ANALYSIS: Justices Mull Sawing Off Executive Branch This Term

The US Supreme Court has accepted only a couple dozen cases so far for the 23–24 term. Several of them present frontal attacks on federal regulatory agencies through a variety of legal theories.

Loper-Bright and Relentless, which signal the potential end of Chevron deference are, of course, critical for federal agencies. But other cases this term threaten to throw the administrative state into chaos.

The End of Agencies? SEC v. Jarkesy

The SEC determined in 2020 that George Jarkesy Jr. committed securities fraud. The Fifth Circuit vacated that decision, holding it was unconstitutional for three independent reasons:

• the SEC’s statutory power to decide between bringing enforcement in court or in an administrative proceeding violates the nondelegation doctrine;
• the SEC’s use of administrative process in civil penalty cases violates the Seventh Amendment right to a jury trial; and
• statutory “for cause” removal protection for SEC administrative law judges violates the US Constitutions’ take care clause in Art. II.

In June, the Supreme Court agreed to hear SEC v. Jarkesy on three questions echoing those holdings. The last two questions have incredibly broad implications for administrative agencies—but full revival of the nondelegation doctrine could signal their demise.

The high court last used the nondelegation doctrine to strike down laws in 1935. It holds that Congress can’t transfer its essential legislative functions, including by statutes that give agencies the discretion to set policy.

The nondelegation doctrine is like the major questions doctrine on steroids: Under the major questions doctrine, an agency can’t use broad discretion when major policy questions are at stake and congressional authority isn’t explicit enough. The resulting law is struck down under the MQD, but the authorizing statute survives (as does the agency to regulate another day). The nondelegation doctrine potentially applies to block an agency’s use of any policy discretion at all—and the authorizing statute creating the agency itself, that permitted the delegation, is unconstitutional.

The doctrine died with the justices who espoused it in the 1930s, making way for the New Deal and administrative agencies in their modern form when then-President Franklin Roosevelt appointed a new slate of justices. Since then, courts have held that congressional delegations of power are constitutional so long as the statute provides an “intelligible principle” to guide the delegee’s authority. But the idea is back from the dead, and in 2019, there appeared to be four justices ( Samuel Alito, Neil Gorsuch, John Roberts, and Clarence Thomas) ready to reexamine whether executive agencies should be able to make policy. Today, with Justices Brett Kavanaugh and Amy Coney Barrett, there could be six.

Jarkesy is how we’ll count those votes. It isn’t an exaggeration to say that the case could spell the end of the federal government as we know it.

The End of Certainty? Corner Post

Corner Post v. Board of Governors of the Federal Reserve presents as a dry “statute of limitations” question: When does the six-year statute of limitations for lawsuits challenging agency action start running? Don’t let that fool you. This case could be disastrous for federal agencies trying to conduct business as usual.

Accrual at Enaction or Injury?

That’s because Corner Post opens the door to an essentially unlimited right to attack long-standing regulations. The petitioners in the case are challenging an agency rule enacted in 2011. Under the ordinary six-year statute of limitations applicable to such challenges, the Eighth Circuit held, their 2021 challenge was brought too late. But the petitioners argue that, since their company impacted by the regulation wasn’t incorporated until 2018, they weren’t harmed and therefore didn’t have a claim regarding the regulation until then. Their six-year statute of limitations should run from when the company was organized, not from when the regulation was enacted, they contend.

Should every new organization get a fresh bite at challenging any agency rule, no matter how old the rule is?

Six federal circuit courts of appeals—the Fourth, Fifth, Ninth, DC, and Federal Circuits, joined now by the Eighth—have said no. An organization coming into existence doesn’t reset the statute of limitations on challenging an agency rule or action.

One circuit—the Sixth—has gone the other way, and the plaintiffs in Corner Post are hanging their hats on that circuit split.

Facial Attacks Versus As-applied Attacks

Corner Post also invites the Court to explain whether the statute of limitations analysis should depend on whether the plaintiff launches a “facial” challenge (which claims the rule is invalid for everyone), or an “as-applied” challenge (which disputes the application of a rule to a particular party).

The respondent in Corner Post, the Board of Governors of the Federal Reserve System, points out that the Sixth Circuit case the petitioners rely on is distinguishable and doesn’t represent a true circuit split. The Board argued that the case involved an “as applied” challenge to an older regulation, as opposed to Corner Post’s suit, which seeks to strike the Board’s rule down as invalid for everyone.

Both the federal district court below and the Eighth Circuit dismissed Corner Post on statute of limitations grounds. So it’s a fair prediction to say that the Supreme Court granted review so it could reverse; if the high court denies certiorari, the lower court decision stands. While it’s possible that the Supreme Court wishes to clarify the facial versus as-applied question, it’s also possible that the Supreme Court plans to reverse. If that happens, the high court would likely accept the Sixth Circuit’s rule. And then it would arguably apply to all federal agencies.

Which would mean an incredibly rough and expensive road for all federal agencies. At any step, a decades-old rule that’s been consistently applied for years could be challenged by an organization set up last week. It could destroy certainty and put repeated, expensive litigation roadblocks in the way of federal agencies’ work.

The “floodgates” argument often isn’t persuasive from a policy standpoint. But here, a decision opening late suits to all comers could really stymie the daily function of government, so much so that important regulatory and enforcement work could come to a damaging standstill.

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