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Administrative Law: The New Landscape for Regulated Businesses
BOSTON – (July 31, 2024) – The New England Legal Foundation and Weil, Gotshal & Manges LLP have collaborated on a detailed analysis of four pivotal administrative law cases from the Supreme Court’s 2023-2024 term. This term profoundly influenced administrative law, examining the balance of power between Executive Branch agencies and the other branches of our federal system. The Court ruled in favor of the agency in CFPB v. Cmty. Fin. Servs. Ass’n of Am. but against agencies in SEC v. Jarkesy, Loper Bright Enterprises v. Raimondo, and Corner Post, Inc. v. Bd. of Governors of the Fed. Reserve Sys. The unifying theme is the separation of powers, reflecting the Court’s ongoing effort to ensure that each branch performs only the functions assigned by the Constitution. These landmark decisions will refine the role of administrative agencies and affect the liberties of individuals, corporations, and other entities for years to come.
Case Summaries and Implications:
SEC v. Jarkesy, No. 22–859 (June 27, 2024)
- Opinion by: Chief Justice Roberts, for the majority (joined by Justices Alito, Gorsuch, Kavanaugh, and Barrett). Justice Gorsuch concurred (joined by Justice Thomas). Justice Sotomayor dissented (joined by Justices Kagan and Jackson).
- Holding: The SEC cannot prosecute claims seeking civil penalties in its administrative courts.
- Background: The Court held that the SEC’s use of its in-house courts to impose civil penalties for securities fraud violated the Seventh Amendment’s right to a jury trial. Chief Justice Roberts, writing for the majority, emphasized the need for such claims to be tried by a jury, as they are akin to common law fraud.
- Implications: This decision significantly limits the SEC’s enforcement power and could affect other agencies that impose civil penalties through administrative proceedings. It emphasizes the need for procedural protections for defendants and is likely to shift many enforcement actions to federal courts.
Loper Bright Enterprises v. Raimondo, No. 22–451 (June 28, 2024)
- Opinion by: Chief Justice Roberts, for the majority (joined by Justices Thomas, Alito, Gorsuch, Kavanaugh, and Barrett). Justices Thomas and Gorsuch concurred. Justice Kagan dissented (joined by Justices Sotomayor and Jackson).
- Holding: The Court overturned Chevron v. NRDC, asserting that courts must exercise their independent judgment on all legal questions, rather than deferring to reasonable agency interpretations of ambiguous provisions.
- Background: Chief Justice Roberts, leading the majority, asserted that the Administrative Procedure Act requires courts to independently decide legal questions without deferring to agencies’ interpretations.
- Implications: This ruling will force agencies to adhere more strictly to statutory text and will likely lead to increased judicial scrutiny of agency rulemaking. It may also encourage challenges to existing regulations and reshape administrative litigation.
Corner Post, Inc. v. Bd. of Governors of the Fed. Reserve Sys., No. 22–1008 (July 1, 2024)
- Opinion by: Justice Barrett, for the majority (joined by Chief Justice Roberts and Justices Thomas, Alito, Gorsuch, and Kavanaugh). Justice Jackson dissented (joined by Justices Sotomayor and Kagan).
- Holding: The six-year statute of limitations for challenges to agency rules under the APA begins when the plaintiff first suffers the injury required to press the claim in court.
- Background: This decision allows regulated entities to challenge agency rules long after their promulgation, based on when the entity first experiences harm from the rule.
- Implications: This ruling could result in more challenges to long-standing agency rules and might lead to strategic litigation by newly formed entities. It provides businesses and industry groups with new opportunities to challenge regulatory frameworks.
CFPB v. Cmty. Fin. Servs. Ass’n of Am., No. 22–448 (May 16, 2024)
- Opinion by: Justice Thomas, for the majority (joined by Chief Justice Roberts and Justices Sotomayor, Kagan, Kavanaugh, Barrett, and Jackson). Justice Kagan concurred (joined by Justices Sotomayor, Kavanaugh, and Barrett). Justice Alito dissented (joined by Justice Gorsuch).
- Holding: The Court upheld the CFPB’s funding mechanism, ruling it does not violate the Appropriations Clause.
- Background: The decision confirms that the CFPB’s method of funding, drawing from the Federal Reserve System, is constitutionally sound. This reaffirms the agency’s financial independence as sanctioned by Congress.
- Implications: The ruling solidifies the constitutionality of innovative funding schemes for federal agencies, ensuring that the Appropriations Clause is satisfied by congressional authorization of the source and purpose of funds.
Conclusion
These decisions collectively highlight the Supreme Court’s commitment to reinforcing the separation of powers and ensuring judicial oversight over administrative agencies. By clarifying the roles and limits of these agencies, the Court’s rulings will likely prompt significant adjustments in how federal agencies operate and enforce regulations, shaping administrative law for the foreseeable future.
Read the full report here.
CONTRIBUTING AUTHORS:
Mark A. Perry, Josh Wesneski & Jacob Altik
Appeals and Strategic Counseling
Weil, Gotshal & Manges LLP
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About the New England Legal Foundation: Founded in 1977, the New England Legal Foundation (NELF – www.newenglandlegal.org) is the leading non-partisan, non-profit public interest law firm in the region dedicated to economic liberty. NELF’s ongoing mission is to champion free enterprise, property rights, limited government based on rule of law, and inclusive economic growth. We believe that free enterprise is a foundational value of a democratic society and the best opportunity for people to lift themselves to prosperity.