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sec v jarkesy
4 Ways the Supreme Court Made It Harder to Protect the Environment
By limiting the power of federal agencies and extending the statute of limitations for challenging agency actions, these rulings introduce uncertainty and could provide an avenue for winding back regulations.
Aug 15, 2024
The U.S. Supreme Court recently issued decisions in four cases that could profoundly weaken the administrative state, foreshadowing widespread dysfunction for federal agencies and the vast regulatory regimes they oversee, including federal protections safeguarding public health and the environment.
The U.S. federal government has more than 439 agencies and subagencies, each with its own sphere of responsibility and expertise. These agencies are responsible for implementing, applying, and enforcing a wide array of regulations across areas such as air quality, clean drinking water, education, energy, financial markets, food safety, and healthcare—regulations that greatly impact American lives.
These Supreme Court decisions will undoubtedly be used to restrict the ability of federal agencies to interpret, apply, and enforce the laws and regulations crucial to the real-life, day-to-day implementation of our federal government’s most important functions.
Supreme Court Decisions Impacting Federal Agencies
The Supreme Court issued four decisions this past term (2023-2024) that challenge the authority of federal agencies:
- Loper Bright Enterprises v. Raimondo: Overturned the longstanding Chevron doctrine, which gave deference to federal agencies. Courts will no longer be required to defer to the specialized technical expertise of federal agencies and their reasonable interpretation of ambiguous statutory terms or unclear definitions provided by Congress.
- SEC v. Jarkesy: Ruled that the Securities and Exchange Commission (SEC) must provide defendants with a jury trial in enforcement actions seeking civil penalties, limiting the agency’s anti-fraud enforcement capabilities.
- Corner Post v. Federal Reserve: Extends the statute of limitations for challenges to agency actions, leading to prolonged legal uncertainty, even for decades-old regulations.
- Ohio v. EPA: Halted enforcement of the Environmental Protection Agency’s (EPA) “Good Neighbor” rule—which aimed to implement ozone air pollution standards—because the agency had not provided an adequate explanation of its plan. This case signals the Supreme Court’s willingness to hinder federal agency efforts to regulate pollution on a nationwide basis.
Chevron Deference and Its Demise
The advent of the doctrine of Chevron deference, established in 1984 through Chevron. v. NRDC, and its demise in Loper Bright Enterprises v. Raimondo both concern environmental regulation.
Chevron v. NRDC addressed the EPA’s interpretation and application of a regulation promulgated under the Clean Air Act. The Supreme Court upheld the EPA’s interpretation of an ambiguous provision of the law and, in doing so, held that courts must defer to an agency’s reasonable interpretation of ambiguous statutory terms—enter “Chevron deference.” For the past 40 years, Chevron deference has been the cornerstone of administrative law, and Chevron v. NRDC has been cited no less than 18,000 times in other court decisions.
Without Chevron deference, the Supreme Court will have the final say over policy questions and, in the words of Justice Kagan, becomes the country’s self-appointed “administrative czar.”
The Supreme Court’s decision in Loper Bright Enterprises v. Raimondo abruptly ended Chevron deference, significantly shifting power from federal agencies to the judiciary. The case concerned the regulation of the commercial fishing of overfished Atlantic herring pursuant to the Magnuson-Stevens Fishery Conservation and Management Act. The Supreme Court considered the narrow question of whether commercial fishers of Atlantic herring can be made to shoulder the cost of hosting government fisheries monitors on board their vessels.
In its decision, the Supreme Court ruled that courts—not agencies—are to determine all questions of law, including the single best interpretation of ambiguous terms, even if those terms are scientific and technical. Justice Elena Kagan’s dissent warned that the majority decision would leave courts to determine questions far outside their expertise, including issues of environmental protection, such as how to define a “distinct population segment” of endangered “vertebrate fish or wildlife” pursuant to the Endangered Species Act.
Shifts in Power and Ongoing Impact
The removal of Chevron deference fundamentally shifts power from Congress and the executive to the judicial branch. By upsetting the long-held equilibrium stewarded by the Chevron doctrine, Loper Bright Enterprises v. Raimondo will restrict the federal government’s operations and hinder environmental regulation.
