Policy Matters – SCOTUS Implications for Business

During its recent term, which concluded this week, the Supreme Court ruled on cases with the potential to transform segments of American society, from the federal government’s regulatory authority to reproductive rights to First Amendment rights on social media to presidential immunity.

This edition of Policy Matters focuses on the implications of three major cases – Loper Bright Enterprises v. RaimondoRelentless v. Department of Commerce and Corner Post v. Board of Governors of the Federal Reserve System – that have broad consequences for business and the federal regulatory landscape. It also includes an overview of some of the other high-profile, consequential opinions from the term, several of them decided by the 6-3 conservative-led majority.

SCOTUS RESHAPES THE ADMINISTRATIVE STATE

The U.S. Supreme Court’s 6-3 ruling in a pair of cases, Loper Bright Enterprises v. Raimondo and Relentless v. Department of Commerce, overturned precedent set in a 1984 decision, commonly known as the Chevron doctrine. The ruling stands to radically alter how Congress and executive branch agencies draft and implement federal laws in every sector of the economy, including the environment, public health, finance, employment practices, workplace safety, auto safety, food, chemicals, technology, education and others.

The Chevron doctrine instructed lower courts to defer to federal regulatory agencies when laws passed by Congress are not clear and specific. Chief Justice John Roberts, writing for the court’s majority, said federal judges “must exercise their independent judgment in deciding whether an agency has acted within its statutory authority.”

In a closely divided Congress, laws can be written vaguely to secure the necessary votes for passage. Further, members of Congress do not always have the subject matter expertise to prescribe specific details into federal law. Executive branch agencies write, implement and enforce specific policy provisions and interpretations. During the rulemaking process, agencies have often refined or broadly interpreted the meaning of the statutes they are charged with enforcing, prompting criticism and legal challenges from regulated companies and their trade groups.

A separate case before the court this term, Corner Post v. Board of Governors of the Federal Reserve System, addressed the amount of time regulated entities have to challenge federation regulations. Under the Administrative Procedures Act, there is a six-year statute of limitations. With a 6-3 opinion written by Justice Amy Coney Barrett for the conservative majority, the Court ruled that such a statute of limitations does not start ticking down until a plaintiff experiences injury from the regulation, not once the agency finalizes a regulation.

What happens now

  • The Court’s rulings emphasize the importance of Congress providing clear and explicit delegation of authority to federal agencies. Congress must clearly define the scope of that authority.
  • When a statute is ambiguous and Congress has not provided specific guidance, courts are tasked with deciding the best interpretation of the statutory ambiguity. Courts will also play a role in policing the boundaries of any expressed delegations and ensure federal agencies remain within the confines of what Congress intended.
  • Federal agencies will have less latitude to interpret their own statutory authorities. They will have to provide clearer justifications for their interpretation of laws and defend the statutory basis of their rulemaking.
  • The Court emphasized that its ruling does not invalidate prior cases decided under the Chevron framework. The decision will only impact future cases.
  • Together with the Corner Post decision, the end of Chevron deference stands to impact how, when and if regulated entities challenge federal regulations, potentially paving the way to more successful and frequent litigation.

Implications for business

Here are some actions companies can take now to prepare for the changing legal and regulatory landscape.

  • Monitor the legislative process more closely. Congress will need to be more specific when writing legislation, so a bill’s text can be clearly interpreted by regulatory agencies, and if necessary, the courts. As a result, companies, trade groups and advocacy organizations must more closely track legislative texts, with a focus on specific provisions around statutory authorities.
  • Expect more litigation and a longer regulatory process. There will be a spike in lawsuits as businesses challenge federal rules where statutory authority is unclear. Companies and industry groups will likely “forum shop” for jurisdictions that may favorably interpret their legal challenge. More legal challenges will likely delay or even prevent final enactment of regulations. 
  • Prepare to educate the courts. In this new legal environment, litigants may benefit from educating judges in areas where they lack the scientific and technical knowledge to decide on rules that can impact the environment, workplaces and the economy.
  • Engage with industry groups. This landmark decision introduces an era of uncertainty as the federal government, businesses, advocacy organizations and the courts adapt to a post-Chevron landscape. Companies must stay informed and consider coordinating with their industry lobbying groups and public affairs partners to decide how to challenge regulations they find burdensome.

The true impact of these rulings will likely be defined over several years of litigation, as courts, federal agencies, Congress and business all navigate the practical implications. The Biden Administration can be expected to continue to defend its active regulatory agenda. Former President Trump says he intends to reverse some Biden-era regulations if elected. The end of Chevron is likely to limit the ability of any future administration – Democrat or Republican – to enact policy goals through regulatory mandate and outside of congressional intent.

OTHER MAJOR SUPREME COURT DECISIONS FROM THE 2023-2024 TERM

The Administrative State

In addition to the cases outlined above, a number of other significant cases involved federal administrative and regulatory authority.

Consumer Financial Protection Bureau (CFPB) v. Community Financial Services Association of America: In a 7-2 ruling by Justice Clarence Thomas, with Justices Samuel Alito and Neil Gorsuch dissenting, the Court determined the funding mechanism of the CFPB – the federal regulator established after the 2008 financial crisis under the Dodd-Frank Wall Street Reform and Consumer Protection Act – is constitutional. The CFPB is funded directly from earnings of the Federal Reserve System, not via the congressional appropriations process; if the funding was found to be unconstitutional, the CFPB and its regulations likely would have been dismantled.

