Supreme Court took a ‘bite out of the administrative state,’ experts say

The Supreme Court’s conservative majority this term issued a handful of rulings that limited federal agencies’ authority and curtailed the administrative state, ushering in the most consequential period for administrative law in recent memory, court watchers say.

The justices rolled back bureaucratic power to issue rules and regulations by authorizing judges to override decisions and upholding the right to a jury trial in disputes with administrative law judges.

“The conservative world has become more and more focused on the administrative state, so I think they are bringing more challenges,” said Curt Levey, president of the Committee for Justice. “This court might see itself — that it might be their biggest legacy is taking a bite out of the administrative state.”

Challengers to the administrative state won at least six high court cases this term.

“These cases help restore self-government,” said Mark Chenoweth, president and general counsel of the New Civil Liberties Alliance.

Chevron

In a 6-3 ideologically divided ruling, the justices overturned a 40-year-old precedent in a pair of disputes known as the Chevron case. The justices ruled that courts should no longer defer to agencies’ interpretations of federal law where Congress is ambiguous.

The 1984 Chevron precedent, named after the case Chevron v. Natural Resources Defense Council, emerged from the Natural Resources Defense Council’s challenge to an Environmental Protection Agency interpretation of the “source” of air pollution. The ruling made it easier for factories to add facilities without undergoing the EPA review process.

A unanimous Supreme Court ruled in favor of the EPA, saying judges should defer to the authority Congress gives the agency to interpret and enforce its policy.

That standard was rolled back this year when fishermen brought two cases — Loper Bright Enterprises v. Raimondo and Relentless Inc. v. Department of Commerce — to challenge a 2020 federal rule that required them to foot the bill for federal agencies to monitor their catch at a cost of $700 per day.

The fishermen said the law, as written, didn’t envision any such payment requirement and the Commerce Department was illegally passing the compliance costs to the privately owned boats.

Lower courts sided with the department. Citing the Chevron principle, they said bureaucrats’ actions must be given deference when the underlying law is unclear and an agency’s interpretation is considered reasonable.

Chief Justice John G. Roberts Jr., writing for the majority, said the 1984 Chevron ruling erroneously muted Congress and pushed courts to defer rather than to judge. He said it was time to restore the judging.

“Bureaucrats who oversee regulations have accrued far too much power since the New Deal, and Chevron deference grossly expanded that undeserved power. The justices issued a decision that favors the republic and the American public, because agency decisions are now subject to the same scrutiny as decisions of Congress. Judicial review applies equally, as it should,” said Mike Davis, president of the Article III Project and a former clerk to Justice Neil M. Gorsuch.

Jury trial

The justices issued a significant ruling for due process rights in a dispute involving the Securities and Exchange Commission.

The SEC has long used in-house tribunals, known as administrative law judges, to decide fraud cases and impose penalties. In a 6-3 ruling, the high court said that, given the nature of the cases and the stakes involved, the defendants are entitled to a jury trial under the Seventh Amendment.

Legal analysts say the ruling could affect other agencies, such as the Social Security Administration and the National Labor Relations Board, which also use administrative law judges.

Administrative law judges act as quasi-judges, though they are not Senate-confirmed judiciary members as established in Article III of the U.S. Constitution. They are employees of the agencies they serve, and the agencies set the rules of procedure. As of 2018, 27 agencies used administrative law judges.

They also serve as judge and jury, deciding facts and law. Their decisions are usually reviewable by the agency and can be appealed to Article III courts, though those judges defer to the administrative law judge proceedings.

The case before the justices, SEC v. Jarkesy, involved George Jarkesy Jr. and his investment firm, Patriot28. The SEC concluded that his firm had misled investors. It rejected Mr. Jarkesy’s request for a jury trial and brought the case before an in-house administrative law judge.

The administrative law judge reached a decision in 2014. The commission then waited six years before issuing a final order in 2020 imposing a $300,000 fine.

Mr. Jarkesy appealed, and the 5th U.S. Circuit Court of Appeals sided with him. The government then took the case to the Supreme Court, which ruled against it.

Mr. Chenoweth said this could be the “most significant case” involving the administrative state this term.

“It is being portrayed in the media as a jury trial rights case, which it is,” he said. “There is no due process in these proceedings.”

Statute of limitations

In another 6-3 ruling, the justices allowed the credit union Corner Post to challenge the federal government over a 2011 Federal Reserve interchange fee for merchants using debit and credit cards.

The lawsuit was filed about a decade later under the Administrative Procedure Act, and lower courts said a six-year statute of limitations barred the challenge to the federal government.

The Supreme Court Ruled that a claim under the Administrative Procedure Act is not subject to the six-year limit.

The decision in Corner Post v. Board of Governors of the Federal Reserve System heralds an increase in challenges to agency rules and regulations.

Justice Amy Coney Barrett delivered the majority opinion. She reasoned that the toll begins when a plaintiff is injured.

Adam Feldman, Supreme Court scholar and creator of “Empirical SCOTUS” blog, said this case could have the “biggest generalized impact.”

“It relates to tolling and so it allows people to bring lawsuits even if the agency action occurred years prior if the injury occurs later,” Mr. Feldman said.

Bump stocks and pollution

The federal government lost two disputes involving the Bureau of Alcohol, Tobacco, Firearms and Explosives and the Environmental Protection Agency.

The justices, in a 6-3 ruling, said the ATF could not ban bump stocks under the National Firearms Act, which outlaws machine guns. The case was Garland v. Cargill.

The ATF tried to classify the firearm accessory as a machine gun for purposes of prohibiting them after the 2017 massacre in Las Vegas, where a gunman used a bump stock device in a shooting that killed 58 people and wounded hundreds of others.

The justices, in a ruling written by Justice Clarence Thomas, said the case hinges on the law’s definition of “a single function of the trigger” as the key to defining an automatic weapon. He said a rifle with a bump stock still requires the right amount of pressure from the non-trigger hand on the barrel.

In another case, the high court reasoned that the EPA’s “Good Neighbor” plan to police air pollution across state lines likely violates “long-settled standards.”

The court granted a stay of the EPA’s plan, which was challenged by a group of conservative states in Ohio v. the Environmental Protection Agency, until the federal appeals court weighs in on the merits of the legal battle.

In the 5-4 ruling, Justice Barrett joined the three Democratic-appointed justices in dissent.

CFPB

In the only dispute of the term giving a win to a federal agency, the justices ruled 7-2 for the Consumer Financial Protection Bureau.

Challengers argued that Congress couldn’t delegate its power of the purse to the Federal Reserve when it created the bureau.

The justices reasoned that the CFPB’s funding structure set up by Congress did not run afoul of the Constitution’s appropriations clause. Justices Gorsuch and Samuel A. Alito Jr. dissented.

The decision was a victory for Sen. Elizabeth Warren, a Massachusetts Democrat who championed the CFPB as an independent check on Wall Street and big banks after the Great Recession from December 2007 to June 2009.

The case was Consumer Financial Protection Bureau v. Community Financial Services Association of America Ltd.

• Stephen Dinan contributed to this report.