Presidents depend on the administrative state to apply their policy preferences, and Congress enacts statutes with the understanding that agencies will utilize their experience and expertise to reasonably interpret ambiguities. Without Chevron deference, the Supreme Court will have the final say over policy questions and, in the words of Justice Kagan, becomes the country’s self-appointed “administrative czar.”
Loper Bright Enterprises v. Raimondo is already having a profound impact: As of August 5, 2024, 59 courts have cited the decision, and litigants in 120 other cases have cited it in court filings. The decision is being used to stymie ESG investment regulation, reopen federal waters after an emergency closure to protect North Atlantic right whales, contest solar power facility certifications as a qualifying source of alternative energy, challenge requirements for water heaters to meet efficiency standards, and defend against the use of a tire manufacturing chemical whose runoff caused a “taking” of protected fish species.
Not only does Loper Bright Enterprises v. Raimondo present a serious obstacle to the application and interpretation of federal environmental protection rules, but, together with SEC v. Jarkesy, it will also limit the ability of agencies to enforce those rules.
Climate Disclosure Rules and ESG Investing after Loper Bright Enterprises v. Raimondo and SEC v. Jarkesy
Loper Bright Enterprises v. Raimondo and SEC v. Jarkesy will influence the ongoing challenge to the SEC’s Climate Disclosure Rules, currently pending before the Eighth Circuit Court of Appeals. The SEC’s Climate Disclosure Rules—albeit insipid—require larger companies to disclose material Scope 1 (direct) and Scope 2 (indirect) emissions information. These rules have been challenged by 25 states, two Big Oil trade groups, and the U.S. Chamber of Commerce.
The primary basis for the challenge to the rules is that it represents an unauthorized expansion of the SEC’s statutory rulemaking authority, making it ultra vires (beyond its legal powers). In overturning Chevron deference, the Supreme Court held that rulemaking agencies, such as the SEC, must demonstrate unambiguous congressional authority to create a rule, increasing the burden on these administrative agencies to prove they have the authority to implement such regulations. This poses a problem for the SEC, which adopted the Climate Disclosure Rules under the investor protection legislation of the Securities Act and the Securities Exchange Act. The SEC must demonstrate that it has unambiguous statutory authority to make climate-related regulations under these laws.
The EPA is one such agency that, until SEC v. Jarkesy, could impose civil penalties in administrative proceedings when environmental protection regulations have been violated, but it now faces limitations due to the decision.
Even if the Eighth Circuit upholds the Climate Disclosure Rules, their enforcement faces additional obstacles due to SEC v. Jarkesy. Failure to disclose material Scope 1 or 2 emissions could violate the Climate Disclosure Rules and potentially constitute securities fraud under SEC Rule 10b-5. The SEC can seek civil penalties for securities fraud, and since the Dodd-Frank Act, it could do so in the agency’s administrative courts.
In the SEC v. Jarkesy case, the SEC brought an enforcement action against investment adviser George Jarkesy, Jr. for securities fraud, resulting in a civil penalty of $300,000 and a disgorgement of $685,000 imposed by an administrative law judge. However, the Supreme Court ruled that the U.S. Constitution’s Seventh Amendment entitles defendants to jury trials for any statutory claim that is legal in nature—even those brought by the government—and impacts the defendants’ private rights. The SEC v. Jarkesy decision significantly limits the SEC’s ability to combat securities fraud involving misleading and deceptive climate disclosures by removing the option of administrative proceedings and requiring enforcement actions be litigated through the lengthy and expensive jury trial process.
The decision seriously undermines the ability of not just the SEC to bring enforcement actions, but, as noted by Justice Sonia Sotomayor in her dissent, SEC v. Jarkesy will also restrict the enforcement capabilities of over two dozen other federal agencies that can impose civil penalties in administrative proceedings. The EPA is one such agency that, until SEC v. Jarkesy, could impose civil penalties in administrative proceedings when environmental protection regulations have been violated, but it now faces limitations due to the decision.
