Loper Bright Enterprises v. Raimondo, 603 U.S. (2024)
This case concerns a challenge to the authority of the National Marine Fisheries Service (NMFS) under the Magnuson-Stevens Act (MSA) to require operators of domestic fishing vessels to pay the salaries of federal observers carried on board their vessels to observe compliance with NMFS regulations. While the MSA expressly requires vessels to pay the salaries of federal monitors in three narrow circumstances, the statute caps those salaries at 2 to 3 percent of the value of the vessel’s catch. Petitioners unsuccessfully appealed the NMFS’ requirement in fisheries management plans for vessels to pay federal observers' salaries in circumstances not expressly authorized by the MSA and without the protections of the statutory cap on those salaries. The District Court granted summary judgment to the NMFS based on Chevron deference, and a divided panel of the U.S. Circuit Court of Appeals for the District of Columbia Circuit affirmed. Loper Bright Enters. v. Raimondo, 45 F.4th 359 (D.C. Cir. 2022).
On certiorari, the Court held that the Administrative Procedure Act (APA) mandates courts to exercise independent judgment when deciding whether an agency acted within its statutory authority and explained that courts should not defer to agency interpretations of a statute simply because the statute is ambiguous. In doing so, the Court overturned the so-called Chevron deference test from Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (Chevron). Under that two-part test, courts would first determine whether a statute is clear or ambiguous. If the statute is ambiguous, the court must defer to an agency’s reasonable interpretation of the ambiguous language.
Writing for the majority, Chief Justice Roberts began by outlining the history of judicial review. The Court noted that the framers intended the judiciary to be the final interpreters of the law. But after rapid expansion of the administrative state during the New Deal, the courts established a body of law under which courts are generally bound by agency findings of fact. However, the courts never extended that same deference to agency determinations of law. Notably, the Court, in Skidmore v. Swift & Company, stated that the weight a court gives to an agency interpretation depended on “factors which give it power to persuade, if lacking power to control.” 323 U.S. 134, 140 (1944).
The Court then differentiated two clauses of section 706 of the APA that guide how courts must review agency action. The APA mandates that courts apply deferential standards when reviewing agency policy making and fact-finding; however, the Court did not read such deference into section 706 guidelines for judicial review of agency legal interpretations. In relevant part, section 706 states that “the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action.” 5 U.S.C. § 706. Further, the APA mandates that courts set aside agency conclusions that are “not in accordance with law.” Id. § 706(2)(A). The Court stated that the APA codified its traditional understanding of the judicial function.
Turning to the Chevron test itself, the Court held that the test “cannot be squared with the APA.” Chevron step two demands that courts mechanically afford binding deference to agency interpretations when a statute is ambiguous or silent on an issue. In effect, the test forces a court to ignore the APA mandate that courts exercise independent judgment when interpreting the law.
Based on this analysis, the Court rejected NMFS’s and the dissent’s contention that statutory ambiguities are implicit delegations to the agencies charged by Congress with implementing the statute. The Court observed that the Chevron Court noted that ambiguous language “may result from an inability on the part of Congress to squarely answer the question at hand, or from a failure to even ‘consider the question’ with the requisite precision.” 467 U.S. at 865. The Court also noted that the framers recognized ambiguities in the written law would inevitably flow from human imperfection and the complexity of words and phrases. The Court then observed that statutory ambiguities are not deemed congressional delegations of legislative authority in any other legal context, and that courts, not agencies, have special expertise in resolving statutory ambiguities.
The Court also addressed whether stare decisis required the Court to stick with the Chevron precedent, holding that the unsteady history of Chevron and subsequent erosion of the test show that Chevron was not the sort of judicial rule that commands respect under the doctrine of stare decisis. The Court observed that judicial humility requires the Court to correct its own mistakes and update legal precedent that is not in line with the law. Thus, despite the Court’s overruling of the Chevron test, it held that the holdings in cases where a court used the test still stand based on stare decisis.
Justice Kagan authored a dissenting opinion joined by Justices Sotomayor and Jackson that asserted expert agencies are best suited to resolve ambiguities falling within their statutory purview and criticizing the majority for overturning forty years of precedent and forcing courts to make technical judgments on esoteric subject matters.
The case was reversed and remanded to the district court for further proceedings.
