July 9, 2024 - In the waning days of its recent term, the Supreme Court released three critical decisions each of which is important in a different way. Taken together, the decisions will profoundly reduce the power of the federal administrative agencies.
In Loper Bright Enterprises v. Raimondo, the Court overturned the “Chevron Doctrine” which required courts to defer to “permissible” agency interpretations of the statutes those agencies administer.
Willkie notes that the Loper Bright majority concludes that Chevron “cannot be squared with the constitutional assignment of responsibility for declaring what the law is to the judiciary or with the Administrative Procedure Act of 1946 (the “APA”). Thus, instead of deferring to an agency’s reading of an ambiguous statute so long as it is “permissible,” a reviewing court must now use every tool at its disposal to determine the “best” meaning of the statute and resolve the ambiguity itself.” The Court also concluded that the APA itself does not anticipate deference to the agencies’ statutory constructions. Ultimately, the Court ruled that courts–not agencies–are to decide relevant questions of law and interpret statutory provisions.
In SEC v. Jarkesy, the Court that when the SEC seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles a defendant to a jury trial and the SEC cannot try such a defendant through its own, in-house, administrative proceeding. According to a recent memo from Skadden, “[d]eciding that a defendant is entitled to a jury trial when the SEC seeks civil penalties for securities fraud violations was “straightforward,” according to the Court. The Seventh Amendment guarantees ‘the right of trial by jury’ in ‘[s]uits at common law.’ That means there is a right to a jury trial in all suits not based in ‘equity or admiralty jurisdiction.’ When it comes to statutory claims, the Seventh Amendment guarantees a trial by jury when the claim is legal as opposed to equitable. One way to determine whether a claim is legal or equitable is by looking to the type of remedy involved. Money damages are considered a legal remedy — implicating the Seventh Amendment jury right — if they are meant to punish or deter the defendant.”
Finally, in Corner Post v. Board of Governors of the Federal Reserve System, a claim under the Administrative Procedure Act (the “APA”) does not accrue for purposes of its 6-year statute of limitations until the plaintiff is injured by final agency action (and not from the finalization of the rule). According to Amy Howe, “the justices significantly expanded plaintiffs’ ability to sue federal regulators, ruling that the statute of limitations to challenge an action by a federal agency begins to run when the plaintiff is injured by the action, even if – as happened in this case – that happens long after the agency’s action occurs.”
Howe further noted that Justice Barrett, writing for the majority, “characterized the case as “straightforward.” But Justice Jackson, writing for the dissenting liberal bloc, warned that the decision could have “staggering” implications, particularly in light of the court’s decision on June 28 eliminating the doctrine of deference to an agency’s reasonable interpretation of the laws that it administers.”
Importantly, Justice Kavanaugh also weighed in on a question of what power federal courts have when it comes to agency actions that they deem improper? As Howe wrote, “Kavanaugh rejected the Biden administration’s contention that the courts can only bar agencies from enforcing the improper rule against a particular challenger. Instead, he maintained, the APA allows courts to invalidate the rule more broadly. A contrary rule, he suggested, “would revolutionize long-settled administrative law — shutting the door on entire classes of everyday administrative law cases.”
Indeed, as Skadden notes, “Corner Post is likely to have an important impact on the regulatory landscape, especially given the Supreme Court’s overruling of Chevron deference just a few days earlier in Loper Bright Enterprises v. Raimondo. Although the Court in Loper Bright stated it was not calling into question earlier decisions relying on the Chevron framework to uphold particular agency actions, (1) agency interpretations underlying those decisions may now be subject to challenge, and (2) challengers may be able to disturb prior circuit precedent if they can point to special justifications, like poor reasoning or unworkability, for overruling those earlier decisions now that Chevron itself cannot justify those outcomes.”
Finally, it is especially notable that while each of the three decisions related to a different federal agency, their impact will cross all agencies. Thus, the Chevron Doctrine, which provided a built-in advantage to agencies dealing with ambiguous statutory language will no longer be available to any agency. Similarly, while the Jarkesy decision applied to the SEC’s administrative court, it will apply equally to all others such as the CFTC, the Consumer Financial Protection Bureau, the Department of Health and Human Services and Food and Drug Administration, the Department of the Treasury, the Environmental Protection Agency, the Federal Communications Commission, and the Department of Transportation. Corner Post, too, will apply to APA challenges to any agency rules.
All in all, a tough week for the administrative state.