The Last Nail in the Coffin? An Extended Statute of Limitations for Challenging Agency Rules
The Administrative Procedure Act provides that a party has six years to challenge an agency regulation, and it was typically presumed that the six-year limitation began to run when the agency issued the regulation. However, in Corner Post v. Federal Reserve, the Supreme Court held that the limitation period starts when the party challenging the rule is actually injured by it. Accordingly, instead of the clock starting at publication, it starts at a different time for each potential litigant.
This decision means that longstanding agency regulations may now be subject to challenges by parties who have only recently been impacted by the rule. The Corner Post v. Federal Reserve decision dramatically expands the universe of existing regulations vulnerable to legal challenges by eliminating existing time restrictions on when court challenges to regulations can be brought.
Corner Post v. Federal Reserve will precipitate legal uncertainty and undermine the predictability of the law and agency regulations.
Good Neighbors No More: Ohio v. EPA
While the focus has been on the above mentioned cases, another decision has received less attention but is just as significant for federal environmental regulation. Ohio v. EPA inhibits the EPA’s ability to regulate air pollution on a national basis.
Under the Clean Air Act’s “good neighbor” rule, the EPA required 23 states—under a single implementation plan—to reduce air pollution traveling to downwind states, thereby requiring big polluters in upwind states to reduce emissions.
In Ohio v. EPA, the Court provided a preview of the post-Chevron difficulties courts will confront in grappling with technical questions best left to agency experts.
The court’s majority recognized the harm that increased ozone levels can cause, including triggering and exacerbating health problems and damaging vegetation, but held that the plan was likely “arbitrary or capricious” because the EPA had not “offered a ‘satisfactory explanation for its action[,] including a rational connection between the facts found and the choice made.’” According to the majority, the EPA failed to explain how the plan’s cost thresholds and emission limits were impacted by the number of states included in the plan.
The court split five-four. Justice Amy Coney Barrett—a reliable member of the court’s conservative clique—dissented and observed:
Given the number of companies included and the timelines for review, the court’s injunction leaves large swaths of upwind states free to keep contributing significantly to their downwind neighbors’ ozone problems for the next several years…
An application for a stay was granted, pending the final determination of the merits of the case. Significantly, Justice Barrett noted that Ohio v. EPA is “fact-intensive and highly technical” and—somewhat at odds with the majority opinion she joined in Loper Bright Enterprises v. Raimondo—that the court “should proceed all the more cautiously in cases like this one with voluminous, technical records and thorny legal questions.”
Indeed, in Ohio v. EPA, the court provided a preview of the post-Chevron difficulties courts will confront in grappling with technical questions best left to agency experts. Justice Neil Gorsuch, the author of the majority opinion, demonstrated that judges are not best placed to determine highly technical non-legal questions: He was clearly confused about the pollutant in question. The original opinion referred to “nitrous oxide” (laughing gas) five times instead of “nitrogen oxide,” an air pollutant that the EPA’s policy aimed to reduce. After the error gained traction on social media, the court issued a corrected opinion.
Uncertainly for U.S. Environmental Regulations
The Loper Bright Enterprises v. Raimondo and SEC v. Jarkesy decisions mean that federal agencies will not receive deference in interpreting their enabling legislation and no longer have the ability to enforce those regulations before administrative law judges. After Corner Post v. Federal Reserve, it is unclear when—or if—agency regulations will be free from potential legal challenges. And, in Ohio v. EPA, the Supreme Court inhibited the EPA’s ability to regulate air pollution on a national basis.
These recent Supreme Court decisions represent a seismic shift in the regulatory landscape and pose a particular threat to the federal government’s environmental protection regime. By limiting the power of federal agencies and extending the statute of limitations for challenging agency actions, these rulings introduce significant uncertainty and could provide an avenue for winding back environmental regulations that are already on the books. The full impact of these decisions will unfold over time, but their immediate effect is a substantial weakening of federal regulatory power and a suite of new tools for those seeking to challenge federal regulation.
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The Arrogant Supreme Court Is Now the Enemy Within
Americans know the Supreme Court’s anti-democratic agenda when they see it. Americans know a judicial power grab when they see it. Americans know a king when they see one. Tell me, America, do you like what you see?
Jul 05, 2024
Former President Richard Nixon used a ridiculous line to rationalize his misconduct: “If the President does it, that means it’s not illegal.”
