Bright Enterprises v. Raimondo and an even-more recent case, Seven County Infrastructure v. Eagle County, that de novo legal review and deferential arbitrariness review are two distinct and different steps. If a court conflates the two steps—and some have—it will smuggle deference into legal review and risk a Chevron redux.

Using hypotheticals and real-life cases, including Loper Bright and its sister case Relentless on remand, this paper establishes a clear path for courts to follow. This paper’s recommendation might seem paradoxical: courts should both go easier on agencies when reviewing discretionary decision making for arbitrariness, while being stricter when analyzing whether an agency is behaving lawfully. But this is consistent with the Supreme Court’s guidance—courts must sharply distinguish these two steps and their differing standards of review.

Continue reading Dodging Chevron’s Redux: The Proper Place for State Farm Arbitrary and Capricious