The fishermen were OK with having observers on board... until they had to pay for them.
Since 1976, American fishing boats have been required to carry federal monitors. These observers come aboard for fishing trips to gather data for the National Marine Fisheries Service ("NMFS"). Their work has shaped U.S. fishing policy for decades.
But in 2020, the NMFS ordered some fisheries to pay for monitoring... which cost more than $700 per day by some government estimates.
The fishermen disagreed with this new regulation... so they sued.
The case went all the way to the Supreme Court. And last Wednesday, the court heard Loper Bright Enterprises v. Raimondo, a lawsuit on behalf of the fishermen. We should know its ruling in the next few months.
This is a big case for the fishermen. But it's about much more than just a fishing regulation... because with this decision, America's entire regulatory landscape hangs in the balance.
Let me explain...
The Supreme Court isn't really interested in fish. It's examining the past 40 years of U.S. legal precedent...
You see, in 1984, the Supreme Court heard a case called Chevron USA v. Natural Resources Defense Council. This case dealt with some unclear language in an amendment to the Clean Air Act of 1963.
According to the amendment, the U.S. Environmental Protection Agency ("EPA") was required to review any new air pollution "sources" before they could be built.
Now, the Clean Air Act hadn't defined what a "source" of air pollution was. So at first, the EPA took "source" to mean any change at a factory or plant that could add to pollution.
Then, in 1981, the EPA changed its definition. It said only factories and plants themselves could be considered "sources" of air pollution. This was good news for many companies... It greatly reduced the burden on businesses.
But not everyone accepted the new definition so easily. A major advocacy group, the Natural Resources Defense Council, filed a lawsuit. It said that the EPA couldn't just change the interpretation of laws like that.
The case went to the Supreme Court in 1984... And the EPA won a unanimous decision. According to the court...
Federal judges – who have no constituency – have a duty to respect legitimate policy choices made by those who do.
In other words, the agencies are the experts. That means they should be able to interpret vagueness in the law better than anyone else.
The Chevron precedent has been cited in thousands of court cases since 1984. It defines regulatory law in America.
And this summer, the fishermen aren't just questioning who should pay the monitors' salary... They're asking the court to rule on Chevron again.
If the court sides with the fisheries, it might not stop at changing boat monitors' payrolls. Instead, it could completely roll back the 1984 ruling... and wipe the regulatory slate clean.
This outcome would have huge implications for just about every company in the market. But the most tightly regulated sectors are likely to benefit the most... like health care, energy, and financials, to name a few.
Still, this isn't a done deal yet. Reversing Chevron would pose big logistical headaches. The court may just choose to define the precedent more clearly or simply leave it alone.
Investors should watch this story closely, though. We've never been closer to a repeal of Chevron than we are today... and you shouldn't get caught flat-footed if it happens.
The nine justices have U.S. regulation in their sights. It may be a good time to invest in highly regulated industries, in case they pull the trigger.
Good investing,
Sean Michael Cummings
Further Reading
Election years might feel like a dangerous time to invest. After all, election cycles are about change... which can cause uncertainty for voters and investors alike. But historically, the stock market reacts well to elections... Learn more here.
"FedNow will revolutionize the way finance works in the U.S," Eric Wade writes. The "digital dollar" finally arrived last year. And as more Americans and banks start adopting this fast-money technology, it could help jump-start the next crypto bull market... Read more here.
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