On July 1, 2024, Nixon’s outrageous position became the law of the land.
But that is only the most recent illustration of how former President Donald Trump’s Supreme Court is remaking America. The justices comprising the court’s six-member conservative supermajority are foisting their personal vision for the country on citizens who largely disagree with that vision. Trump appointed three of them.
Trump asserts that, if reelected, he’ll be “dictator for a day.” The Supreme Court’s ruling makes him comparable to a king—a law unto himself—for an entire four-year term.
Two years ago, Dobbs v. Jackson Women’s Health Organizationwas a harbinger. The Court’s six conservatives overruled the landmark 50-year-old precedent, Roe v. Wade, and obliterated a woman’s right to abortion—a right that the vast majority of Americans across the political spectrum support.
Dobbs was only the beginning.
The Court Abandons Stare Decisis
The conservatives justices’ agenda requires violating the bedrock principle of stare decisis.
Justice Elena Kagan explained, “Adherence to precedent is ‘a foundation stone of the rule of law...’ Stare decisis ‘promotes the even-handed, predictable, and consistent development of legal principles.’ It enables people to order their lives in reliance on judicial decisions. And it ‘contributes to the actual and perceived integrity of the judicial process,’ by ensuring that those decisions are founded in the law, and not in the ‘personal preferences’ of judges.” [Citations omitted.]
Already at a historic low, the court’s perceived integrity continues to suffer self-inflicted wounds at the hands of its conservative members. They are imposing their personal preferences on the entire nation.
In the waning days of the court’s 2023-2024 term, some of the most draconian—and dangerous—emerged from the shadows.
The Court Guts the SEC and Imperils Other Federal Agencies
On June 27, 2024, the Court’s conservative block (Justices Samuel Alito, Amy Coney Barrett, Neil Gorsuch, Brett Kavanaugh, John Roberts, and Clarence Thomas) issued SEC v. Jarkesy. The ruling bars the Security and Exchange Commission from adjudicating civil fraud actions itself before an administrative law judge. Instead, the SEC must now file all such actions in federal court where a defendant can request a jury trial, thereby crippling the agency’s enforcement capabilities.
On behalf of the court’s three dissenting liberals (Ketanji Brown Jackson, Kagan, and Sonia Sotomayor), Justice Sotomayor wrote, “Congress has enacted countless new statutes in the past 50 years that have empowered federal agencies to impose civil penalties for statutory violations… Similarly, there are, at the very least, more than two dozen agencies that can impose civil penalties in administrative proceedings… The constitutionality of hundreds of statutes may now be in peril, and dozens of agencies could be stripped of their power to enforce laws enacted by Congress.”
Justice Sotomayor added, “Today’s ruling is part of a disconcerting trend: When it comes to the separation of powers, this court tells the American public and its coordinate branches that it knows best… Make no mistake: Today’s decision is a power grab.”
The Court Kills the Climate
Also on June 27, 2024, in Ohio v. EPA, five of the Court’s conservatives blocked the Environmental Protection Agency’s plan to protect “downwind” states from the air pollution that “upwind” states generated.
From 1981-1983, Justice Gorsuch’s mother, Anne, had led the EPA during the Reagan administration. Repeatedly, she clashed with environmentalists and congressional investigators challenging her management of the agency. In 1983, the White House forced her to resign.
In her 1986 memoir, Anne Gorsuch wrote that her rocky tenure and unceremonious departure distressed her son, Neil, who was 15 years old at the time:
“You should never have resigned,” he told her. “You didn’t do anything wrong. You only did what the president ordered. Why are you quitting? You raised me not to be a quitter. Why are you a quitter?”
Forty years later, Justice Neil Gorsuch wrote the majority opinion in Ohio v. EPA.
The Court “Grasps for Power”
The following day, on June 28, the conservative block struck again in Loper Bright Enterprises, v. Raimondo, overruling a 40-year-old precedent, Chevron v. National Resources Defense Council.
Back in 1984, conservatives had scored a big victory when a unanimous Supreme Court first issued the Chevron ruling. It required that courts defer to administrative agencies that filled in gaps or resolved ambiguities in Congress’ regulatory statutes.
