ADMINISTRATIVE LAW IN LIGHT OF JARKESY & LOPER BRIGHT

The Supreme Court made some significant changes in administrative law due to its holdings in SEC v. Jarkesy (Jarkesy) and Loper Bright Enterprises v. Raimondo (Loper Bright). These cases and the West Virginia v. EPA (West Virginia) case in 2022 provide insight into how the court will assess cases involving administrative law moving forward.

The Court only addressed whether Congress’ allowing the SEC to bypass a jury trial for civil penalties under Dodd-Frank violated the Seventh Amendment to the U.S. Constitution. The Seventh Amendment to the U.S. Constitution, which reads as follows:

“In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any court of the United States, than according to the rules of the common law.”

The Supreme Court held that the delegation of power under Dodd-Frank violated the Seventh Amendment. If the SEC seeks to impose a civil penalty, it must have a jury trial in federal court.

?Following Jarkesy, the Supreme Court made another significant move. It overturned the Chevron test in Loper Bright Enterprises v. Raimondo. (Loper Bright). The law involves the Magnuson-Stevens Fishery Conservation and Management Act (MSA). The case involved the constitutional challenge of a rule under the Act. The question that the Court was asked to rule was whether or not Congress gave specific authority. ?The Chevron test only applies when the statute authorizing an agency to act is vague. Chevron called for courts to give broad discretion to the agency in matters of laws, empowering an agency to act. ?The court said no and reversed the Chevron case. The court held that Congress must be clear in its authority to an agency.

?To understand the shift in administrative law, one must also read West Virginia v. EPA (West Virginia), which was decided in 2022. In West Virginia, the U.S. Supreme Court struck down the EPA’s policy for clean air because the EPA overstepped its jurisdiction authority. In other words, Congress did not give them any authority to develop a clean energy plan to address climate change when Congress gave the EPA authority in the past to address new issues, such as acid rain.

Reading these three cases, the following three things stand out:

The Court is skeptical of administrative agencies.? This is seen in both the West Virginia case and the Jankesy case.? In the West Virginia case, the court was surprised that implementing the Obama Administration’s clean air plan would not only cost billions of dollars but also involve closing coal-fired plants, which would eliminate tens of thousands of jobs. Additionally, there is the factor that energy costs for consumers would be ten percent higher and reduce the Gross Domestic Product by at least a trillion dollars by 2040. ?Although it was not stated in writing, the majority must have been surprised by the Administration’s plan and the appearance of no one asking, “Could there be a better way?” The idea, the consequences, and the appearance that no one was challenging the plan within the EPA bothered them. Congress in the past granted the EPA new authority under the Clean Air Act when addressing new issues in 1977 and 1990. ?According to the Court’s rationale, Congress did not grant the EPA new authority to address climate change. As a result, the clean air plan proposed by the EPA was outside its scope of authority.

In the Jarkesy case, that skepticism is seen when Chief Justice Roberts cited the difference between administrative law hearings and jury trials. Administrative hearings are conducted by an administrative law judge, an agency employee bound by different procedural rules, with no jury. ?On the other hand, jury trials have a jury that serves as a fact finder, a federal judge appointed for life. Litigation is bound by procedural rules, including rules for admitting evidence, which have a higher standard than an administrative hearing. As for civil penalties, Chief Justice Roberts wrote, “Because civil penalties are designed to punish or deter, and not compensate, it is a type of remedy that could only be enforced in courts of law.”

?Be familiar with the Public Right exception and other administrative law doctrines. In Jarkesy, the majority opinion addressed the public right exception. The public right exception is when Congress may assign the matter for decision to an agency without the right to a jury trial. For instance, collecting revenue, power over foreign commerce, immigration, patent rights, granting of public benefits, and other powers enumerated in the Constitution fall under this exception. The significance of this is that if the power appears to be enumerated under the Constitution, the courts are to defer to the agency on how it enforces those regulations.

Justice Gorsuch introduced the major question doctrine in his concurring opinion in the West Virginia case. Justice Gorsuch explains the major question doctrine when he writes,

?“The major question doctrine is defined as ‘administrative agencies [being] able to point to clear congressional authorization when they claim the power to make decisions of vast ‘economic and political significance…the laws passed by Congress must “operate in the congruence of the Constitution rather than testing the bounds.”

In other words, these doctrines will become more prominent among the justices. Agencies need to understand them to defend their position. We are seeing a backlash against deference when it comes to the question of authorization and the constitutional rights of those who are the subject of an enforcement action. This leads to our third and final point. ?

?Originalism demands a proactive Congress and a proactive President. Remember when GOP candidates said they wanted judges to be like Scalia? Well, they have them. The holdings in both the West Virginia case and the Loper Bright case have sent a clear signal to the other branches of government to be proactive. Now that Chevron has been reversed, federal courts must be skeptical when an agency argues that it has jurisdiction when the authorizing statute is vague or silent.

?For Congress, this means becoming proactive. It must assume the responsibility of drafting legislation as explained in the Constitution. It means members must take political risks, which members are unwilling to do. A Congress that fails to fulfill its obligations under the Constitution is lazy and deserves to be thrown out.

?For the President, the “I’ve got a pen and I’ve got a phone” argument has been diminished. ?As Justice Gorsuch in West Virginia wrote,

?“When Congress seems slow to solve problems, it may be natural that those in the Executive Branch might seek to take matters into their own hands. [However], the Constitution does not authorize agencies to use pen-and-phone regulations as substitutes for laws passed by the people’s representatives. In our Republic, ‘it is the peculiar province of the legislature to prescribe general rules for the government of society…”? ?

In closing, the Court has signaled through its decisions what it thinks about administrative law in the United States. First, it informs the Executive branch that it is skeptical about the current system applied to enforce agency regulations. The executive branch is also advised to seek clear language from Congress to be authorized to address an issue or some flexibility in its authorizing statute so that Congress cannot amend the laws.

?The Court called on Congress to become proactive, not passive, under originalism regarding the Legislative branch, as cited in the Loper Bright and West Virginia cases. That means Congress should review and amend its authorizing statutes to avoid more constitutional challenges. However, as seen in the majority opinion in Janesky, both Congress and the President would need to work on amending the Administrative Procedure Act as it relates to agency hearings and judicial review.

?If neither Congress nor the President works on addressing these issues, expect the Court to begin to impose its vision of what administrative law should look like.