In two days last month, the United States Supreme Court dealt devastating blows against the administrative state and for constitutional order.
On June 27, 2024, the court released its decision in SEC v. Jarkesy which hobbles the power of agencies like the Securities and Exchange Commission to bring cases against defendants in front of an administrative court rather than a traditional federal court, and on June 28 released a decision in the case of Loper Bright Enterprises v. Raimondo, setting aside the so-called Chevron Doctrine which held that, in the case of ambiguity in the law, courts were to give deference to agency interpretation.
In the first case, George Jarkesy ran two hedge funds the SEC claimed were frauds and brought an action against him in their own administrative court, fining him $300,000 and ordering him to return $685,000 in illicit profits.
It is notable that this was not a criminal proceeding but rather a lawsuit seeking monetary damages in which Jarkesy was sued in a court controlled by the agency suing him.
Jarkesy appealed, and both the 5th Circuit and SCOTUS agreed that he was entitled to a jury trial.
Similar courts set up by multiple executive agencies, such as the EPA, OSHA, and the Department of the Interior, are at issue.
Former federal Judge Elliot Kaplan, who himself sat in front of an administrative court, lauded the decisions in both cases.
Kaplan noted there are two types of administrative courts: those authorized specifically by Congress, such as immigration courts, and those set up as administrative procedures by the agencies themselves.
According to Kaplan, the issue with those “courts” is that the judges are employees of the agency in question.
“They don’t meet the independence that a court requires in order to dispense justice fairly,” Kaplan said. “They’re representing an executive, right? And that’s the fundamental problem with all of this.”
Chief Justice John Roberts seems to agree, writing that the 5th Circuit identified two Constitutional issues with the case:
- “First, it determined that Congress had violated the nondelegation doctrine by authorizing the SEC, without adequate guidance, to choose whether to litigate this action in an Article III court (judicial branch court) or to adjudicate the matter itself.
- “The panel also found that the insulation of the SEC ALJs (Administrative Law Judges) from executive supervision with two layers of for-cause removal protections violated the separation of powers.”
Indeed, Roberts noted that the English pushing colonists into juryless trials before admiralty and other courts was one of the grievances listed in the Declaration of Independence and, quoting Alexander Hamilton in The Federalist Papers, “there is no liberty if the power of judging be not separated from the legislative and executive powers.”
Roberts concluded by affirming the right to a jury trial.
“A defendant facing a fraud suit has the right to be tried by a jury of his peers before a neutral adjudicator,” he wrote. “Rather than recognize that right, the dissent would permit Congress to concentrate the roles of prosecutor, judge, and jury in the hands of the Executive Branch. That is the very opposite of the separation of powers that the Constitution demands.”
Chevron defense elimination is possibly a larger blow to bureaucratic overreach
In rejecting the deference to Chevron, the Court dealt what may be a near-fatal blow to the administrative state.
For decades, under the Chevron decision, Congress has delegated much of its legislative authority to executive agency rule-making powers. Those rules — never voted on, much less read by the legislative branch — have had the force of law.
Under Chevron, when the law is ambiguous and Congress has not specifically spoken, courts were required to give deference to agency interpretation.
In effect, executive branch agencies had the power to decide what the law meant, rather than their Constitutional duty to implement laws passed by Congress.
Indeed, Roberts noted that the 1946 Administrative Procedures Act, in section 706 states that courts — not agencies — decide “all relevant questions of law.”
The decision returns the interpretation of laws to the courts rather than allowing executive agencies to tell courts what the law says.
In his opinion, Roberts said that “Under Chevron, a statutory ambiguity, no matter why it is there, becomes a license authorizing an agency to change positions as much as it likes.”
He also noted that nothing stops a court from considering the agency’s interpretation in its decision, but courts are no longer required to defer to those interpretations.
Kaplan lauded the decision — and Roberts’ leadership of the Supreme Court.
“I think that all these decisions show great leadership by Chief Justice Roberts,” Kaplan said. “I think Roberts clearly stated that agencies are not better suited than the courts at resolving ambiguities in federal law.”
Kaplan said the biggest issue with Chevron is that agencies “can change direction willy-nilly whether Congress says so or not.”
An example is the recently overturned “bump-stock ban.” For years, the Bureau of Alcohol, Tobacco, Firearms and Explosives interpreted their regulations such that bump stocks were not considered “machine guns” under the law. In the wake of the Las Vegas shooting, ATF — under the Trump Administration — changed their interpretation of the law and forced thousands of people to turn in or destroy the bump stocks they had purchased legally or become federal felons.
“They’ve given them a slap on the wrist and said, ‘pay attention. You’re not the Congress,'” Kaplan said. “‘Start acting, start acting in a manner that you are intended or we will overturn it.'”
