When the Thumbs Leave the Scale: the Supreme Court Pulls Back on Federal Agencies’ Rulemaking and Enforcement Authority
Federal agencies have long had the upper hand in disputes with regulated parties, and in many ways, they still do. But over the last few years, the Supreme Court has taken some of the thumbs off that scale, reining in federal agencies that have gone too far. This past term, the Supreme Court continued that trend, limiting federal agencies’ rulemaking and enforcement authority in several important respects.
1.) Loper Bright Enterprises v. Raimondo: For the past four decades, under a doctrine known as “Chevron deference,” federal courts have deferred to “permissible” agency interpretations of ambiguous statutes—even if the courts might have read those statutes differently. In Loper Bright, the Supreme Court overruled that doctrine, holding that a statute’s ambiguity does not require—or even permit—courts to defer to an agency’s interpretation. Rather, courts must exercise their independent judgment in deciding whether agencies have acted within their statutory boundaries. After Loper Bright, clients should take a renewed look at the regulations most affecting them, asking whether those regulations fall within the promulgating agency’s statutory authority.
2.) Corner Post, Inc. v. Board of Governors: Although most of the headlines focused on Loper Bright, Corner Post was just as important. Regulated parties have long faced uncertainty on whether and how they can challenge regulations that have been in effect for years. In Corner Post, the Supreme Court answered that question, holding that the six-year statute of limitations does not begin to run for claims under the Administrative Procedures Act until the plaintiff bringing the claim is injured by an agency’s actions. So many regulated parties can now challenge longstanding agency regulations.
3.) SEC v. Jarkesy: Agencies often prefer to bring enforcement proceedings in-house before their administrative law judges, rather than in federal court before a jury. In Jarkesy, the Supreme Court held that the Seventh Amendment protects the right to a jury trial when an agency seeks certain types of relief (there, civil penalties for securities fraud), prohibiting the agency from bringing its enforcement proceedings before an administrative law judge.
4.) Starbucks Corp. v. McKinney: The National Labor Relations Board often seeks preliminary injunctions against employers accused of unfair labor practices, requiring employers to rehire employees or take other actions while the Board investigates the accusations and pursues administrative enforcement proceedings. In McKinney, the Supreme Court held that the Board could not obtain a preliminary injunction just by satisfying an easy-to-meet “reasonable cause” standard. Instead, the Board must satisfy the same four-factor test that everyone else must meet when seeking a preliminary injunction—including the requirement that the Board is likely to succeed on the merits of its unfair-labor-practices claim.
This term’s decisions are just the latest in a long string of cases in which the Court has cabined federal agencies that have overstepped their boundaries. Under the major questions doctrine, for instance, the Court has required “clear congressional authorization” when agencies purport to have broad regulatory authority on a question of economic or political significance. And even when interpreting valid regulations, federal courts no longer defer to an agency’s interpretation unless the regulations are genuinely ambiguous and the agency’s reading falls within the bounds of reasonable interpretation. An agency’s interpretation of its regulations cannot be merely a convenient litigating position or a new interpretation that creates “unfair surprise” to regulated parties.
Miller Johnson’s attorneys are available to assist clients regarding these developments and any related questions in this area. Please contact the authors or a member of Miller Johnson’s Appellate Practice Group.