The U.S. Supreme Court made two key rulings on June 27 and 28 that have weakened the power of federal agencies, limiting their ability to enact regulations and take certain enforcement actions.
On June 28, in the case of “Loper Bright Enterprises v. Raimondo,” the Supreme Court voted 6-3 to overturn the long-standing legal precedent known as the “Chevron deference doctrine,” which had been in place for 40 years. This doctrine required judges to defer to a federal agency’s reasonable interpretation of ambiguous regulatory language.
The decision on the “Chevron case” has been cited by federal courts over 18,000 times, making it a foundational decision in administrative law, according to the Congressional Research Service.
The Supreme Court emphasized the need for judges to use traditional legal interpretation tools and rely on the “best” interpretation, sparking debates on how Congress drafts laws and how agencies are expected to interpret them.
In the case of “SEC v. Jarkesy” on June 27, the Supreme Court’s ruling similarly curtailed the regulatory powers of federal agencies and bolstered the power of the judiciary, albeit in a different manner.
In a 6-3 decision, the Supreme Court found that the SEC’s use of internal tribunals to enforce civil penalties was incorrect. The Constitution’s Seventh Amendment requires the SEC to bring civil penalties before a federal court jury, rather than handling them internally.
Chief Justice John Roberts wrote the majority opinion in the “Loper Bright case,” with Justices Clarence Thomas and Neil Gorsuch penning concurring opinions.
Justice Gorsuch stated, “Today, the Supreme Court marked a tombstone on the Chevron case that no one could ignore. The Court has returned judges to interpretive principles that have guided federal courts since its inception.”
Both dissenting and concurring opinions in the “Chevron case” expressed concerns about the Court’s departure from longstanding precedent and acknowledged the far-reaching implications of their decisions on the federal government’s functioning.
The rulings are likely to prompt a reevaluation of multiple regulations and how agencies apply them in the coming years.
Whenever the Supreme Court overturns legal precedents like “Roe v. Wade,” it typically considers the principle of stare decisis, or maintaining precedent. The reliability of the Chevron principle, despite being a long-standing precedent, has been called into question.
Justice Kagan wrote, “The majority cannot destroy one pillar of judicial humility and expect the other not to be mocked,” referring to the Chevron deference and stare decisis. She quipped, “If opinions had titles, today’s might be called ‘Hubris Squared.'”
Justice Sonia Sotomayor also criticized the ruling on “SEC v. Jarkesy,” stating that the majority opinion failed to recognize how it upset longstanding practices of the government, placing Congress in a difficult position.
Both cases shift certain powers of administrative agencies to federal courts. In the “Jarkesy case,” the Court empowered juries, a fundamental part of federal court proceedings, where their decisions are usually respected by judges.
It remains unclear how things will unfold in the coming years, but these decisions signal that the SEC must go through traditional courts rather than bypassing them in its enforcement actions. Before the “Jarkesy case,” the SEC had the option to litigate cases in federal court or its internal tribunal.
Internal rulings can be subject to judicial review, as noted by Chief Justice Roberts, who emphasized that such reviews must defer to the SEC’s factual findings in cases.
Justice Gorsuch’s concurring opinion suggests that the SEC’s power is “overrated,” citing data from The Wall Street Journal.
He said, “The numbers bear this out: A report shows that during the research period, the SEC won around 90% of cases in disputed internal litigations, compared to only 69% in court cases.”
The dissenting and concurring opinions in the “Loper Bright Enterprises v. Raimondo” and “Relentless Inc. v. Department of Commerce” focus on judicial discretion and the judges’ ability to interpret laws concerning complex subjects regulated by the agencies.
Chief Justice Roberts highlighted in the majority opinion that courts must understand and determine the best meaning of every regulation, no matter how intricate or arcane.
Citing a previous case “Wisconsin Central Ltd. v. United States,” he stated, “Our convoluted Chevron doctrine does little but divert attention from the vital issue: Does the regulation authorize the contested agency action?”
Justice Kagan outlined concerns about how judges grapple with the Chevron deference, citing several laws she believed the Court would find challenging to interpret. For instance, she pointed out a legal phrase about when “α amino acid polymer” meets the standard of “protein” under the Public Health Service Act.
She remarked, “I do not know how many judges would have confidence deciding this issue. In each case, a statutory phrase has more than one plausible interpretation.”
In a case involving “Consumer Financial Protection Bureau (CFPB) v. Community Financial Services Association of America,” the Supreme Court ruled 7-2 in favor of the constitutionality of the CFPB’s funding mechanism. Justice Thomas’s majority opinion raised hope for curbing executive powers.
In this case, Justice Thomas and six other justices supported the constitutionality of the CFPB’s funding mechanism, with Justices Samuel Alito and Neil Gorsuch in dissent.
However, concerning the “Jarkesy” and “Loper Bright” cases, Justices Thomas, Gorsuch, and Alito sounded alarms on government power, with Justices Thomas and Gorsuch being particularly forthright.
In his concurring opinion, Justice Thomas wrote, “Chevron doctrine makes judges abdicate” their judicial power.
He warned, “While the Court has ultimately put an end to our unfortunate 40-year Chevron deference, its deeper problems cannot be overlooked.”
Justice Thomas stated that this decades-old doctrine is “unconstitutional.”
Justice Sotomayor authored a dissenting opinion in the “Jarkesy case,” with Justices Kagan and Jackson also joining the dissent. The dissent in the “Loper Bright case” was penned by Justice Kagan, with Justices Sotomayor and Jackson sharing the dissent. Justice Kagan praised the Chevron doctrine and subsequent regulations in her dissent.
She said, “The doctrine has become part of modern governance, supporting various regulatory efforts, including maintaining clean air and water, food and drug safety, and integrity in financial markets.”
Justice Kagan posited that regulations “inevitably will contain ambiguities that others must resolve and gaps that others must fill.”
She wrote, “And, usually, we prefer that job to be done by the responsible agency rather than the courts.” She added, “Some interpretive issues that arise in regulation involve scientific or technical questions, areas where the government expertise lies, not with the judiciary.”