At the time, business leaders cheered the decision because President Ronald Reagan’s EPA (under Anne Gorsuch) had loosened air pollution emission regulations. To preserve that loosening, the affected businesses wanted courts to respect the EPA’s scientific and technical expertise. The Court agreed, observing, “Judges are not experts in the field, and are not part of either political branch of the government.” The latter point meant that judges weren’t accountable to the electorate, whereas agency administrators served at the pleasure of an elected president.
But in the years that followed, businesses chafed at agency regulation. Along with the conservative legal movement, business leaders reversed course and attacked Chevron unsuccessfully—until Trump’s appointment of Barrett gave the conservatives a supermajority on the Supreme Court.
In dissent, Justice Kagan observed that Chevron “served as a cornerstone of administrative law, allocating responsibility for statutory construction between courts and agencies… [It] has formed the backdrop against which Congress, courts, and agencies—as well as regulated parties and the public—all have operated for decades. It has been applied in thousands of judicial decisions. It has become part of the warp and woof of modern government, supporting regulatory efforts of all kinds—to name a few, keeping air and water clean, food and drugs safe, and financial markets honest.”
Under Chevron, Justice Kagan added, the Supreme Court itself “has upheld an agency’s reasonable interpretation of a statute at least 70 times. Lower courts have applied the Chevron framework on thousands upon thousands of occasions... Chevron was cited in more than 18,000 federal-court decisions.” [Citations omitted.]
“A longstanding precedent at the crux of administrative governance thus falls victim to a bald assertion of judicial authority,” Justice Kagan concluded. “The majority disdains restraint, and grasps for power.”
The Court Helps Trump Avoid Accountability
The conservative block saved its worst for last—the court's July 1, 2024 ruling in Trump v. U.S. If democracy dies in America, Chief Justice Roberts’ opinion in the case will have been a key contributor.
“We conclude that under our constitutional structure of separated powers, the nature of presidential power requires that a former president have some immunity from criminal prosecution for official acts during his tenure in office,” Roberts wrote on the final day of the court’s term. “At least with respect to the president’s exercise of his core constitutional powers, this immunity must be absolute. As for his remaining official actions, he is also entitled to immunity.”
Writing for the three dissenting liberal members, Justice Sotomayor declared, “Today’s decision to grant former presidents criminal immunity reshapes the institution of the Presidency. It makes a mockery of the principle, foundational to our Constitution and system of government, that no man is above the law… [O]ur Constitution does not shield a former president from answering for criminal and treasonous acts,…”
Trump asserts that, if reelected, he’ll be “dictator for a day.” The Supreme Court’s ruling makes him comparable to a king—a law unto himself—for an entire four-year term.
“I Know It When I See It”
In discussing a pornography case, Justice Potter Stewart once remarked, “I know it when I see it.”
Americans know the Supreme Court’s anti-democratic agenda when they see it.
Americans know a judicial power grab when they see it.
Americans know a king when they see one.
And as Americans come to understand the conservative Supreme Court justices’ profoundly negative impact on their daily lives, they won’t like what they see.
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Supreme Court's Right-Wing Majority Delivers Gift to Corporate Criminals
Decision in SEC v. Jarkesy decried as a "victory for the wealthy and powerful" delivered by a right-wing majority that once again put "corporations, Wall Street, and billionaire benefactors over everyday Americans."
Jun 27, 2024
The U.S. Supreme Court on Thursday ruled along ideological lines that the Securities and Exchange Commission cannot use in-house legal proceedings to civilly penalize fraudsters, a decision that could strike a devastating blow to federal agencies' ability to fight corporate crime.
In the 6-3 decision, the high court's conservative supermajority deemed the SEC's in-house proceedings unconstitutional, siding with the U.S. Chamber of Commerce and other big business-aligned organizations that weighed in on the side of the plaintiff—conservative radio host and hedge fund manager George Jarkesy, who was accused by the SEC of defrauding investors and ordered to pay a $300,000 civil penalty.
Jarkesy argued the SEC proceedings violated his Seventh Amendment right to a jury trial. But as Vox's Ian Millhiser observed, "the Constitution treats civil trials very differently from criminal proceedings."