Corner Post, Inc. v. Board of Governors of the Federal Reserve System, Case No. 22-1008
This case concerns a 2021 complaint by two trade associations and a convenience store/truck stop challenging a Federal Reserve Board of Governors (Fed) rule promulgated in 2011 that caps debit-card processing fees for large banks. Corner Post, Inc., which owns a small truck stop in North Dakota, was added as a plaintiff in an amended complaint when the Fed moved to dismiss the original complaint on statute of limitations grounds. Although the Fed had issued the rule ten years earlier, Corner Post, Inc. first opened for business in 2018, and therefore argued that its Administrative Procedure Act (APA) claim did not accrue until it was first injured by the rule in 2018. The U.S. Court of Appeals for the Eight Circuit affirmed the dismissal of this action by the U.S. District Court for the District of North Dakota as being time-barred. Certiorari was granted given the inter-circuit split of authority with the U.S. Court of Appeals for the Sixth Circuit. N.D. Retail Ass'n v. Bd. of Governors of the Fed. Rsrv. Sys., 55 F.4th 634, 637 (8th Cir. 2022).
The Court agreed with petitioners, rejecting the arguments of the Fed based primarily on the express language of 28 U.S.C. § 2401(a), the default six-year statute of limitations applicable to suits against the United States, and holding that an APA claim does not “accrue” under section 2401(a) until the plaintiff is injured by final agency action. The Court began its analysis by interpreting the text of section 2401(a), which provides that civil actions against the United States “shall be barred unless the complaint is filed within six years after the right of action first accrues.” The Fed asserted that an APA claim accrues under section 2401(a) when agency action is final, i.e., when the challenged credit card fee rule became final, but the Court disagreed. Looking at section 2401(a) and its predecessor statutory language prior to adoption of the Judicial Code in 1948, the Court observed that Congress retained the language starting a limitation of actions period when the right “accrues,” or “when the plaintiff has a complete and present cause of action.” Moreover, a review of the Court’s precedent revealed that this definition of accrual is the “standard rule for limitations periods,” citing Green v. Brennan, 578 U. S. 547, 554 (2016), and noting that the Court has previously rejected the possibility that a “limitations period commences at a time when the [plaintiff] could not yet file suit” when considering this same standard language. The Fed’s position that the claim accrues when agency action becomes final was then categorically dismissed by the Court as interpreting section 2401(a) as a defendant-protective statute of repose, contrary to the plaintiff-focused language that makes it a statute of limitations. The Fed’s reliance on Court precedent was distinguished by the majority, as well.
Finally, the Fed’s policy argument that agencies and regulated parties need the finality of a six-year cutoff on challenges to new rules, and that facial challenges thereafter upset the reliance interests of those operating under the rules was also rejected as being overstated, since regulated parties can always challenge a regulation as exceeding statutory authority in enforcement proceedings against them. The Court noted there are significant interests supporting the plaintiff-centric accrual rule that it effectively affirmed, including the APA’s basic presumption of judicial review and the “deep-rooted historic tradition that everyone should have his own day in court.”
Justice Jackson wrote a dissenting opinion, which Justices Sotomayor and Kagan joined, that asserts the meaning of “accrues” is context-specific in the Court’s precedents, and accuses the majority of misguided, one-size-fits-all reasoning that ignores the “hazards inherent in attempting to define for all purposes when a ‘cause of action’ first ‘accrues.’”
The case was reversed and remanded to the district court for further proceedings.
Securities and Exchange Commission v. Jarkesy, Docket No. 22-859
This case concerns discretionary review of a Fifth Circuit decision that held the Securities and Exchange Commission’s (SEC) 2013 administrative prosecution of securities fraud claims against hedge fund manager George Jarkesy was unconstitutional on several grounds. The Fifth Circuit majority found that 1. Congress had not authorized SEC to adjudicate administrative enforcement proceedings that impose monetary penalties; 2. allowing SEC to decide between prosecution for securities fraud in an Article III court and before an administrative law judge (ALJ) employed by SEC is an impermissible delegation of legislative authority, and 3. SEC cannot provide ALJs with multiple layers of removal protection without impermissibly limiting the President’s executive power, consistent with the Supreme Court’s 2010 decision in Free Enterprise Fund v. PCAOB, 561 U.S. 277 (2010).
Chief Justice Roberts, writing for the 6-3 majority, held that when the SEC seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial. Under the Seventh Amendment, most defendants in civil cases seeking monetary damages have the right to jury trial, and the exceptions to this right generally require establishing that the types of actions at issue could have been brought in the 18th century in an equity court without a jury. The exception to the Seventh Amendment’s guarantee of a right to jury trial at issue in Jarkesy concerns the Supreme Court’s doctrine of “public rights.” When this exception to the right to a jury trial applies it is because the right in question is a “public right” that would not have required the kind of suit at common law to which the Seventh Amendment applies.
