U.S. Supreme Court Reigns in Federal Agency Powers

In two landmark decisions during the last week of June 2024, SEC v. Jarkesy et al. (“Jarkesy”) and Loper Bright Enterprises et al. v. Raimondo (“Loper”), the Supreme Court has shown its intent to intensify its scrutiny over federal agency powers, signaling a shift towards limiting regulatory overreach. These decisions highlight a likely judicial trend aimed at reinforcing constitutional protections and ensuring that agencies operate within strict legal boundaries. 

Loper Bright Enterprises et al. v. Raimondo

In the Loper decision, the Supreme Court overruled the long-existing precedent of the Chevron doctrine, which has required courts to defer to agency interpretations of ambiguous statutes over the past forty years. The Court asserted that the judiciary must independently interpret statutes, even amidst ambiguity, rather than deferring to executive agencies. This ruling reiterates the judiciary’s role, as outlined in Marbury v. Madison, to declare the law’s meaning without reliance on agency interpretations, thus changing the landscape of administrative law. It insists on judicial independence in the face of statutory ambiguity and restricts agency discretion only to areas explicitly delegated by statute.

SEC v. Jarkesy et al.

In Jarkesy, the Supreme Court ruled that the Securities and Exchange Commission (“SEC”) cannot levy civil penalties against individuals for securities fraud via in-house administrative proceedings, as this action violates the Seventh Amendment right to a jury trial. The ruling reverses the SEC’s use of administrative tribunals for such penalties, a power expanded under the Dodd-Frank Act of 2010. The Court emphasized that civil penalties, being punitive and deterrent in nature, fall within the scope of traditional legal rights demanding jury adjudication, marking a significant reaffirmation of constitutional jury trial rights and delineating the limits of administrative agency authority concerning punitive enforcement actions.

This Jarksey decision signifies a pivotal moment that is primed to impact the broader spectrum of federal agencies and potentially redefine the landscape of administrative enforcement across agencies like the EPA, the Department of Labor, and beyond. The essence of this holding underscores a judicial pushback against broad agency discretion, heralding a future where more agency-imposed penalties might be contested in judicial courts rather than through administrative proceedings. Specifically, agencies accustomed to leveraging in-house adjudications for penalties face a new era of scrutiny under the lens of constitutional rights to a trial by jury. While it is not likely that settlements will be affected or fewer cases will be adjudicated, many agencies may need to strengthen their enforcement resources to handle judicial court cases. 

How Jarkesy and Loper Together Reshape Federal Agency Reach

The Supreme Court’s decisions in Loper and Jarkesy significantly recalibrate the balance of power between administrative agencies and the judicial branch, underscoring a trend towards reinforcing judicial oversight and constitutional safeguards in administrative actions. In Jarkesy, the Court curtailed the SEC’s use of in-house tribunals for imposing civil penalties, emphasizing the Seventh Amendment’s jury trial right. This decision not only challenges the administrative state’s expanding reach but also revives the fundamental role of jury determination in punitive legal contexts. In a complementary vein, Loper asserts judicial independence in statutory interpretation, rejecting the deference once prescribed by the Chevron doctrine. Together, these rulings represent a judicial reassertion against perceived overreaches of administrative discretion. By insisting on independent judicial review and the inviolability of jury trials, the Court delineates clearer boundaries for administrative action and reaffirms its interpretative authority over ambiguous statutes. This pivot underscores a broader philosophical shift towards enhancing the judiciary’s role in checking administrative power, advocating for a closer adherence to constitutional principles and procedural rights.