Securities and Exchange Commission (SEC) v. Jarkesy: In a 6-3 decision from Chief Justice Roberts, joined by the other conservative justices, the Court ruled that when the SEC seeks civil penalties against a defendant for securities fraud, they are entitled to a jury trial, rather than the SEC’s standard practice of utilizing administrative proceedings to impose fines. As a result, securities fraud proceedings will now play out in the court system.

Abortion

Food and Drug Administration v. Alliance for Hippocratic Medicine: In a unanimous 9-0 decision written by Justice Brett Kavanaugh, the Court ruled that the plaintiffs – a group of anti-abortion doctors and medical associations – do not have legal standing to challenge the FDA’s approval of mifepristone, one of the primary drugs used in medication abortion, because they have not suffered real injury as a result of the approval. Access to mifepristone will remain dependent upon state regulations; the issue will likely arise again through the courts.

Moyle v. United States and Idaho v. United States: The Supreme Court issued a 6-3 decision with a dissenting opinion from Justices Alito, Thomas and Gorsuch, dismissing a pair of cases regarding Idaho’s abortion ban, which includes exceptions only to save the life of the mother and in cases of rape or incest, in potential conflict with the Emergency Medical Treatment and Labor Act (EMTALA). EMTALA is a 1986 law that requires emergency rooms in hospitals receiving Medicare funding to provide “necessary stabilizing treatment” to patients experiencing a medical emergency regardless of insurance status or ability to pay. The Biden Administration had argued that EMTALA preempts Idaho’s abortion ban in emergencies threatening a pregnant patient’s health, not just their life. The Court did not rule on the merits of the case but returned it to the lower courts for ongoing litigation, meaning it could yet return to the Supreme Court in a future term. Importantly, a lower court ruling allows hospitals in Idaho to temporarily continue to perform emergency abortions under EMTALA, pending the final outcome of the case.

Social Media

Netchoice v. Paxton and Moody v. Netchoice: Justice Elena Kagan wrote a 9-0 opinion for the Court sending back to the lower courts two cases challenging Texas and Florida’s laws governing social media platforms, including limits on the ability to perform content moderation. Those laws arose from concerns about perceived censorship of conservative voices – including that of former President Trump – on social media. Netchoice, representing a range of internet and social media companies, challenged the laws under the First Amendment right to free speech. The Supreme Court determined the cases had not been litigated correctly and the facts and issues must be further developed in the lower courts. For now, content moderation on social media is generally protected by the First Amendment.

Murthy v. Missouri: Justice Barrett penned a 6-3 opinion throwing out a lawsuit seeking to limit the government’s ability to communicate with social media companies about content moderation policies. Justices Alito, Thomas and Gorsuch dissented. The case specifically related to the Biden Administration’s informal conversations with social media platforms encouraging the removal or restriction of posts spreading misinformation about the COVID-19 vaccine. The majority found that the defendants – who had claimed they were censored because of pressure from the government, in violation of the First Amendment – did not have standing as there was no proof to validate their claims of injury.

Gun Rights

Garland v. Cargill: Justice Thomas, writing for a 6-3 majority, wrote an opinion striking down a federal regulation banning bump stocks, which allow a semiautomatic rifle to fire rounds at a faster rate. The federal government had argued that bump stocks convert rifles into machine guns, which are prohibited under federal law. The dispute between the majority and the dissent from the three Democratic appointees centers on the mechanical operation of a gun with a bump stock and if that amounts to a machine gun. The ban on bump stocks was issued by the Trump Administration after the mass shooting at a music festival in Las Vegas in 2017 – the deadliest mass shooting in modern U.S. history.

United States v. Rahimi: In an 8-1 decision, the Supreme Court upheld a federal law barring anyone subject to a domestic violence restraining order from possessing a gun. In the lone dissent, Justice Thomas – the author of 2022’s New York State Rifle & Pistol Association v. Bruen, which said gun restrictions can only be implemented when there is a tradition of such regulation in U.S. history – said that there is no evidence that the domestic violence ban was consistent with “the Nation’s historical tradition of firearm regulation.”

Former President Trump and January 6

Trump v. United States: Chief Justice Roberts wrote a 6-3 opinion joined by the other five conservative justices, determining that the President of the United States has immunity from criminal prosecution for actions within his core constitutional authority and some official acts, but not for unofficial acts. As a result, presidents – including former President Trump – cannot be prosecuted for actions taken as part of the core powers of the office of the presidency. The case arose out of charges brought by Department of Justice Special Counsel Jack Smith alleging Trump conspired to overturn the results of the 2020 presidential election. The lower courts will now have to determine whether Trump’s actions were “official” or “unofficial” before charges and any trial can proceed. The Democratic appointees on the Court strongly dissented, voicing concerns for American democracy, including concerns about a president misusing official powers for personal gain and evading accountability.

Fischer v. United States: Chief Justice Roberts, joined by Justices Alito, Thomas, Gorsuch, Kavanaugh and Ketanji Brown Jackson, threw out charges against Joseph Fischer, a former police officer charged for his actions during the January 6, 2021 Capitol Insurrection, ruling that the law he was charged with violating – which states it is a crime to obstruct, influence or impede an official proceeding – applies only to evidence tampering and destruction of records or documents. The decision could affect the charges brought against more than 300 other January 6 defendants as well as two of the four charges brought by Special Counsel Smith against former President Trump. Notably, Justice Jackson’s concurring opinion suggested the charges against Fischer could still proceed, and Justice Barrett joined Justices Sonya Sotomayor and Kagan in dissent, supporting the broader, textual interpretation of the law as written.

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