Calling the resolution of this issue “straightforward,” the majority explained that it was following the analysis set forth in Court precedents Granfinanciera, S. A. v. Nordberg, 492 U. S. 33, and Tull v. United States, 481 U. S. 412. This action implicated the Seventh Amendment because the SEC’s antifraud provisions replicate common law fraud. The Seventh Amendment embraces all suits that are not of equity or admiralty jurisdiction, whatever may be the peculiar form which they may assume, including statutory claims that are “legal in nature.” To determine whether a suit is legal in nature, courts must consider whether the cause of action resembles common law causes of action and whether the remedy is the sort that was traditionally obtained in a court of law. Of these factors, the remedy is the more important, and in this case the remedy was all but dispositive for the majority. For respondents’ alleged fraud, the SEC seeks civil penalties, a form of monetary relief. The Court observed that such relief is legal in nature when it is designed to punish or deter the wrongdoer rather than solely to “restore the status quo.” Tull, 481 U. S., at 422. The Court also noted that the close relationship between federal securities fraud and common law fraud confirms that conclusion.
Because the fraud claims at issue implicate the Seventh Amendment, a jury trial is required unless the “public rights” exception applies. Certain categories that have been recognized as falling within the public rights exception include matters concerning the collection of revenue, aspects of customs law, immigration law, relations with Indian Tribes, the administration of public lands, and the granting of public benefits.
In Granfinanciera, the Court considered whether Congress’s designation of fraudulent conveyance actions as “core [bankruptcy] proceedings” authorized non-Article III bankruptcy judges to hear them without juries. Because such actions were akin to “suits at common law” and were not “closely intertwined” with the bankruptcy process, the Court held that the public rights exception did not apply, and a jury was required. Because securities fraud and common law fraud were also effectively the same types of actions, Granfinanciera effectively determined the outcome in this case.
SEC had argued that the Court’s precedent in Atlas Roofing Co. v. Occupational Safety and Health Review Comm’n, 430 U. S. 442, supported reversal, but the Court disagreed. In Atlas Roofing, the Court held that Congress could assign adjudications under the Occupational Safety and Health Act to an agency because the claims involved “a new cause of action, and remedies therefor, unknown to the common law.” Id., at 461. Thus, the “public rights” exception to Article III jurisdiction did not apply.
Justice Sotomayor authored a dissenting opinion in which Justices Kagan and Jackson joined, observing that Congress has enacted more than 200 statutes authorizing dozens of agencies to impose civil penalties for violations of statutory obligations with “no reason to anticipate the chaos today’s majority would unleash.”
The Court did not address the remaining issues in the case, which was affirmed and remanded.
Ohio et al., v. Environmental Protection Agency, Docket No. 23A349
This case concerns a request by several states, companies, and trade associations for an emergency stay of a final rule promulgated by U.S. Environmental Protection Agency (EPA) pending their judicial challenges to that rule on the merits. The rule concerns the “good neighbor” provision of the Clean Air Act, 42 U.S.C. § 7410(a)(2)(D)(i)(I), requiring over 20 upwind states to implement additional air pollutant emission control measures so as not to cause or contribute to nonattainment of federal health-based air quality standards in downwind states (Final Rule). The D.C. Circuit Court of Appeals, in which the challenge to EPA’s Final Rule is pending, refused to grant a stay of the rule, prompting the emergency stay request to the Supreme Court. The majority of a closely divided Court granted the stay.
Justice Gorsuch wrote for the 5-4 majority, joined by Justices Roberts, Thomas, Alito, and Kavanaugh. The majority observed that while allowing the rule to remain effective would improve air quality, it would also require the challengers to spend hundreds of millions, if not billions, of dollars to adopt the required emission control measures. The key question for the majority in deciding to put the rule on hold was whether the challengers were likely to prevail on the merits, i.e., for the D.C. Circuit to conclude that the plan is impermissibly flawed. EPA’s failure to explain why the plan should proceed even though 12 of the more than 20 states intended to be covered by the rule were not subject to the Final Rule by virtue of court stays of EPA’s Federal Implementation Plan was deemed significant by the Court in deciding to grant the stay.
Justice Barrett authored a dissenting opinion in which Justices Kagan, Jackson, and Sotomayor joined. The minority criticized the Court for blocking EPA’s plan “based on an underdeveloped theory that is unlikely to succeed on the merits,” and claimed EPA would have promulgated the same plan even if fewer states were covered.
This is the third edition of Trends’ Supreme Court review, a summary of environmental, energy, and natural resources cases decided by the U.S. Supreme Court during its October 2023 term. We review several cases with potentially profound implications including one that does away with judicial deference to an agency’s interpretation of its statutory authority (Chevron deference), and another that will significantly change how and when agency rules can be challenged.
