The Supreme Court’s Watershed Week
Few debates animate the business world like those involving the power of federal regulatory agencies.
How much discretion should regulators have in writing the rules that Congress authorizes? What entities fall within their jurisdictions when existing industries develop or new ones emerge? What guidelines must they follow when implementing their rules or seeking to enforce them?
Questions like these and countless others have split opinion since the very beginnings of the federal regulatory state. But seldom has the discourse been so divisive.
Now, the Supreme Court has handed down three watershed decisions that promise to reshape the discourse and the regulatory state itself.
In this edition of Vantage Point, we look at each of the decisions in turn.
Loper Bright: Taking the (Interpretive) Power Back
Congress often passes laws that direct or authorize regulators to act. But when those laws are silent or ambiguous on an issue at the center of a dispute, who gets to fill in the gaps?
That was in essence the question at the heart of Loper Bright Enterprises v. Raimondo — a decision that shifts interpretive power away from regulators and into the hands of federal courts.
The industry at issue — commercial fishing — might not be one you often think about. But as far as the underlying administrative law principles go, this case is just about as big as it gets.
For more than 40 years, where a federal law was silent or ambiguous on a particular interpretative question, courts had to defer to regulators’ interpretation of that law, as long as the interpretation was rational or reasonable.
This requirement, named the Chevron doctrine for the private party in the case that enshrined it, rests on a variety of theories, including that Congress implicitly delegates such interpretative questions to agencies.
The premise was that agencies’ experience with the statutory scheme, expertise in technical and scientific issues, and political accountability make them better situated than judges to fill gaps in statutory schemes.
But in striking down Chevron, the Court has flipped that premise on its head.
Just as in the pre-Chevron world (or in Chevron-era cases not involving administrative agencies), courts must once again apply their independent judgment to determine what statutes mean, and “may not defer to an agency interpretation of the law simply because a statute is ambiguous.”
Looking ahead, Loper Bright could encourage a wave of challenges to rules in a wide range of areas where agencies have regulated in reliance on Chevron deference, or invoke expansive interpretations of vague or ambiguous statutes. Areas like the environment, labor, tech, finance, healthcare, and more.
Emboldened litigants will see this new environment as an opportunity to limit aggressive assertions of agency authority and potentially defeat regulations they oppose — and Loper Bright as a key tool for seizing it.
Read our full coverage.
Corner Post Resets the Clock
How long do plaintiffs have to challenge regulatory actions under the Administrative Procedure Act?
Had you asked before the recent Supreme Court decision in Corner Post, Inc. v. Board of Governors of the Federal Reserve, your answer would have been six years after a right of action first accrues.
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But today, your answer ... remains six years after a right of action first accrues. The difference — and it’s an important one — is when the clock starts ticking.
Here’s what happened:
After Corner Post, a North Dakota truckstop, challenged a debit-card fee rule enacted by the Federal Reserve Board, a federal district court dismissed the case — and an appellate court affirmed the dismissal.
The reason, the lower courts said, was straightforward: The right of action began accruing when the rule under dispute was enacted in 2011. But Corner Post didn’t open until 2018 — and didn’t join the suit until 2021 — well outside the six-year statute of limitations.
Yet the Supreme Court overruled them both, holding that the six-year limit cannot begin to run until a plaintiff is injured, because only upon injury does the plaintiff’s right of action “accrue” under the statute.
In the eyes of the dissenting Justices, the Court’s opinion will lengthen or perhaps even eliminate the statute of limitations for new challenges to old regulations, as long as a particular plaintiff initiates a challenge within six years of forming or otherwise becoming subject to the regulation.
Coupled with Loper Bright, the dissent says, Corner Post will create a “tsunami of lawsuits against agencies,” a result that Congress could not have intended.
The majority, of course, believes otherwise, arguing that “alleged congressional intent” cannot supersede clear statutory text. Congress could have chosen different language, the majority wrote, but it didn’t.
There is little here on which the majority and dissenting Justices agree, except that Congress remains free to amend the statute if it wants a different time period to govern claims under the Administrative Procedure Act.
But until Congress does so, Corner Post opens the door to challenges to a wide range of regulations long understood to be past the point of judicial review.
Read our full coverage.
In Jarkesy, the SEC — and Other Agencies — Lose Home-Field Advantage
When the SEC brings an enforcement action for securities fraud, it has long enjoyed the luxury of choice: adjudicate the matter in federal court, or do so through its own administrative proceedings.
The Dodd-Frank Act granted the SEC this choice. But choice can be fleeting, and so it is proving here.
In SEC v. Jarkesy, a fraud case seeking civil penalties against an investment adviser and his firm, the Supreme Court affirmed a Fifth Circuit decision ruling that adjudicating the matter in-house violated the defendant’s Seventh Amendment right to a jury trial. The SEC now must try securities fraud cases in federal court, where that right is available.
Jarkesy involved fraud claims asserted by one agency. But as the dissenting Justices made clear, its impact will be far broader, reaching the dozens of other agencies that have traditionally used their in-house courts to assert similar kinds of claims.
Jarkesy imposes serious constraints on federal agencies’ ability to use their in-house courts to adjudicate fraud claims seeking to impose civil penalties, and could have broader consequences for a range of other claims and remedies that agencies have long pursued in their preferred home-court forums.
Read our full coverage.
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