Tag: administrative state
Future of SEC’s ALJs looks bleak—but the administrative state? Not so much
Last week, SCOTUS heard oral argument in Jarkesy v. SEC (BTW, pronounced Járk?z?, according to his counsel). As you may have heard, that case is about the constitutionality of the SEC’s administrative law judges. There were three questions presented, and Jarkesy had been successful in the appellate court on all three:
“1. Whether statutory provisions that empower the Securities and Exchange Commission (SEC) to initiate and adjudicate administrative enforcement proceedings seeking civil penalties violate the Seventh Amendment.
2. Whether statutory provisions that authorize the SEC to choose to enforce the securities laws through an agency adjudication instead of filing a district court action violate the nondelegation doctrine.
3. Whether Congress violated Article II by granting for-cause removal protection to administrative law judges in agencies whose heads enjoy for-cause removal protection.”
While, on its face, the case may not have much allure, it has the potential to be enormously important in limiting the power of the SEC and other federal agencies. That’s especially true if SCOTUS broadly decides that the statute granting authority to the SEC to elect to use ALJs violates the nondelegation doctrine. This case, together with the two cases to be heard in January addressing the continued viability of Chevron deference (see this PubCo post), could go far to upend the “administrative state.” And, for those justices with a well-known antipathy to the administrative state, that might be their ultimate goal. (See, for example, the dissent of Chief Justice Roberts in City of Arlington v. FCC (2013), where he worried that “the danger posed by the growing power of the administrative state cannot be dismissed.”) During the over two-hour oral argument, however, the discussion was focused almost entirely on the question of whether the SEC’s use of an ALJ deprived Jarkesy of his Seventh Amendment right to a jury trial—certainly an important issue with possibly far-reaching implications across federal agencies. But what was most conspicuous—and perhaps most consequential—was what was not discussed: the nondelegation doctrine. In case I missed it, I searched the 170-page transcript and found the word “nondelegation” only once and that from the lips of SEC counsel. While, at the end of the day, the Court’s opinion could certainly go in a different direction, the oral argument did not leave the impression that the end of the administrative state is nigh—not as result of this case, at least.
Jarkesy and climate disclosure: how far will the courts go in constraining the administrative state?
On Wednesday, in an Expert Forum sponsored by Cornerstone Research, Stanford professor and former SEC Commissioner Joe Grundfest and Vice Chair and Chief Legal Officer of Millennium Management and former SEC General Counsel Simon Lorne discussed “The Evolving SEC Landscape: Jarkesy v. SEC and the Proposed Climate Rules.” The two seemingly disparate topics were united by a common thread—the intense skepticism exhibited by some courts (including a likely majority of SCOTUS) of the vast power of the administrative state and their undisguised enthusiasm to constrain it. As Grundfest put it, in a slightly different context, the words are different but the melody is the same. What will be the impact?
In Ohio v. EPA, SCOTUS reinforces powerful role of judiciary in agency oversight
As has been widely discussed, the administrative state took quite a shellacking this last SCOTUS term. But as I noted earlier, it wasn’t just the elimination of Chevron deference in Loper Bright (see this PubCo post) or administrative enforcement proceedings seeking civil penalties in SEC v. Jarkesy (see this PubCo post). There were at least a couple of other cases this term that contributed to the drubbing. One of them, Corner Post, Inc. v. Board of Governors of the Federal Reserve System, had the effect of extending the statute of limitations under the Administrative Procedure Act (see this PubCo post). Another case, Ohio v. EPA, in which SCOTUS put a temporary hold on the “good neighbor” provision of the Clean Air Act because EPA failed to “reasonably explain” its action, might also be worth your attention. In Ohio, Justice Neil Gorsuch, writing for the majority, concluded that enforcement of EPA’s rule should be stayed because the challengers were likely to prevail on the merits. Why? Because EPA had provided an inadequate explanation for the continued application of the emission control measures in the plan in response to comments. Where have we heard this “failure-to-explain” theory recently? How about Chamber of Commerce of the USA v. SEC, vacating the SEC’s share repurchase rule for, among other things, failure to respond to petitioners’ comments (see this PubCo post) or even National Association of Manufacturers v. SEC, vacating the 2022 rescission of certain proxy advisor rules for arbitrarily and capriciously failing to provide an adequate explanation to justify its change (see this PubCo post). Justice Amy Coney Barrett dissented, joined by Justices Sonia Sotomayor, Elena Kagan and Ketanji Brown Jackson, contending that the majority opinion “risks the ‘sort of unwarranted judicial examination of perceived procedural shortcomings’ that might ‘seriously interfere with that process prescribed by Congress.’” As characterized by Professor Nicholas Bagley of the University of Michigan Law School in Michigan Law, in its “broad strokes,” the dissent asserted that “courts shouldn’t be in the business of fly-specking lengthy notice-and-comment records,” especially with the benefit of hindsight. The question, he continued, “is whether the agency has behaved arbitrarily and capriciously, and that’s a pretty demanding standard.” With this decision, SCOTUS amplifies the increasingly powerful role of the judiciary in overseeing federal agencies, adding to the decisions this term seeking to rein in the administrative state.