"While the Sixth Amendment provides that 'in all criminal prosecutions' the defendant is entitled to a jury trial," Millhiser wrote, "the Seventh Amendment provides a more limited jury trial right, requiring them 'in suits at common law.'"
Millhiser argued that with its ruling in SEC v. Jarkesy, the high court effectively "lit a match and tossed it into dozens of federal agencies."
The Supreme Court's three liberal judges dissented from Thursday's decision, with Justice Sonia Sotomayor denouncing the ruling as "a power grab" with potentially "momentous consequences."
"Today's ruling is part of a disconcerting trend: When it comes to the separation of powers, this court tells the American public and its coordinate branches that it knows best," Sotomayor wrote, warning that the decision "means that the constitutionality of hundreds of statutes may now be in peril, and dozens of agencies could be stripped of their power to enforce laws enacted by Congress."
Congress would have to give a bunch of federal agencies VASTLY more money and personnel to handle all the jury trials they would need to conduct to patch the hole that SCOTUS just blew in their enforcement powers. It won't happen. This case will just let lawbreakers off the hook.
— Mark Joseph Stern (@mjs_DC) June 27, 2024
Consumer advocates and watchdog organizations warned the high court's decision in SEC v. Jarkesy could have implications that extend well beyond the Securities and Exchange Commission, given that other key agencies—including the Federal Trade Commission, the Federal Mine Safety and Health Review Commission, and the Environmental Protection Agency—use internal legal proceedings overseen by an administrative law judge.
The Associated Pressnoted Thursday that the SEC "had already reduced the number of cases it brings in administrative proceedings pending the Supreme Court's resolution of the case."
"Today's decision is another step in the long-term corporate project of neutering federal agencies' ability to protect the public from fraudsters, rip-offs, dangerous products, carbon polluters, and more," Robert Weissman, president of Public Citizen, said in a statement. "The decision will have near-term consequences for the financial system, as it hinders the SEC's ability to seek critical penalties."
As a result of Thursday's ruling, said Weissman, some federal agencies "will need new authority from Congress, which is not doing much legislating, in order to be able to enforce the law."
"The decision extols the Seventh Amendment, but shows little respect for the separation of powers that is at the heart of our constitutional system," Weissman added. "There's also more than a little irony in this court touting the right to access the court system, when it has broadly allowed companies to require consumers to use arbitration rather than protecting their right to access the courts."
"In gutting the federal government's ability to enforce laws enacted by Congress, this ruling gives special interests even more power to set the rules for the rest of us."
As Politicoreported last month, an "alliance of tech billionaires, conservative legal activists, and the business lobby" joined the fight to strip the SEC of the key enforcement tool.
The outlet noted that "since Jarkesy was filed, companies including Meta, SpaceX, and Amazon have escalated it into a broader fight against federal power by suing other agencies over their own courts—a way of fighting unfavorable judgments by attacking the system that delivered it."
The Revolving Door Project noted in an analysis released Thursday that at least 13 organizations with "ties to court-whisperers and judicial gift-givers like Leonard Leo, Charles Koch, Paul Singer, Harlan Crow, and wealthy elites in the Horatio Alger Association in which Clarence Thomas is a key member" submitted amicus briefs supporting Jarkesy's fight against the SEC.
"Some of the organizations that supported the weakening of the SEC have direct ties to the powerful friends and benefactors of the court," the group said. "The very same people who are flying Clarence Thomas and Samuel Alito to vacation destinations on private jets are closely tied to organizations that are urging the court through amicus briefs to rule in a manner favorable to corporate wrongdoers."
Caroline Ciccone, president of the watchdog group Accountable.US, said in a statement Thursday that the Supreme Court's decision "is a victory for the wealthy and powerful, delivered by a Supreme Court conservative majority all too used to putting corporations, Wall Street, and billionaire benefactors over everyday Americans."
"In gutting the federal government's ability to enforce laws enacted by Congress, this ruling gives special interests even more power to set the rules for the rest of us," said Ciccone. "Let's be clear: This is a power grab that will ultimately harm ordinary people by making it harder for federal agencies to hold corporations accountable for misdeeds."
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