The demise of “Chevron Deference” on the federal level has also arrived in the Arizona state courts

This article originally appeared in The Maricopa Lawyer.

Changes in federal and many states’ laws (e.g., just last month in Arizona) may put industry on more equal footing with agencies when interpreting rules and permit terms. If agencies have overreached on these interpretations, companies now have a better chance to challenge these interpretations (or prepare to defend their preferred interpretation if challenged by the Agency). The key is to intentionally identify and analyze – in advance – which aggressive or objectionable agency interpretations you are impacted by and are candidates worth challenging, either in a permit renewal/modification, or by preparing to defend an enforcement case. In contrast to deference-focused reviews of agency interpretations, it is now possible to defend your position in court based on logical interpretations of rules and permit terms.

Background

In defending regulated industries and challenging administrative agency decisions at the federal level, defense attorneys have historically been at a disadvantage in federal court based on the historical decision in Chevron USA v. Natural Resources Defense Council, 467 U.S. 837 (1984).  Commonly referred to as “Chevron Deference,” the federal courts generally adopted the following position in reviewing administrative agency decisions:

With regard to judicial review of an agency’s construction of the statute which it administers, if Congress has not directly spoken to the precise question at issue, the question for the Court is whether the agency’s interpretation is a permissible construction of the statute.  “We have long recognized that considerable weight should be accorded to an executive department’s construction of a statutory scheme it is entrusted to administer, and the principle of deference to administrative determinations.”  (467 U.S. at 844)

Since 1984, Chevron Deference has been cited in at least 17,661 federal cases, and, in such cases, the agencies almost always won.

Since 1983, Arizona courts have similarly determined that an agency’s interpretation of a statute or regulation which it implements is entitled to great weight. Although the ultimate responsibility rested with the Courts, the [Arizona] appellate courts do give more “deference” to an Agency’s long-standing interpretation of its own rules. See Marlar v. State, 666 P.2d 504 (Ariz. App. 1983).

Federal and State Agency Deference Overturned

Good news! In June 2024, the U. S. Supreme Court overturned Chevron Deference in the landmark decision Loper Bright Enterprises v. Raimondo, 603 U.S. 369, 144 S.Ct. 2244 (2024). In the Loper Bright case, the SCOTUS overruled Chevron Deference and determined that the Administrative Procedures Act (APA) requires federal courts to exercise independent judgment in deciding whether an agency has acted within its statutory authority and federal courts should not “defer” to an agency’s legal interpretation just because the statute is ambiguous. (144 S.Ct. at 2273)

The law in Arizona has also abandoned agency deference. Arizona courts have now implemented the Arizona legislature’s mandate to drop Chevron-like deference to agency interpretations.  In 2018 and 2021, the Arizona legislature amended Arizona Revised Statute § 12-910(F), which governs judicial review of administrative agency decisions such that, in a regulated-party proceeding, Arizona courts should decide questions of law and fact interpreting administrative actions without deference to prior agency interpretations.

AZ Rev Stat § 12-910 (F) (2024) provides:

“F.  . . . In a proceeding brought by or against the regulated party, the court shall decide all questions of law, including the interpretation of a constitutional or statutory provision or a rule adopted by an agency, without deference to any previous determination that may have been made on the question by the agency. In a proceeding brought by or against the regulated party, the court shall decide all questions of fact without deference to any previous determination that may have been made on the question by the agency. Notwithstanding any other law, this subsection applies in any action for judicial review of any agency action that is authorized by law.”

After reviewing the administrative record and supporting evidence, the Arizona courts may affirm, reverse, modify, or vacate and remand the agency action. Now is the time to create the administrative record to support your position to win your case!

Two recent Arizona cases, S. Arizona Home Bldg. Assoc. v. Town of Marana, 522 P.3d 671, 254 Ariz. 281 (Ariz. App. 2023) and Simms v. Simms, Case No. CA-CV23-0139 (Ariz. App. March 18, 2025), have interpreted A.R.S. § 12-910(F) and specifically curtailed deference to agency interpretations by the Arizona Courts. As stated in Simms:

“Now, in regulated-party cases, reviewing courts do not defer to an agency’s legal interpretations.  As 910(F) puts it, “[i]n proceeding” involving “the regulated party,” courts “decide all questions of law.” Questions of law include “the interpretation of a constitutional or statutory provision or a rule adopted by an agency[.]”  A.R.S. § 12-910(F). And reviewing courts no longer defer even when an agency has interpreted a statute or regulation in the same way for a long time.  Id. (instructing courts to decide “all” legal questions “without deference to any previous determination that may have been made on the question by the agency”).  Put differently, reviewing courts have the final say on what the law is.”  (See, Simms ¶31)

What’s Left?

After the demise of both Chevron deference and Arizona State deference, what is left? Attorneys must be prepared to address agency claims to deference under a U. S. Supreme Court decision from 1944. “Although the rulings, interpretation, and opinions of the administrator under the [Fair Labor Standards] Act do not control judicial decisions, they do constitute a body of experienced and informed judgment to which Courts and litigants may property resort for guidance.” See, Skidmore v. Swift & Company, 323 U.S. 134, 140 (1944) (commonly referred to as “Skidmore Deference.”)

Arizona state courts will follow a similar interpretation of state agency positions on laws, rules, or regulations. “Agency action also sometimes involves expertise. This court has long recognized that a reviewing court “may not function as a ‘super agency’ and substitute its own judgment for that of the agency where . . .  agency expertise [is] involved.”  (See, Simms ¶57.) “Although reviewing courts must decide all legal and factual questions without deferring, if an agency uses discretion or expertise in other ways referring courts can defer on those matters.” (See, Simms ¶58.)

Conclusion

The Supreme Court’s decision in Loper Bright now requires federal courts to exercise their independent judgment in deciding if the agency has acted within its statutory authority and federal courts may not defer to an agency’s interpretation of the law because a statute is ambiguous. Now, Arizona law and two recent Arizona state court cases require Arizona courts to no longer give deference to Arizona administrative agencies on both questions of law and fact when reviewing agency action involving regulated parties. But there remains some uncertainty in the level of deference that will be given by Arizona courts to Arizona agencies. Accordingly, we recommend that you closely monitor State administrative law decisions to see if this trend continues.

We strongly recommend that regulated industries closely monitor the legislative and/or administrative agency rulemaking processes and comment upon laws, rules, and regulations that may affect your business. These efforts can create an administrative record that supports a logical or favorable interpretation of administrative law, rules, or regulations. You should also consider identifying current agency interpretations of regulations that impact your bottom line and prepare to challenge the agency, knowing that courts will not just defer to the agency’s interpretation, even if it is a historical position of the agency. Although federal or Arizona state courts may consider rulings, interpretations, or opinions of the applicable agency, the agency’s position will only provide an experienced and informed judgment.

This publication is intended for general informational purposes only and does not constitute legal advice or a solicitation to provide legal services. The information in this publication is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this information without seeking professional legal counsel. The views and opinions expressed herein represent those of the individual author only and are not necessarily the views of Clark Hill PLC.